Insurance for Cannabis Related Businesses (CREs)
Our insurance agency can provide coverage for general liability, lessors risk for cannabis operations, workers compensation, and even Cyber or Employment Practices Liability Coverage. Take a moment to review the various types of coverage we can consider for your respective marijuana based business.
Coverage Available
General Liability
Although typical businesses may need $1,000,000 per occurrence and a $2,000,000 general liability aggregate, your growing operation or dispensary probably needs significantly higher limits of coverage; $5,000,000 and even $10,000,000 or regular and customary limits of insurance as it relates to dispensary and cultivator insurance programs.
Product Liability
Occasionally this coverage can be included under the same coverage section as the gl. It’s important you double check your current cannabis policy to see if the product liability coverage is included. Production Liability Insurance is super important for companies that make, sell, or distribute products, especially those in cannabis related businesses. If a consumer makes a claim that a product made them sick and this product came from your business, Product Liability Coverage is what you will need (amongst some other key coverages, too), to make sure that the assets of your corporation are protected. There are many other factors to decide and discover when it comes to choosing the right type of insurance coverage for your business. Give us a call today!
Professional Liability or Malpractice Based Coverage
Most certainly if you are in the business of prescribing medical marijuana to patients you would have medical malpractice based errors and omissions coverage (otherwise known as Professional Liability Insurance). However, for those that are on the retail side or growing side, this type of coverage could be a good idea as it could include a number of different coverage option: 1) Improper labeling 2) Infringement Type Claims where an allegation of intellectual property theft is made 3) Misreading an identification card resulting in wrongful and wrongful dispense claim.
Business Loss or Business Overhead Expense
Having access to your store, your warehouse, and ultimately your land is critical for the survival of your business. Let’s face it, if you couldn’t open your store this morning due to a small fire in the grow room, your business could be in serious jeopardy if the doors remained closed for too long. If you already have property insurance chances are that will take care of getting the cost of repair taken care of, but what about the lost revenue due to your store being closed? Without business loss coverage, sometimes referred to as business overhead expense, your cannabis operation’s future could be in jeopardy. How will your business pay for rent? Employee salaries? License Agreements? How will your business plan to pay bills if the dispensary is closed due to a fire? This is why you need Business Income Loss Insurance.
Stock Coverage
When you are in the marijuana cultivation business, liability only coverage is not an option. CRB’s need 1st party property coverage sometimes referred to as Stock Coverage or medicine coverage. This coverage will help indemnify your CRB in the event of your stock getting damaged or stolen. Many policies will exclude a significant amount of perils so its super important you read the entire application, proposal, and insurance policy to be sure you know what you are getting. Even when you get insurance with us, we still have limitations and coverage gaps that need to be considered. Talk to us today about your CRB!
Coverage for Medicine
Consists of 1st party property coverage for flower and other similar types of inventory related to your medical marijuanaoperation.
Product Recall Coverage
Does your cannabis operation manufacture vapes or vape pens, syringes, or some other type of THC delivery device? Having recall coverage in place would pay to help notify the affected parties and coordinate the return of the affected devices. This coverage usually only extends to 3rd party types of claims. Whereas a 1st party type of claim would be to actually have the affected vape pen or other device be replaced by the insurance company – such insurance is not included under the typical Product Recall coverage form.
Crime Insurance
We don’t like to think about it but without this type of coverage for 1st party theft, any loss you sustain due to the criminal activity of your employees would most likely be denied.
Sexual Abuse and Molestation Coverage
No matter your political views, world views, or favorite ice cream flavor, problematic sexual behaviour is being ‘outed’ by those courageous enough to share. Although all business owners have a responsibility to hire responsibly, many simply have no way of telling if certain behaviors will be exhibited by current and future employees. In the event an allegation is brought against the dispensary or cultivating facility for the inappropriate touching of a staff member by another staff member, sexual abuse and molestation coverage is the only coverage line item that will help fund counsel and a limited amount of coverage for damages.
