What Alabama requires of cannabis and marijuana businesses
Alabama licenses medical cannabis under the Darren Wesley 'Ato' Hall Compassion Act, administered by the Alabama Medical Cannabis Commission (AMCC). The integrated facility license is the top of the program. It lets one company cultivate, process, transport and dispense, and it carries the heaviest financial assurance requirement in the state.
Under Ala. Code § 20-2A-67(d)(1), an integrated facility applicant must provide a letter of commitment or other acknowledgement of its ability to secure a performance bond of two million dollars ($2,000,000) issued by a surety insurance company approved by the Commission. In practice that letter is a binding letter of bondability. The Commission accepts domestic or alien insurers that hold a current certificate of authority from the Alabama Department of Insurance and carry an A rating or better from an accepted rating agency such as AM Best.
| Bond | Penal sum | Who files it | Obligee | Authority |
|---|---|---|---|---|
| Alabama Integrated Medical Cannabis Performance Bond | $2,000,000 minimum | Integrated facility license applicants and licensees | Alabama Medical Cannabis Commission | Ala. Code § 20-2A-67(d)(1); AMCC Rules, Chapter 3 |
What the bond guarantees
The bond is a performance instrument. It secures the licensee's duty to build out and operate the integrated facility as represented in its application and to comply with the Act and the Commission's rules. Because the penal sum is large and the obligation is performance based, it is underwritten on full financial disclosure.
Like every surety bond, this is a three party agreement and it is not insurance for the operator. If the surety pays a valid claim to the obligee, the principal must reimburse the surety under the general indemnity agreement signed when the bond is issued. Read how the different cannabis bond obligations work.
How we underwrite Alabama cannabis and marijuana bonds
This obligation is larger than, or worded more heavily than, a simple compliance bond, so it is underwritten on financial disclosure: the application, a current personal financial statement from each owner holding ten percent or more, current business financial statements (CPA prepared for the largest bonds) and a copy of your complete state or local license application. A cannabis bond is in substance an unsecured credit instrument. The surety extends its credit to you in front of the regulator, so financial strength, operating experience and the exact wording of the bond form drive both the decision and the rate. Where the numbers are thin, partial collateral can close the gap. No applicant is automatically declined.
More on cost, credit and collateral.
The parties to a Alabama bond
On a Alabama bond the principal is your licensed business, named exactly as it appears on the license or application. The obligee is Alabama Medical Cannabis Commission. The surety is an insurance company admitted in Alabama, placed by Surety One, Inc. as producer and underwriting manager. Who files in Alabama: Integrated facility license applicants and licensees ($2,000,000 minimum).
Claims, cancellation and renewal in Alabama
If Alabama Medical Cannabis Commission believes the bonded obligation has been breached, it makes a written claim on the surety. The surety opens a file, asks for documentation and notifies you, and you have the opportunity to respond and to cure. A valid, unresolved claim is paid up to the penal sum, and the surety then recovers that payment and its expenses from the business and the individual indemnitors. Because the Alabama obligation is large or carries performance, decommissioning or supply language, a claim can reach the full penal sum, which is why the indemnity agreement deserves the same attention as a personal guarantee on a loan.
Most forms let the surety cancel on written notice to the obligee, commonly 30 to 90 days. If a replacement is not on file before the effective date, the regulator can suspend the medical cannabis license. We send renewal notices 45 days ahead, and renewing at least 30 days early removes the risk of a gap.
Getting a Alabama bond issued, step by step
- Confirm the form and amount. Ask Alabama Medical Cannabis Commission for the current bond form and penal sum, or send us the license type and we will confirm them.
- Apply. Complete the online application. It collects the business details and the name, home address and Social Security number of each owner for a soft inquiry credit report.
- Send financial statements. Personal financial statements from owners of ten percent or more, current business financials and your license application let us quote in about three to five business days.
- Bind and file. Pay the premium and sign the indemnity agreement. We deliver the executed bond to you and, where it accepts electronic filing, to the obligee. Wet signature originals go out overnight.
Keeping a Alabama bond in good standing
- File and pay every medical cannabis tax and fee on time. Delinquent taxes are the most common trigger for claims.
- Keep seed to sale records reconciled to physical inventory, and document every destruction event with photographs, witnesses and waste manifests.
- Tell us before you change the business name, ownership, location or license type, so the bond can be amended by rider before the regulator notices a mismatch.
- Protect the personal credit of every indemnitor and keep quarterly financial statements. Both are reviewed at renewal.
Terms such as penal sum, obligee and indemnitor are defined in the glossary. Changes to Alabama and other state requirements are logged with dates in regulatory updates, and an underwriter is available through the contact page.
What to send us
- Cannabis license bond application
- Personal financial statement from each owner of ten percent or more
- Current business financial statements
- A copy of your complete license application
- Alabama Cannabis Integrated Facility Performance Bond (Form F)
- Alabama Cannabis Surety Verification (Form M)
Send documents to Cannabis@SuretyOne.com or apply online. Confirm the current form and amount with the Alabama Medical Cannabis Commission before you file.
A note on vocabulary: cannabis and marijuana are the same plant and, for bonding purposes, the same business. Alabama law uses the term "medical cannabis". Operators look for this bond as a Alabama marijuana bond, a Alabama marijuana license bond, a Alabama cannabis bond and a Alabama cannabis surety bond. They are one instrument, and this site uses the words interchangeably. See marijuana surety bonds.
Primary sources
Official texts behind this page. We link to citation based addresses on legislature, code and agency sites because those are the least likely to move.
- Code of Alabama, official site of the Alabama Legislature (Title 20, Chapter 2A)
- Alabama Medical Cannabis Commission
Alabama marijuana and cannabis bond questions
Do Alabama cultivators, processors or dispensaries need the $2,000,000 bond?
The $2,000,000 performance bond in § 20-2A-67 applies to integrated facility licenses. Other license categories have their own application requirements. Confirm the current checklist with the Commission before you file, because AMCC has amended its rules and application cycles several times.
What is a letter of bondability?
It is a written commitment from a surety stating that it has underwritten the applicant and will issue the bond if the license is awarded. Alabama asks for it at the application stage so the Commission knows the bond is real before it scores the application.
Is a Alabama marijuana bond the same as a Alabama cannabis bond?
Yes. Marijuana bond, cannabis bond, marijuana license bond and cannabis surety bond are different names for the same instrument. Alabama law uses the term medical cannabis, operators search under all of these names, and the bond form and amount are the same whichever word you use.
How much does a Alabama cannabis or marijuana surety bond cost?
You pay a premium, not the penal sum. The premium is a small fraction of the bond amount and depends on the size and wording of the obligation, your credit and your financial strength. Small compliance bonds carry low fixed annual premiums. Larger Alabama bonds are rated individually. Quotes are free.
Can I get a Alabama medical cannabis bond with bad credit?
Yes in most cases. Surety One does not automatically decline any applicant. Files with damaged or limited credit go to our non-standard program, which carries a higher rate and sometimes partial collateral.
Written and reviewed by C. Constantin Poindexter, MA, JD, CPCU, AFSB, ASLI, ARe, AINS, AIS, CPLP, CICS. Founder of Surety One, Inc., Cannabis Insurance Coverage Specialist, attorney and surety underwriter for more than thirty years. Author of The Contractor's Guide to Surety Bonds. View his cannabis insurance credentials. Last reviewed .