Cannabis And Hemp Industry Insurance
Insurance coverage is a necessity for businesses in every industry, cannabis and hemp related ones are certainly not the exception. But of course, insurance in the cannabis industry comes with its twist and many complications, as most things in this industry do.
It is no secret the cannabis business is skyrocketing, many states have now legalized both medical and recreational marijuana and many more are close to take that step later this year. Nevertheless availability of insurance coverage for the cannabis industry remains in flux.
The issues surrounding cannabis insurance are mostly due to the constant changing regulation, lack of data, and many banking restrictions. Still, this industry may offer an even higher reward to insurers who overpass the complexities Federal illegality of the industry brings.
A comprehensive insurance program may be your best protection against the many risks you face on a daily basis as a cannabis entrepreneur, here is what you need to know when deciding to insurance your business.
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What challenges do cannabis companies face when finding insurance?
While the industry is growing, insurance coverage is having a hard time to keep pace with its risk management needs. Conflicting state and federal laws have made insurance carriers reluctant to write cannabis policies, resulting in higher prices.
Although the stigma and uncertainty of the cannabis industry has decreased in the past years, and education has become and incredible asset to the discussion of legalization of cannabis, it is still a very difficult industry for insurance companies to get into.
Not only the regulations change drastically from state to state – since states don’t have the same regulatory environment for cannabis – the insurance industry is forced to address those differences in terms of coverage and policy making.
Even with the reputation risk being a much lesser concern, the fear of federal prosecution of financial and insurance institutions if services to legitimate marijuana businesses are provided has played a major part in making insurers avoid adjusting their policies to accommodate cannabis business protection for fear.
In reality, since insurance companies are regulated by state no on a federal level, there shouldn’t be any risk as long as the insurance companies and their clients comply with state regulations and always operate in-state.
What Risks Do Cannabis and Hemp Business Need To be Protected From?
As the legalization of both medicinal and recreational cannabis continues to grow, manufacturers, distributors and retailers, have to be prepared to deal with the controversy of the industry that points to risk management implications.
Incidents that impact cannabis businesses can cause irrevocable financial and reputational damage:
Product liability includes but is not limited to breach of warranty, failure to warn, label claims, misrepresentation, fungus, pesticides, and vaporizers.
Claims of illness caused by products, manufacturing or product-related defects that result in a loss, and damage because product misuse are very common occurrences in the cannabis industry.
A recent vaping crisis has increased the risk exposure and coverage gaps. Insurance carriers are now adding more exclusions for vape products, premium rates are increasing for product liability coverage.
Theft and Fraud
Many cannabis businesses remain cash only and that is a significant part of risk exposure for the industry, since they become the prime targets for theft and fraud. Also, the nature of these businesses makes them specifically vulnerable to theft.
Standard general liability policies, needed by all other businesses to protect themselves from lawsuits, were not created with the cannabis industry in mind, and since there is so much legal uncertainty it may be difficult for insurance companies to offer adequate general liability for those cannabis businesses that need it.
Crop loss is coverage for crops in the event of loss or damage by insured perils including fire, lightning and hail. It does hold an area for risk exposure in the cannabis industry different from other businesses.
Fire, theft, and sprinkler leakage are common threats most indoor crop insurance policies cover. Buty cannabis growers experience different threats as well, such as mold, rot, disease, changes in climate, or fertilization problems.
Because of recent natural disasters, outdoor coverage has become hard to find and those insurance companies with such policies have increased exponentially the prices. The lack of available outdoor crop insurance is one of the biggest gaps in cannabis business coverage.
What cannabis related industries need insurance coverage
- Cultivators: Cultivators are confronted with a wide range of risk challenges including fire, theft, equipment breakdown and other inherent risks that impact the business.
- Manufacturers: Manufacturers of hemp and cannabis products carry many of the same standards and regulatory requirements as other types of vendors. They require insurance protection such as product liability and product recall.
- Dispensaries: Many retail stores of everyday consumer based products require insurance to protect themselves from burglary, vandalism, fire and other hazards that could strike at any moment, cannabis dispensaries are not the exception.
- Ancillary businesses: Many ancillary businesses require insurance protection and they still suffer from the challenges and uncertainties all cannabis businesses face. They require general and professional liability, property, products and workers’ compensation insurance, among others.
- Testing laboratories: Not properly insuring your cannabis testing lab could lead to massive financial losses that many business owners wouldn’t be able to recover from. testing equipment, computers, documents, or samples are expensive and important property that could be damaged in a fire, burglary, or other unpredictable events
- Landlords: Landlords that support cannabis and hemp industries are also exposed to inherent challenges of the industry that put their businesses in risk.
What is Cannasure?
In this Cannabis Legislation News episode we had the opportunity to talk to Patrick McManamon CEO of Cannasure, a cannabis insurance company that has been serving hundreds of cannabis businesses since 2010 and mitigating the challenges they face when trying to get insurance coverage
Their understanding of the industry and many years of expertise analyzing the unique risks facing the cannabis industry gives them a leverage to best serve cannabis and hemp related businesses.
The origins of Cannasure can be traced back to one of our oldest friends who was in the process of opening a medical marijuana cooperative in Southern California. During one of our weekly conversations, we discussed the trouble he was having securing business owner’s insurance at a reasonable cost. We offered to take over the search and report back to him on our findings. With that, we became involved in this complex industry.
We saw, first hand, that the stigma against the burgeoning marijuana industry was strong, but not based in fact. We also quickly became aware of the many brokers and agencies looking to make a quick buck without understanding the true needs of the businesses in the industry. We knew something had to change, and we were the ones to do it.
Don’t miss out on our Marijuana Legalization Map where you can browse the current status of laws in every state in the United States and see all our posts on each of them.
- Tom Howard at CannabisIndustryLawyer.com
- Miggy at Cannabis Legalization News
- Cannasure at Cannasure.com
Interested in coming on as a guest? Email our producer at [email protected].