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Buying Peace of Mind with Cultivator Insurance

September 14, 2016

The possibility of losing an entire crop to theft, equipment failure or fire is a sobering thought to any professional grower. Without the proper insurance, such a loss could spell the end your operation.

Fortunately, there are insurance options specifically for cannabis growers. We tapped several industry professionals for their insight into the various types of insurance available, as well as simple practices you can implement to reduce your risk and minimize insurance costs.

Finding an insurance provider

Given the high value of your product, insurance is essential for your operation. According to James Nelson and Cairn O’Donnell, “Insurance protects you from financial loss and manages your risk,” Nelson and O’Donnell are CEO and COO, respectively, of New Growth Insurance, a Portland, Ore.-based firm. “If you’re not insured, then you could lose your entire operation. It would be financial disaster waiting to happen.”

New Growth Insurance logo
However, finding an insurer isn’t always easy. Some of the big players in the insurance industry are reluctant to enter the cannabis market.

“Since the marijuana industry is a new and largely un-litigated industry dealing with a federally regulated Schedule I drug, not to mention unresolved banking issues, it is not surprising to see that the well-known names in insurance are in a wait-and-see mode,” said Bill McKnight, of All Green Insurance. The firm is a wholly owned subsidiary of Prince Insurance Group Inc.

“Luckily, however, there are a few companies in the secondary insurance market that are willing to work in the marijuana industry.”

If your grow isn’t already insured, or if you’re re-evaluating your coverage options, what should you look for in an insurance provider? McKnight, Nelson and O’Donnell all recommend finding a company with experience and proven success in the cannabis market. Finding these agencies can be easy. Professional organizations, like the National Cannabis Industry Association and the National Cannabis Chamber of Commerce, include cannabis-friendly insurance providers in their member registries.

Basic coverage

Your coverage requirements will vary depending on your operation and your personal tolerance to risk. However, at minimum, cultivators should invest in the following coverage types:

  • General liability, which protects against liability claims for bodily injury and property damage, among other things
  • Worker’s compensation, which is required for any business with employees
  • Commercial auto insurance, which should include coverage for hired and non-owned vehicles
  • Product liability for any product you make: This coverage protects against suits alleging damages caused by the use of your products.
  • Crop coverage, which insures against crop damage caused theft, fire and other incidents
  • Commercial property insurance, both for real property as well as business personal property (that is, all the other supplies and equipment necessary to run a business)
  • Equipment breakdown insurance: This type of coverage is vital to preserving your crop. “The equipment to run these operations is the very reason the product is alive,” Nelson and O’Donnell said. “Indoor grows, manufacturing, refrigeration, air-conditioning and lighting, to mention just a few, are what keep the crop producing. If the risk experiences an electrical outage, the whole crop could be lost.”

If you’re leasing a commercial space, your landlord’s level of coverage also plays into the equation. Their insurer’s willingness to work with the cannabis industry could have an impact on your operation.

“Many buildings owners/landlords have found that when their insurance carrier of many years discovers they are leasing all or part of their building to a tenant in the cannabis industry, the insurance company cancels the policy, citing the risk no longer meets the company risk profile or underwriting criteria,” McKnight said.

Reducing your risk, reducing your costs

You can take other steps to mitigate the risks associated with your grow and, in the process, reduce your insurance rates. These include setting up vaults, safes and monitored security systems on-site. Installing fire sprinklers reduces your fire hazards, and putting up fences around your grow can protect your assets. You can also take proactive steps to create a workplace that’s designed to control risk. With this, too, an insurance provider can help.

“Work with an agent who has experience in the cannabis industry to help with establishing a business culture designed to mitigate and control risks in order to reduce your probability of loss,” McKnight said.


By Bridget Manley
Cannabis Cultivation Today articles are for informational purposes only and should not be considered legal guidance or advice on grow practices. You should contact an attorney or a qualified cultivation consultant for specific compliance and cultivation advice.
 © 2016 CAN Performance Group, LLC. All rights reserved.



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