Water Damage and Flood Insurance
The Lurking misfortune of commercial package policies and business insurance policies (and of course for personal home insurance, but that’s on another webpage of ours). Click here to learn more about protecting you and your business from claims due to water damage. Did you know that if your stock is damaged due to a roof leak you probably won’t have coverage for the damaged cannabis products? Not to be a debbie downer but so many policies do not cover these types of claims. Unfortunately, coverage may not be available for your business property that is damaged due to a water leak from a gutter, downspout, or crappily installed roof. If this sort of claim worries you, the most important thing you can do is make sure you get your landlord to fix the roof problem or downspout problem because even the best policies in the world may still not cover these types of claims for you.
Medical Marijuana Businesses Eligible for Coverage
Marijuana Dispensaries
The retail side of the CRB industry. Typically storefront operations or stand alone buildings make up the majority of this classification. Different forms of Consumables could include : Pills, Extracts, Shatter, Wax, Oil, Budder, Resins, Liquids/Tinctures, Skin Ointments, Band-Aid type patches and whole or ground flower.
Cultivators and or Farming Operations
In the business of growing medical marijuana? Whether using farmland or indoor greenhouses, the risks could be widely different when growing product for research or sale.
Manufacturing
Vapes, Electrical Apparatus, Delivery Systems, and other ‘adult’ devices don’t need to be 100% assembled by you for you to be considered a manufacturer. Insurance Companies usually ask questions like, ‘are you helping to assemble any of the products sold?’ or ‘do the business re-label or place their own branding on products manufactured elsewhere?’
Testing Laboratories
Within a regulated pharmaceutical type of industry, such products developed need extensive research and testing. If this is your business type, we have accessible insurance options. Usually the underwriting is more extensive with the regulated testing of products, however we can help find a solution that fits your needs.
Research and Development
Similarly classified as medical marijuana testing labs, these outfits will certainly need some form of professional liability insurance. Otherwise known as malpractice insurance or errors and omissions, this type of insurance can help labs and other medical cannabis facilities protect their assets against their failure to do, or the failure to do something properly, among other types of claims.
Seed and Propagation Consultants
Every plant needs to start somewhere. Within the medical marijuana community there is much effort in the field of studying cultivars and the genetics of the plant’s respective seed. If your canna business genetically modifies, tests, or comes up with new types of seeds, chances are you will need Professional Liability amongst many other types of coverages.
Distillation Companies
With the onset of medical canna being legalized in many states and commonwealths in the United States, this type of business will extract oils and other waxes from medical marijuana flower for use in various devices for which the distillate can be consumed (i.e. by vaporizing, burning, or ingesting, etc).
Holding Companies
Often we find multiple corporations being involved during the growth of a medical marijuana business. One LLC may own the property/building and then another ‘C’ Corporation owns the vehicles used to transport the canna. Perhaps another ‘S’ Corporation or Partnership owns the license and rights to specific strains. A different company altogether could be renting space to run the dispensary. This type of structuring is normal and customary but it is important you get your bases covered effectively. Talk to your broker and determine the best option for your corporate structure.
Trucking and Transportation of Product
This can be an extremely troublesome area as federal law is still different from state laws. That is, the transportation from outside of the U.S into the U.S. would certainly be a problem. Further, in many cases even transporting the cannabis between New York and New Jersey (as an example) could result in a felony. Due to such a problematic issue, the states where cannabis has been legalized has mostly legalized the legal transportation of legal cannabis within the state only. Each individual state varies greatly with the laws and legislation passed.
Advertising and Marketing Companies
Arguably the most important coverage within the business type is the set of coverages called ‘Personal and Advertising Injury.’ However, you will find that when an underwriter properly classifies an Advertising Firm as such, the resulting general liability coverage will exclude ‘Personal and Advertising Injury,’ but all of the other coverages typical to the general liability form remain intact. The reasoning behind such an exclusion is that because the advertising company is in the business of the specific coverage in question, the peril becomes a professional exposure that would need covered under a professional type of insurance policy known as malpractice, errors and omissions, E&O, and professional liability insurance.
