In the quickly evolving cannabis sector, securing a robust risk management partner who understands the industry and potential risk exposures associated with your business’s growth is crucial. Remaining compliant to maintain your operating license, mitigating claims from customers, and transferring the financial risk of theft are just a few issues cannabis businesses face. These issues are unique to the industry and specific to each company, so you need tailored solutions that accurately reflect your business’s risk profile.

As the cannabis industry expands, so do the regulations. It becomes increasingly difficult for businesses to avoid risk exposure. Additionally, there are unique risks that cannabis businesses face. The tiniest issue can lead to an expensive lawsuit or loss of your business license. The legal statutes of both medical and recreational cannabis are in constant flux, so your business’s success depends on securing insurance coverage that can help you stay on the right side of the law.

Importance and Function

The emerging cannabis business sector offers a unique set of challenges and risks to obtaining proper coverage for businesses. Conflicting state and federal laws, regulations, and the reluctance of major carriers to get involved with the cannabis industry can be tricky obstacles in finding the right insurance policy. Many are faced with purchasing substandard policies that may leave gaps in their coverage.

It takes too much time, capital, and headache to run your cannabis business smoothly to settle for less than a top-notch, tailored insurance program, with an agent who is an expert in the industry. They can create a plan that covers the details that really matter for your business. Each policy can have unique terms; with endorsements or removed exclusions to adequately cover your risks. A savvy broker who understands the industry will navigate these terms to match your exposures. The foundational insurance policies that cannabis companies should obtain to mitigate and transfer risk are:

Commercial General Liability

General liability protects cannabis businesses and their assets from bodily injury and property damage claims from third parties that occur on your property.

Product Liability Insurance

This policy provides coverage if you are held liable for the product allegedly causing bodily injury or damage to a third party. For the cannabis industry, this is a complex, evolving issue since there are various license types.

This protection offers coverage if the consumption or use of products causes illness or unwanted side effects.

Commercial Property Insurance

Commercial property insurance will cover property such as buildings, contents, equipment, and personal property from fire, theft, and natural disasters.

It may also cover loss of income caused by these perils, which is critical for cannabis companies as the equipment needed is often extremely expensive and could create a massive loss if not appropriately maintained. Also, the finished inventory should be insured since this is the lifeblood of the business.

Crop Insurance

This will protect a cultivator’s crop, insuring it against indoor and outdoor hazards such as fire, soot, water, and fluctuating climates. Utilizing property and crop policies together helps mitigate a large portion of the risk.

Director’s & Officer’s (D&O) Policies

This covers defense costs and damages from wrongful acts, allegations, and lawsuits brought against the board members and/or officers. It will protect them from lawsuits and litigation.

Employee Protection Liability Insurance (EPLI)

Protect your business from potential employee-related claims relating to:

  • Discrimination
  • Harassment
  • Failure to promote
  • Wrongful termination

Workers’ Comp

Employees are exposed to risks related to your cannabis business, and if they become injured in the workplace, this protection covers medical care and lost wages.

Cargo Insurance

This will protect items transported by your business or for your business. It will cover the loss of the cannabis product if it is lost, damaged, or stolen while being loaded, transported, or unloaded.

Cyber Insurance

Technology is heavily integrated into most cannabis business operations to keep records, if not for anything else. On the customer-facing front, being compliant with HIPPA regulations is crucial, as businesses are legally liable to protect this data. Cyber insurance policies help mitigate the risk of losses resulting from being hacked or from data breaches.

Property Insurance

This will protect the inventory from the perils of fire, theft, and natural disasters.

The Manufacturers

Those who are manufacturing also encounter significant regulatory requirements associated with licenses based on the inherent risks. Processing cannabis biomass often may alter the product’s value, and mistakes can lead to substantial losses if the entire plant is not utilized to its full potential. Additionally, manufacturing equipment is costly and should be protected. Equipment breakdown language can even be added to strengthen the value of the policy further.

About Thayer Innes and Freeman Bunting Insurance Agencies

At Thayer-Innes Insurance Agency and Freeman Bunting Insurance Agency, we strive to provide comprehensive insurance solutions to support Ann Arbor homeowners. Our homeowners’ policies can be tailored to meet your specific risk exposures and provides much more coverage than a traditional policy, giving you the peace of mind you deserve. For more information about our products, contact us today at (855) 395-6316.