The COVID-19 pandemic has impacted every country as stay-at-home orders and social distancing guidelines are issued in an attempt to reduce the rate of infection, and the cannabis industry is one of many industries that feel the impact of the economic shift.

Cannabis operations have been deemed “essential” by many states, but this hasn’t prevented cannabis companies in those areas from facing difficulties during this time. Attempting to comply with social distancing requirements makes operating as normal an impossible task, so many companies in response are laying people off, restructuring their company, or shutting down temporarily. Some companies are also seeing a reduction in staff because their employees need to remain in quarantine, and others are afraid to come to work for fear of catching the virus.

For farmers, that could mean that flowering plants won’t be harvested and processed on time if staffing remains a problem. That could cause a disruption in the whole supply chain. Most cannabis companies aren’t prepared financially to weather a crisis like COVID-19, and they aren’t eligible to receive federal emergency relief funding from the CARES Act (most businesses can apply through the Small Business Administration, but not cannabis companies).

Cannabis companies are in a delicate position financially. Due to federal prohibition, cannabis companies have been largely unable to obtain traditional loans from the SBA and private financial institutions. While loans are mostly unavailable, cannabis companies do work with insurance companies to get the coverage they need to meet state requirements and to protect their businesses. Before COVID-19, the insurance industry was warming up to the cannabis industry but there were other priorities. Largely the cannabis industry has had to focus on compliance, funding, and growth management.

Although most states have some kind of regulations regarding cannabis, whether medical or adult-use, this quasi-legal status has made insurance companies leery to offer coverage. Those who do often increase the rates significantly; there isn’t enough data to know what the risks are for the cannabis industry and so some insurance companies set the premiums higher to hedge their bets.

What will the industry look like after COVID-19 has run its course? Many industries will be forever changed because of this outbreak, and those that were hanging by a thread may collapse all together. But not all are doomed, many will survive and some will thrive. The need for proper cannabis insurance coverage has definitely become apparent in this crisis, as those with business interruption coverage attempt to make their first claim. If claims are denied, then litigation will be soon to follow, which could last for months or years, meaning the impacts of the COVID-19 virus are far from over when the shelter-in-place orders are lifted.

Some cannabis companies have switched their operations to produced hand sanitizer in order to donate to places in need, but a business operator should check in with their insurance agent before moving forward. Most companies will probably see hand sanitizer as a less risky operation than producing cannabis, but it’s important to remain covered for employee safety and other liabilities.