Types of Insurance Available for Cannabis Related Businesses
Property Insurance
Coverage for your real property (building) and business property. We can also offer inland marine and coverage for rented equipment.
Marijuana Medical Malpractice
We discuss this topic in various sections on this website. E and O coverage is typically class specific so a ‘blanket’ malpractice type of policy that covers all of your efforts is usually not possible. I would say impossible but there could be some insurance carriers out there that would provide an ‘everything’s covered’ type of policy for beaucoup dollars, but we still have not found one yet.
Professional Liability
Coverage for your professional recommendations or your professional failures comes from professional liability insurance. Hence the reason behind the same coverage named ‘Errors and Omissions Insurance.’ Many titles are used to represent this specific coverage set but it is almost never included with your standard general liability insurance policy. You will find most insurance agents will have this type of coverage, doctors of course, attorneys, those distributing intellectual property, just to name a few. There are times when professional liability may be a more beneficial coverage as compared to general liability in very specific circumstances. Talk to us today, we can get you insured.
Product Liability
This coverage may go unnoticed for some businesses, but for those businesses in the medical cannabis industry, it’s super important. As an example, say one of your vape cartridge manufacturers mistakenly cleans their containers with a chemical not suitable for human consumption. If people become sick upon consumption, not only will the vape maker be put on notice but most likely you will also. Remember, not everyone sues everyone to make a buck; some have to sue in order for medical bills to be paid, or for their home to be retrofitted. Your best coverage is meant for those that unequivocally need it.
Extra Expense and Loss of Income Coverage
Admittedly, there are so many important coverages to consider, this is no exception. Fortunately for most businesses the loss of income types of coverage would be included under your commercial property set of coverages (that is, if you are a small business owner). If you are a business that pushes north of $1,000,000 in annual revenue you need to have a conversation with your insurance broker about this coverage set especially because it may not be included. If you are a dispensary or a cannabis related business this coverage is extremely necessary.
Cyber Security Insurance
Every business owner needs to consider adding data breach and cyber attack coverage into their portfolio. Let us share a personal experience as an example: Our agency can provide both personal insurance and business insurance in most states-we are about 60% commercial lines and 40% personal lines in terms of premium dollars. In 2021, we had 5x the amount of cyber attack calls than home fires. It’s getting more and more difficult not to make this coverage front and center. Could it be more important than general liability? We are happy to discuss this interesting topic with you. Call us today!
Cannabis Cultivator Insurance
Do you currently own acreage and are thinking about converting some of your crops from a traditional source of revenue to a marijuana related crop? Perhaps you are already well seasoned in the canna business and already have an operation under roof. Whatever the situation is, we can help. We look forward to hearing from you.
Workers Compensation and Employers Liability
Did you know that Workers Compensation will pay for your injured employee’s medical bills if they were hurt while working under your employ? You probably knew that but did you know that the insurance company’s limit of insurance as it relates to your employee’s medical bills is unlimited? Did you know that? In other words, if one of your employees lost the use of their legs due to an accident at your business and the medical bills reached $5 million, the workers compensation insurance company is obligated and required to pay the bill. Now, if the employee claims you put them in a precarious situation and exacerbated the injury (negligence) the employer’s liability is the coverage that would kick in to protect the business owner. Make sure you read and internalize your workers compensation policy because some do not include the employers liability coverage automatically.
Kidnap and Ransom
(seen on Directors and Officers Insurance) – This type of coverage is getting more and more difficult to purchase as D and O is getting ludicrously expensive for marjiuana type businesses. K&R based coverage utilizes the expertise of crisis managers and hostage type negotiators. Some of the coverage available include workplace violence and active shooter type situations.
Hired and Non Owned Auto Liability
We strongly suggest all businesses have this type of coverage whenever possible. An underestimated asset saving protection mechanism.
