Cannabis Insurance Coverages

Coverages available for cannabis businesses

General Liability

General Liability can protect you from a variety of claims including bodily injury (“slips, trips and falls”) property damage, personal injury and other situations that may arise including slander, libel, copyright infringement and more.  Depending on what state you operate in, and your lease requirements, it may or may not required.

Because General Liability is not always required, we understand the temptation to forgo the expense.  As an insurance brokerage, we are also aware that the unforeseen happens more often than most realize, which is why we encourage business owners to put the right coverages in place in order to ensure a successful operation for years to come.  A simple, single accident can quickly escalate into a lawsuit that is both time-consuming and costly.  By obtaining General Liability, you are investing in protection that is far less expensive than what may result if such an event occurs.

Product Liability and Withdrawal Coverage

Product Liability provides coverage in the event that you are found liable due to a defective product.

It’s important for you to know that it has become increasingly common for litigation to go after every operation that had involvement of the compromised product, tracing back from the point of sale.  In the event that a consumer becomes sick, is involved in an accident, commits a crime, experiences “side effects,” or other mishap related to the product you could be held liable regardless of where your operation falls within the supply chain.  Due to heightened media attention, varying laws and the remaining conflict between federal and state regulation, cannabis businesses have become easy targets for lawsuits.

If you were to face a product liability claim, one of the best actions you can take is to withdraw your product.  This is a radical step that a company can take to respond favorably to the notice of a defective, or potentially contaminated product.  The process of withdrawing a product is much more expensive and stressful than most realize and by having withdrawal coverage in place, you can position yourself to proactively prevent greater losses.

Business Auto

A Business Auto Policy provides coverage in the event of an at-fault accident, covering injuries and damages for third parties.  It offers comprehensive and collision coverage, covering any damages to your work vehicle, regardless of fault.  Business Auto also insures you in the event you are hit by a third party without insurance.

As a cannabis business owner, it is important for you to know that a regular business auto policy may not cover you and the items you are transporting unless you disclose that you are transporting cannabis, or work with a cannabis operation.  There are very few insurance carriers who will provide insurance for cannabis businesses which is why it is extremely important to work with an agent who specializes in the industry.  Also, many business owners believe that personal auto policies will suffice; however, that is not the case.  Keep in mind that if you, your employees, or hired help is using their vehicle for work (whether they own it or not) it is paramount for you to have the right policy in place in order to ensure coverage.

Workers Compensation

Workers Compensation provides coverage in the event of an employee injury, or fatal accident.  Most states require it.

To put it plainly, if you have one or more employees, you need Workers Comp.  In most states, failure to have Workers Comp results in punitive action resulting in exorbitant fines and the state may choose to completely shut down your business.   It’s also important for you to know that General Liability will not provide coverage in the event of an employee related injury or death as it only applies to third parties.

Many cannabis businesses choose to bring on “helpers” in exchange for a small wage, product, or both.  If your helper is supervised, instructed, can quit or be discharged at any time and/or performs work as part of your regular business, it is likely that the state would deem your helper as an employee.

Property Insurance

Property insurance can provide coverage against damage and loss of income caused by fire, theft, and vandalism.

If you operate in or own a structure such as a building, greenhouse or another structure type, it is important that the details of your property insurance policy are correctly written for your business.  There have been many cases in which insurance claims have been denied due to “minor things” such as misclassification of business type, or failing to disclose that the business is a cannabis operation.  In some instances, these oversights have been on the side of the agent which is why it is important to work with an agent who specializes in the cannabis industry and looks out for your best interest.

Crop Coverage

Crop Coverage is insurance for damage to, or loss of cannabis crop, harvested plants and finished stock in the event of:

• Theft
• Fire
• Explosion
• Vandalism
• Equipment breakdown
• Environmental Control/Monitoring System malfunction (greenhouse or indoor)
• Automated pumps & compressor failure
• Interruption of service

These coverages apply to:

• Seeds
• Seedlings/Clones
• Vegetative Plants
• Harvested Plants
• Finished Stock

Cannabis is a perishable good and in the event that equipment breaks down, or other mishaps the losses can extend beyond product and equipment.  When it comes to harvesting cannabis, “time is money,” and coverage for “interruption of service” can make a big difference in recovering from an unforeseen event.

