Understanding insurance coverage can be tricky, particularly in the emerging cannabis industry. As a business owner, you must know what kind of coverage meets your unique needs. As your operation changes, so do your insurance needs—so, continual re-evaluation is critical.
Fortunately, there are specialists who can help you navigate these decisions. We’ve spoken with several of them to help you better manage this essential component of your operation.
All companies should carry a basic general liability policy that includes products liability, said Sabrina Roberts, account executive at Specialty Insurance Partners, LLC. Additionally, any operation with employees is required to have workers’ compensation insurance, she said.
General liability insurance is a standard policy that, among other things, protects against liability claims for property damage and bodily injury. Product liability covers property damage or bodily injury caused by a defect in a product you sell or manufacture.
Gerry Jones, VP of marketing and business development for Cannabis Insurance Solutions, highly recommends that your plan also include crop coverage. And, while not critical, obtaining commercial auto insurance or hired and non-owned auto coverage could protect you in the event of an accident.
“We see so many companies that have their employees running errands, including moving cannabis product between facilities,” he said. “Should an accident occur, this puts the company at a serious risk once the parties find out a cannabis company was involved.”
After you have your coverage established, it’s a good idea to evaluate it regularly. The plan that covered your business at startup may no longer be sufficient if you’ve since opened other dispensary locations or doubled your grow.
A good insurance agency will offer a no-obligation review of your coverage, Jones said. Unfortunately, many dispensary owners don’t take advantage of that resource.
If you’re not currently insured, obtaining coverage should be a top priority. In the event of an accident or lawsuit, expenses can quickly mount—crippling or even potentially shuttering your business. For instance, if you are named in a suit, your defense costs could mount into the hundreds of thousands of dollars, regardless of whether you’re at fault. And the lawsuit can drag on for years, Roberts said.
Choosing an agent
In choosing an insurance provider, industry knowledge and experience is crucial. The process to obtain a quote can be “pretty lengthy and complex,” Roberts said. Working with an insurance agent who isn’t familiar with the process or who doesn’t know the regulations and requirements of the cannabis industry could saddle you with the wrong type of coverage or result in a coverage plan with significant gaps.
“For new industries like this, things are always evolving, for both the cannabis operations and insurance,” Roberts said. So, having an agent who’s well-versed in the industry is essential when looking at coverage types and pricing.
Jones highly recommends working with an agency that works specifically with the cannabis industry. “Anyone in the cannabis space should look for a partner that understands their businesses and has the coverages that match it,” he said.
“The cannabis industry is one of the most complex businesses you can get into, and all of your business partners should be very well-versed in those complexities, including each state’s regulations.”
Specialty Insurance Partners, LLC is a Colorado Springs, Colo.-based agency with more than 35 years combined experience in the dietary supplement and nutraceutical industry. It serves the cannabis and hemp industries among other manufacturing companies.
Cannabis Insurance Solutions focuses solely on the cannabis industry and is based in Littleton, Colo. The firm works with cultivators, dispensaries, testing labs, manufacturers, attorneys and realtors.
Rick Cline, Cannabis Insurance Solutions president, and Lisa Chaumont, Cannabis Insurance Solutions VP and senior underwriter, also contributed to this article.
© 2019 CAN Performance Group, LLC. All rights reserved.