Physical Damage for Hired Cars
(Rented Vehicle Physical Damage Coverage) – The coverage will pay to fix the vehicle you are legally required to fix. Keep in mind this coverage only applies to the vehicles you ‘hire’. An example of a ‘hired’ car would be when you rent a vehicle from Enterprise through your business. You may think that your personal auto insurance or commercial auto will pay to fix the vehicle you are renting, but buyer beware.
Excess Liability Insurance
Typically this coverage should list the specific underlying policies of the CRB.
Product Recall Insurance
Coverage can apply to vape manufacturers and other types of devices adult and otherwise.
Event Based Insurance
For Trade Shows and Exhibitions or even music festivals and concerts. Review the other pages on our site for a more deep dive into our Event and Concert type of coverages.
Brief History of the Cannabis Insurance Industry
Short Story - ‘Backpack full of Cash’
Our first cannabis account was a workers compensation insurance policy for a dispensary down the street from our offices in downtown Los Angeles. It was at a time when there were no banks that would knowingly accept deposits from a dispensary. I knew we had a duty to get insurance in place for our customer but I had some obstacles. Figuring out how to make sure the insurance companies got paid was going to be tough. Further, I wasn’t even sure if our bank would accept our deposit without question. At Kelly Insurance Group, we get insurance issued for those that need our help and respect our expertise, no exceptions. I was going to have to deposit a significant amount of cash into our agency trust account at the bank. At the end of the day that is the most important item in the insurance contract, getting the premium/cash in the carriers’ hands. If the insurance carrier makes a formal offer of insurance and that offer can be accepted in the form of premium, we need to get the premium in the carrier’s hand to solidify that contract. I knew that my customer would be giving me $17,497 in cash, which of course could be an issue. I was thinking, ‘I’m in LA, I only own a motorcycle and having a backpack filled with cash while on a crotch rocket looking thing could be troublesome on pretty much every level imaginable.
The meeting with the customer went as planned and I loaded up the cash in my jansport pink backpack. Looking back at this situation, an armoured personnel service would have been a better plan, but the only concern on my mind was getting the premium to the carrier (we do things differently now, safer but we still accept cash 🙂 ). You tend to get a little excited when it’s your first deal in a newly discovered territory, you want to make it happen.
Next thing, I leave the appointment and get on my bike to head back to the office. I call the bank and let them know I have a cash deposit of over $17,000. To my surprise the clerk on the phone said, ‘thanks for letting us know, when you come into our branch see the associate in the 2nd office to your right, they can take the deposit.’
This was my first cannabis related business insurance account. Then came SAFE, and thank goodness.
Important Links and Definitions for Cannabis Business Owners that love Insurance
NAIC
Outlines recent updates to the cannabis industry as it relates to insurance and financial matters. There are great links that continue to be a resource to our agents and staff.
NAIC Cannabis Insurance Working Group
Specifically this group has a sub committee specifically referred to as the Property and Casualty Insurance Committee. They have a great calendar of events, please check it out.
SAFE
Otherwise referred to as the Secure and Fair Enforcement Banking Act of 2021 or the SAFE Banking Act of 2021. To sum it up, this bill pretty much makes it do-able for a Cannabis Related Business to have a legitimate bank account. This legislation passed on 04/19/2021 finally allows CRB’s to conduct their banking needs just as any other main street business. Click on the link above to read the specific bill discussed.
CLAIM
The Clarifying Law Around Insurance of Marijauna Act discusses the ability for insurance companies to conduct business in states or commonwealths where legal medical cannabis and recreational marijuana has been legalized. The act aims to expand availability of insurance options to owners and purveyors within the legal marijuana community.
Farm Bill of 2018
The Farm Bill of 2018 removed a derivative of the marijuana plant from the list of controlled substances. The Farm Bill of 2018 removed hemp from the controlled substances list.
About Us
At Kelly Insurance Group, we get insurance issued for those that need our help and respect our expertise, no exceptions.