Will Title Insurance Industry Venture Into Cannabis Cultivation and Sales?

Title insurance companies recently dipped a cautious toe into the green waters of the developing cannabis business in California.  In the spring of 2017, at least two title insurers indicated a potential willingness to issue title insurance policies in California for properties that are identified as connected with, or intended to be connected with, the growing, processing, manufacture and/or sale of marijuana and marijuana products.  The thought was that any such a policy would carry with it an express exception that would state (1) the growing, manufacturing, and sale of marijuana and marijuana related products are subject to state and/or federal law, and (2) the policy does not afford coverage for any claims of loss or damage arising from the enforcement of any such laws.  This would mean quite simply that there would be no coverage for loss attributable to forfeiture or seizure actions which could result in a complete failure of title.

But it seems this foray was short lived, and the availability of title insurance products for the ever-developing marijuana business in California will likely remain questionable for awhile.  Because of continuing concerns about the everpresent schism between state and Federal laws concerning the status of cannabis as a controlled substance and cannabis related products, and legal exposure resulting from the transfer of monies related to marijuana growing or sale operations, title insurance underwriters and the underwritten title companies in California will not be expected any time in the near future to extend escrow services for transactions involving properties involved in the cannabis business.  This prohibition on escrow services will likely extend to a title insurer’s limited role as a sub-escrow for the payoff of existing loan obligations, which title insurance companies and their underwritten agents customarily engage in as a part of their underwriting of title insurance products.  

Title insurers and the title companies remain understandably wary, like many attorneys, given the ever widening gap between a developing California cannabis regulatory landscape supportive of this industry on the one hand and conflicting Federal statutes and regulations on the other.   With that, the American Land Title Association and the California Land Title Association will both continue to closely and actively monitor the situation both at the state and national level.

 

David G. Boss, coauthor of chapters 3 and 9 in CEB’s easements book, is the founder and Principal of The Boss Law Firm, APLC, San Diego. He represents title insurers and developers in real estate matters and provides legal counsel to title insurers in connection with the coverage for, and resolution of, numerous title insurance claims, as well as the underwriting of title insurance transactions involving residential, commercial, industrial, agricultural, and publicly owned or managed lands.

  • © The Regents of the University of California, 2015

  • Terms of use