Cannabis Commercial Auto And Cargo Insurance

What Does Cannabis Commercial Auto And Cargo Insurance Cover?

A business auto policy covers bodily injury and property damage the business's vehicles cause to others and can add physical damage, medical payments and uninsured motorist coverage. Cargo coverage, often written on an inland marine or motor truck cargo form, covers the goods being carried.

Common parts of a cannabis auto program:

• Auto liability: injuries and property damage to others caused by a covered vehicle.
• Physical damage: collision and comprehensive coverage for the business's own vehicles, including vehicle theft.
• Medical payments and uninsured motorist: coverage for occupants, with availability and requirements set by state law.
• Hired and non-owned auto: liability for vehicles the business rents or that employees drive on business.
• Cargo: theft of or damage to cannabis goods in transit, subject to the form's terms and limits.

The NAIC's 2023 cannabis insurance guide identifies cargo coverage for an often high-value commodity, exposed to theft, hijacking and spoilage, as a transport concern, and reports an agent's comment that low cargo limits can force companies to split shipments.

Why Is Commercial Auto Different For Cannabis Businesses?

Cannabis vehicles carry high-value product under detailed state transport rules that control who may drive, which vehicles may be used and how product must be secured. Those rules drive what underwriters ask and how coverage is structured.

California

• Only licensed distributors or their employees may transport cannabis between licensees, in vehicles and trailers owned or leased by the licensee, under 4 CCR 15311.
• Product must ride in a fully enclosed, windowless, locked trailer or trunk or a secured compartment, and every transport vehicle needs an alarm system. Vehicles may not be left unattended or parked overnight in residential areas.
• Vehicles transporting cannabis for hire need a motor carrier permit.
• Retail delivery vehicles must be enclosed, unmarked and fitted with a dedicated GPS device whose location history is kept at least 90 days (4 CCR 15417). A delivery employee may not carry more than $10,000 in cannabis goods at any time (4 CCR 15418).

Massachusetts

• Delivery vehicles must be owned or leased by the licensee, registered as commercial vehicles, and inspected and insured in Massachusetts (935 CMR 500.145).
• Retail value in a delivery vehicle is capped at $5,000, or $10,000 with two agents.
• Vehicles moving product between establishments must be registered, inspected and insured, with an approved alarm, a fixed GPS device, a locked storage compartment and generally two agents (935 CMR 500.105(13)).

Michigan

• Secure transporters must run a two-person crew, drivers need a state chauffeur's license, route plans and manifests go into the statewide monitoring system, and vehicles may not carry cannabis markings (MCL 333.27503).

Which Cannabis Businesses Commonly Carry It?

Distributors, secure transporters and retailers that deliver commonly carry commercial auto and cargo coverage. Cultivators, manufacturers and dispensaries that own vehicles or have employees driving on business often carry auto liability or hired and non-owned coverage.

• Distributors and transporters: vehicles, drivers and cargo are the core of the business.
• Retailers with delivery: daily trips to consumers with product and, in many cases, cash.
• Cultivators and manufacturers: company vehicles, and transport where the state license allows it.
• Any licensee: staff who drive to the bank, a supplier or a regulator's office.

Hired and non-owned auto (HNOA) protects the business when employees use their own cars or the business rents a vehicle. It does not cover physical damage to the employee's car, and the employee's personal auto policy generally responds first, with non-owned coverage stepping in above it. Where rules require licensee-owned or leased vehicles, as in California distribution and Massachusetts delivery, personal vehicles are not an option for carrying product, so HNOA serves only non-transport driving.

How Are Limits Typically Structured?

Auto liability is written either as a combined single limit per accident or as split limits for bodily injury per person, bodily injury per accident and property damage. Massachusetts requires cannabis delivery vehicles to carry liability insurance of at least $1,000,000 combined single limit.

A combined single limit applies one amount to all bodily injury and property damage from an accident. Split limits divide that amount into separate caps. State financial responsibility laws set minimums for every vehicle, and cannabis rules or contracts can require more.

Physical damage is usually written with a deductible for each covered vehicle. Cargo is commonly written with a limit per vehicle or per shipment, so the highest load value matters. State value caps help frame the delivery exposure: $10,000 per delivery employee in California, and $5,000 or $10,000 per vehicle in Massachusetts depending on staffing. California's distribution rule sets no similar cap.

An excess or umbrella policy can sit above auto liability for higher limits.

What Do Carriers Ask For When Quoting Commercial Auto?

Underwriters typically ask for a vehicle schedule, a driver list with motor vehicle records, routes and radius, the maximum value carried per load and the security measures on each vehicle.

• Year, make, model, VIN and value of each vehicle, and whether it is owned or leased.
• Drivers, license types and motor vehicle records.
• Delivery or transport radius, stops per day and overnight parking locations.
• Maximum and average cargo value per trip.
• Alarms, GPS, locked compartments and crew size.
• Whether employees ever drive personal vehicles on business.
• Prior auto and cargo losses.

Frequently Asked Questions