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Marijuana businesses across Los Angeles County are struggling to protect their operations as wildfires tear through the region, once again testing the resiliency of local operators.

More than 190,000 residents face evacuation orders or warnings, and cannabis businesses find themselves in a particularly difficult position: Many can’t get insurance because marijuana remains illegal under federal law, while others are priced out of the coverage that is available.

“Everyone refers to fire insurance as a separate peril, which it is, but most insurance companies will offer what’s known as special form, which is a full coverage policy including fire,” Charles Pyfrom, chief marketing officer at CannGen Insurance, said. “Fire is a covered peril on the vast majority of policies that we offer by default.”

“The perception that cannabis insurance is more expensive because it’s cannabis insurance, it’s a fact. It definitely costs more,” he added. “But there’s also that additional risk that every underwriter assumes based on writing something that’s still federally illegal.”

Many California marijuana farmers have already lost coverage from major insurance companies after previous fires. They also can’t turn to the state’s backup insurance program – known as the FAIR plan – because it won’t cover federally illegal businesses. In addition, that program is already heavily strained, with its potential exposure approaching $500 billion as of September’s year-end calculations, up more than 60% since 2023.

While outdoor grows are prohibited in Los Angeles County and licensed warehouse facilities are currently safe from direct fire damage because they operate in industrial areas like Sun Valley and Van Nuys, growers have still been taking precautions, sources recently told GMR. Some veteran operators are running on emergency generators with minimal lighting and installing air purifiers in their grow rooms.

For companies that do offer cannabis insurance, like CannGen, protecting outdoor marijuana farms poses particular challenges. Many won’t insure outdoor growing operations because they lack basic safety features that indoor facilities have.

“It’s hard to prevent and connect where the operational assets of the business are and how we can mitigate risk with a building or fire alarm or burglar alarm,” Pyfrom said. Instead, the company focuses on indoor facilities with “state of the art HVAC, heating, burglar systems, fire alarms across the board.”

The firm also has to take a strategic approach to spreading out its risk. “For example, I’m up in the Bay Area. We have what’s known as the Green Zone in Oakland… If an entire block like Pacific Palisades went up, we as underwriters would be doing a disservice to our clients if we wrote the entire street,” Pyfrom said.

Analysts at Moody’s Ratings expect insurance companies to pay billions in claims from these fires, with marijuana businesses likely facing an outsized share of uninsured losses.

As a result, the fires have pushed California’s cannabis industry to organize its own emergency responses. Local business collectives have created text message chains to share updates and offer help, and one company, Embarc Dispensary, even started a relief fund that has raised more than $55,000 over the past three days to help feed emergency workers and displaced residents. Several marijuana companies have joined Embarc’s relief effort, including the software company Treez.

“Our industry was built on compassion, resilience and coming together when it matters most,” Lauren Carpenter, Embarc’s co-founder and CEO, said in a LinkedIn post. “Many have sprung into action, but by uniting we can make an even greater impact.”

State regulators have also begun allowing insurance companies to use new methods to calculate wildfire risks to make coverage more available, according to Firas Saleh, director of North American Wildfire Models at Moody’s. But even so, a 2022 study from the University of California Berkeley found marijuana businesses deal with especially unique fire risks because local rules often force them to operate in rural areas more prone to dangerous fire spread.