Crop Coverage is available for indoor grows and approved greenhouse facilities.  Outdoor grows can obtain crop coverage once the product is brought to a secure location for drying and processing; however, coverage is not available at this time for outdoor crops.  Coverage is calculated based on the information you provide us.  It is determined by your estimated number of harvests per year, how many ounces you produce per plant and the average wholesale value of the plant and the number of plants at their different stages of the growing cycle.  That might sound like a lot of details…don’t worry, we’re here to help.

Cargo Coverage

Cargo coverage provides you the protection of items in transit.

In the event that your product is lost, damaged or stolen while being loaded, transported and unloaded Cargo coverage can help you recover the loss in such an event.  If your operation transports items via hired delivery, additional coverage is available to further protect your investment.  This protection will support you in the replacement of cargo and income loss replacement for loss / irreplaceable cargo.

Because the value of the cannabis product transported by cannabis operations vary, we will take the time to find out more about the product you transport and can provide coverage type and limit options that fit your needs.

Equipment Coverage

Equipment coverage is an additional coverage added to your property policy to recover from equipment damage or loss due to fire, theft, and vandalism of or within the facility.

Equipment coverage is different than Equipment breakdown insurance

It’s no secret that the equipment you own and operate is expensive.  When it comes to equipment, most cannabis operation owners are already aware, that at some point, the equipment will probably break down.  What is often not considered is the likelihood of damage, or loss of equipment due to “outside factors” such as fire, theft or vandalism of the facility.  An Equipment Coverage policy can pay for replacement or repairs of that expensive equipment.  Let’s not forget about time.  When equipment is down revenue is lost.  When you’re dealing with facility and equipment repairs or replacement that can take up a lot of time.  This can be especially bad if you have to figure out where to get the money to get up and running again.

Equipment Breakdown Insurance

Equipment breakdown coverage provides coverage for equipment failure and damage or loss to cannabis stock due to that failure.  Coverage applies to events such as power surges, burnout, malfunction, and user error.

When equipment fails, the hassle and expense are difficult enough.  Often cannabis stock is lost in the process and things add up quickly.  To make matters worse, as long as the equipment is down, you are losing revenue.  By having the right protections in place, you can have your business back to full operation as fast as possible.

There are additional, relevant coverages that you may consider such as business income and extra expense to help you reduce the chance of income loss while your equipment is being repaired or replaced.

Business Income & Extra Expense Insurance

Business income and Extra Expense covers you while your business operations are suspended as a result of a covered cause.  Business income insurance pays for the actual loss of business income or profits that you sustain due to the suspension of your business operations as a result of damage or destruction to your property.  Extra Expense insurance covers expenses that you would not have incurred if there was no damage.

When something goes wrong, in addition to the obvious expenses, there are usually additional, unexpected expenses that arise.  Even for the well-prepared, these unexpected expenses can be detrimental.  This might include expenses such as running your business from a different location, or other expenses such as rent, utility, payments, taxes and more.  Business Income and Extra Expense insurance is a great way to recover expenses as if there was no effect on your business income stream.

Errors and Omissions Insurance

Errors and Omissions (E&O) is professional liability coverage that protects your business in the event you’re found legally responsible for faulty advice or negligence related to your service.

If your cannabis operation makes recommendations of any sort that could lead to an unforeseen mishap that is traced back to “faulty advice,” or “negligence,” you may find yourself facing liability claims and expensive litigation.  Furthermore, situations like this can quickly ruin your company’s reputation.  While dispensaries and laboratories are the operations that are most at risk for this type of scenario, our cannabis insurance agents will take the time to find out about your business type and help you determine if E&O insurance is relevant to you.

Your Next Best Step…

As you can see there are a lot of available coverages. Because every Cannabis Business is unique, the next best step is to contact us, The Cannabis Coverage Company, today to find out how to protect your investment.

Contact The Cannabis Coverage Company.