Gilbert Insurance Answers the Most Frequently Asked Questions About Cannabis Insurance
Gilbert Insurance Commercial Lines Account Executive David Gilbert, Certified Insurance Counselor, has been advising clients in the cannabis industry and developing strategic partnerships throughout the cannabis insurance marketplace since 2017. As a result, Gilbert Insurance clients have access to multiple cannabis insurance providers and an array of coverage options.
Whether you’re a cannabis retailer, manufacturer, cultivator, delivery service, or landlord, or your work is related to the cannabis industry in some other way, we are here to answer all your questions and find the insurance coverage that is best for your business.
Frequently Asked Questions About Cannabis Insurance
Below, David answers many of the common questions clients ask him about cannabis insurance, including “What businesses need cannabis insurance?” and “What does cannabis insurance cover and cost?” However, for information and advice tailored to your specific company and needs, please email David or call his direct line at (781) 909-7143.
If your cannabis operation fits into any of the following classifications, then you should speak with an insurance agent who services the cannabis industry to make sure you have the right cannabis insurance coverage in place.
- Cannabis Retailer
- Delivery Operation
- Product Testing Facility
- Property Manager, Landlord, or Building Owner leasing space to a cannabis-related business
The type and amount of insurance coverage you need might may vary based on the size of your company, how it’s structured, whether your product is used for recreational or medicinal purposes or both, and whether you’re a for-profit or nonprofit operation. However, they all have risk exposures that the right cannabis insurance policy can go a long way in helping to mitigate.
One of the first things to look at when determining the type of insurance product(s) your business needs is whether your state has any specific requirements for cannabis-related businesses like yours. In Massachusetts, for example, the minimum insurance coverage that operations like yours are required to obtain includes general liability and product liability. That’s why it is important to consult with an insurance advisor on the various products available to protect your investment.
You and your cannabis insurance professional should regularly be evaluating the following coverage options.
- Commercial Auto
- Crop (Indoor/Outdoor)
- Commercial Umbrella
- Cyber Liability
- Directors and Officers Liability
- Employment Practices Liability
- Equipment Breakdown
- Errors and Omissions
- Excess Liability
- Earthquake, Wind, and Flood (mono-line coverage)
- Pesticide/Herbicide Applications Endorsement
- Premises Liability
- Product Liability
- Surety Bonds
- Workers’ Compensation
The majority of insurance providers are reluctant to insure cannabis operations. However, since 2017, Gilbert Insurance has been developing relationships with a select group of cannabis insurers who do offer our clients a variety of coverage options.
Traditionally, in the standard market, if an insurance carrier wants to sell to customers in Massachusetts, the carrier has to jump through the state’s regulatory hoops, file rates and forms, and get them approved. In addition, if a traditional insurance company goes out of business, the state generally backs all the policyholders and ensures that coverage continues through the end of their policy term.
For the most part, in the cannabis marketplace, none of these consumer safeguards exist. Instead, cannabis insurance carriers determine their own rates and forms. In addition, many policies contain exclusions and limitations that can differ widely between carriers and can significantly expose your business to risk.
For these reasons and more, it is extremely important to work with an insurance agent who has expertise in navigating this unique cannabis insurance marketplace and has built relationships with reputable cannabis insurance companies. An experienced cannabis insurance agent should be able to find the carrier that is the best fit for you and your business, even in a complex marketplace. They should also have the knowledge to identify gaps in coverage and provide solutions for those exposures.
While the cost of your cannabis insurance program is going to depend on several different factors, there are some key factors that you and your agent can use to estimate your rates, even before getting a quote.
The following chart shows five common cannabis insurance coverage options and the basis that insurance carriers use for setting the cost of a policy premium.
Please scroll right to view table details
|Insurance Coverage||Cost Basis||Example(s)|
|Product Liability||Gross Annual Sales||How much revenue is derived from the sale of your product|
|Property Coverage||Replacement Cost||How much it costs to replace a building or other asset that you are covering|
|Business Interruption||Profit and Continuing Expenses||How much it will cost to keep your business running and make a profit|
|Crop Coverage||Replacement Cost||How much it would cost to replace your crop at the time of loss|
|Workers’ Compensation||Payroll Exposure||How much you spend on payroll|
At Gilbert Insurance, we can give you a projection of your insurance costs almost immediately. All you need to do is call David and provide him with minimal information about your business. While he may be able to give you only a rough estimate of your insurance cost, it should still help you figure out what you need to budget for your insurance expense.
Businesses that manufacture, distribute, sell, or transport CBD products have very similar insurance needs to cannabis-related businesses. However, their level of risk and types of exposures can be very different. Insurance policies for CBD companies tend to be less restrictive—meaning there are fewer exclusions and limits—and easier to access.
