As a cannabis company, you may find yourself in a situation where a Motor Carrier Permit (MCP) is required to engage in your business operations.  Due to the relative youth of the industry, the laws and regulations surrounding this requirement are scattered across various sources and can prove difficult to successfully navigate.  We have consolidated all requirements from both the CA DMV, and the CA Cannabis Regulation Bureau to clarify and summarize.  We have also detailed the current state of the CA Commercial Auto Insurance marketplace as insurance coverage will be a prerequisite to obtaining your MCP.

What is a Motor Carrier Permit (MCP)?

An MCP is a document issued by the DMV’s Registration Operations Division.  The purpose of the MCP is to:

• Confirm that the motor carrier has registered their CA# with the DMV, and 
• Has complied with the requirements to commercially operate on CA highways

The MCP contains the motor carrier’s Name, Address, CA#, and effective/expiration dates of the MCP.

Which Cannabis Companies Need an MCP?

• A person or entity that is paid to transport property in their motor vehicle:
  • This includes vehicles of any size, type, or weight
  • These persons or entities are also referred to as “For-Hire” 
• A person or entity operating a commercial vehicle:
  • Gross Vehicle Weight Rating (GVWR) of 10,001 pounds or more, and
  • Hauling their own goods or property
  • These persons or entities are referred to as “Private Motor Carriers”
• Operators of any vehicle(s) that transport hazardous materials
• Operators of a motor truck and trailer combination:
  • Combined length of over forty feet
  • Includes semitrailers, pole or pipe dollies, auxiliary dollies, and logging dollies
  • Excludes camp trailers, utility trailers, and trailer coaches
• Operators of any motor vehicle(s) that require a Commercial Driver License (CDL):
  • Excludes camp trailers, utility trailers, and trailer coaches
• CA Cannabis Regulations

Summary:  If your company is paid to transport any products, regardless of the type of vehicle used to transport that product, your company is considered “For Hire” and must obtain an MCP.  If you are operating a vehicle with a GVWR of 10,001 pounds or more, you must obtain an MCP (regardless of whether you are “For Hire”).  If you are transporting your own products in a vehicle below 10,001 pounds, an MCP will not be needed.

How to Obtain an MCP?

To obtain an MCP, the following must be provided to the DMV:

• A CA# issued by the CA Highway Patrol (CHP)
• Completed Application for Motor Carrier Permit (MC 706 M)
• Proof of Workers Compensation Insurance
• Carrier filed Proof of Financial Responsibility (MCP 65 M)
  • Auto Liability carrier must file the MCP 65 M
  • Must also contain proof of Product Liability
• Payment of Fees
• Valid Requester Code issued by the EPN if:
  • You employ drivers with a Commercial Class A, Commercial Class B, or Class C with hazardous materials
• CA DMV Motor Carrier Permit Page

Challenges in Obtaining an MCP?

There are some challenges cannabis companies in need of an MCP are facing.  By far the largest hurdle is the current state of the CA Commercial Auto Insurance marketplace.  Per the underlined points above, to obtain the MCP, there must be a carrier filed proof of responsibility.  This is referred to as an MCP65M, or simply an MC65 filing.  However, obtaining this filing is proving difficult for various cannabis companies depending on their scope of operations, length of time in business, and fleet size.  Depending on these factors, the CA Commercial Auto carriers have become reluctant to issue the MC65 filing.  Through our extensive experience and additional research, we have determined the most common reasons for their reluctance are:

• The MC65 grants certain guarantees in favor of the state that eliminate or reduce a carrier’s ability to control a claim
• Carrier exposure is increased as coverage is expanded from specific vehicles to any auto liability the insured entity may incur
  • This includes unscheduled, hired, or sub-contracted vehicles
• Inaccurate reporting of cannabis company fleet size
  • Many companies have insured a single vehicle for the sole purpose of obtaining the MCP. Per the above, this may leave the carrier significantly exposed if other vehicles are also operating without adequate premium being collected

In response to these concerns, the carriers have begun to significantly tighten their underwriting requirements prior to issuing the filing.  It is vital that cannabis companies are aware of these restrictions, and if need be, able to adjust their operations to accommodate.

Which Cannabis Companies Qualify for an MCP?

As of the publishing date of this article, we have ascertained that the following requirements have been levied upon cannabis businesses seeking an MCP:

• Possession of a Federal Department of Transportation (DOT)# for not less than three years, or
• Presentation and approval of three years audited company financials, or
• Company fleet size of 10 vehicles or more

Based on these restrictions, there are currently very limited options for “For-Hire” cannabis transportation companies that have recently formed, or recently obtained a DOT#. It should be noted, we have successfully placed cannabis companies that fall outside of these parameters with carriers that have issued the MC65 filing.  However, the current market trend indicates a dramatic tightening of underwriting guidelines due to adverse loss ratios and significantly increased exposure.  

What is Being Done to Address This?

We are currently contacting all CA Commercial Auto carriers to inform them of the coverage void and persuade them to establish an underwriting guideline that will allow the restricted “For-Hire” cannabis transportation companies to receive the required MC65 filing.  We are also in contact with the office of the CA Insurance Commissioner to make them aware of this lack of available coverage.  Please continue to follow our progress as we lobby on behalf of these companies.  We will provide updates as advancements are made.  

For a complimentary review of your current risk management portfolio, please feel free to contact our office.  Our dedicated network of cannabis experts includes insurance, accounting, legal, and employee benefits strategies specifically focused on the cannabis industry.  We will work diligently to ensure that your operation is properly insured and operating at maximum profitability.