Michigan’s Medical Marihuana Facilities Licensing Act (MMFLA) section 408 requires licensed facilities to carry liability insurance — or post $100,000 in cash or bonds — in the event of bodily harm to lawful marijuana users from an adulterated substance.
According to Kevin Cross, very few insurance companies he knows of have tried to offer a comprehensive solution to that financial requirement.
So Cross, who also is president of Linkfield & Cross Agency, in May established the Specialty Agriculture Insurance Company of Michigan Inc., owned by the parent venture he created in February, the Michigan Cannabis Risk and Financial Association (MCRFA).
The insurance arm of MCRFA received its licensure from the Michigan Department of Insurance and Financial Services on May 31 and now is offering a product called “Licensee Patient Protection from Adulterated Marihuana” to MCRFA members.
Cross described the product as a “solution for legal medical cannabis growers, transporters, compliance facilities, provision centers, processors and other licensed entities” to navigate risk and meet section 408 obligations.
“There are several organizations in the legal arena out there for people going through the application process (for medical marijuana facility licensure), but we found there were very few organizations established to help them fill out the insurance side, the risk side,” Cross said.
“We established this organization to address that.”
Cross said Michigan was ahead of the curve in addressing the potential risk for licensees in relationship to cardholders.
“The Legislature in Michigan was pretty forward-thinking when they required financial responsibility to all of the licensees,” he said. “Most of the states with medical marijuana programs require financial responsibility in a set amount — such as $25,000, $50,000 or $100,000 — but in most of the states, that money is used to reimburse unpaid taxes or offer some protection for the state,” he said.
“In Michigan, this financial responsibility of $100,000, this money goes to an injured cardholder who purchases marijuana from one of the approved license facilities and is injured due to the marijuana being adulterated.”
According to the MMFLA, “adulterated” marijuana refers to “a product sold as marihuana that contains any unintended substance or chemical or biological matter other than marihuana that causes adverse reaction after ingestion or consumption.”
“It could be fertilizers, fungi or a spiking-type substance that could be used to replace or enhance something,” Cross said.
The coverage includes $100,000 in protection for the licensee if they need to award damages to injured cardholders, and it provides clients access to attorneys who specialize in canna law.
The insurance plan, available to those who pay the annual MCRFA membership dues of $500 in accordance with state law, costs $5,000 annually, or 5 percent of the $100,000 section 408 financial requirement.
MCRFA members also get access to a 10 percent discount from CannGen Insurance Services LLC toward property, liability, product liability, workers’ compensation, commercial auto liability, physical damage and facility testing professional liability coverage.
Other financial tools MCRFA is developing for the cannabis industry include a pooled collateral financial instrument and a credit union.
“Those are currently in the study stage,” Cross said. “I hope to have more information in the next month or two.”