The coverage provided by a cannabis crop insurance policy is very similar to the coverage in a commercial property policy, which protects a building and/or the business property inside from a variety of covered perils, such as fire, lightning, windstorm, theft, and explosion. No matter what phase of the growth cycle your crops are in, if they are damaged or destroyed by any of these threats, having crop insurance should help you replace them.
Just as important, we want you to understand what is not typically covered by crop insurance. If your losses are due to infestation or mold, an error by your head grower, or poor maintenance and handling by your staff, then you typically will not be able to make a claim against your crop coverage.
There are a few ways to cover cannabis inventory while it is in transit. The coverage that is designed to protect your property or the property of others while in transit is called motor cargo coverage. This insurance solution should provide you with protection in the event you experience an in-transit product loss. It also typically pays for the cost to remove debris from a roadway or waterway if your product is accidentally dumped there. You may also have the option to add “property in transit” coverage to your property policy rather than having to purchase a separate motor cargo policy.
If you’re hiring a third-party delivery operation, then it’s essential you confirm that this transportation company carries motor cargo coverage and that it’s designed to cover your property while on their vehicles. We recommend that our clients request a certificate of insurance proving that the coverage exists.
At Gilbert, we would be glad to review any contracts you have in place with your third-party vendors to help make sure that they have the right coverage in place to protect against their risks and yours.
No matter what you are transporting, your business should have general liability, workers’ compensation, auto liability, and motor cargo coverage. For companies that offer cannabis delivery services, having these policies in place should provide the comprehensive coverage you need to protect your people, vehicles, and product while in transit.
At Gilbert Insurance, we’ve partnered with an insurance company that offers a discount for installing its fleet telematics device in your vehicles. Aside from the discount this will provide, the other benefit of this program is that you will have detailed information about where your drivers are at any given time, including date and time of departure from an origination location and upon arrival at a delivery destination. In states like Massachusetts, the Cannabis Control Commission (CCC) requires transportation companies to track much of the same data that these telematics devices collect. In addition to the auto policy discount, the fleet telematics will help you comply with the CCC’s requirements.
Yes, most cannabis insurers offer product recall coverage. This coverage is triggered in the event your product is found to be contaminated, either by malicious intent or accidently, or is defective in a way that might possibly cause bodily injury or property damage from its continued use or existence.
If a product that you have cultivated, manufactured, or distributed is recalled, having this type of insurance in place should help you pay for the following recall-related expenses.
- Costs associated with notifying customers
- Shipping costs
- Extra warehouse and storage costs
- Actual cost to dispose of the products
- Cost of extra personnel required to conduct the recall
- And more…
This insurance protection is important for practically any business that touches the cannabis product at any point in the supply chain. Once a cannabis product hits retail and is available to consumers, either for recreational or medical use, all parties that have been involved in development, from seed to shelf, could be found liable for future product issues and any resulting third-party lawsuits. We recommend product recall coverage to our cannabis-related business clients because of the coverage it provides and its relative low cost.
Let’s talk specifically about the scenario of a cannabis-related business working with a general contractor and sub-contractors. This is often the case in the build-out stages of a dispensary, or a cultivation or manufacturing facility. If a worker is injured on your premises, there is a strong possibility that they will include you in a lawsuit and workers’ comp claim. To effectively manage this risk, we recommend you confirm with the general contractor and/or subcontractors that they have a workers’ compensation policy in place and ask them to provide proof of insurance.
In general, a workers’ compensation policy is one of the most important coverages any business can have, not only for the protection of its employees but also to safeguard the company. Most states mandate that a business carry workers’ compensation coverage, and there are generally very few exceptions to this requirement. Even if you’re a one-person show or it’s just you and a couple of business partners that own a CRB, in many states, including Massachusetts, you might still be required to have a workers’ comp policy in place. If you do not currently have a workers’ comp policy, or you’d like an experienced professional to review your current coverage, please feel free to contact us.
If you are currently leasing building space to a cannabis-related business, or plan to in the future, you will want to notify your insurance professional. In today’s insurance marketplace, most of the major insurance carriers are not willing to insure cannabis-related properties.
With that being said, Gilbert Insurance now has access to a product through a traditional insurance carrier for building owners who lease their space to a dispensary. For landlords with manufacturing and cultivating tenants, we have a number of insurance programs to offer. Please reach out to David Gilbert if you would like to learn more.
While having the right insurance policy in place is essential to effectively manage your risk when leasing to a CRB, it’s just as important to make sure that your tenant is properly insured. At Gilbert, we can review your lease agreement, which should include requirements for your tenant’s insurance coverage. We suggest that a tenant’s policy include high limits of liability, additional insured status for the building owner, primary and noncontributory wording, waiver of subrogation, and indemnification/hold harmless wording. Our goal is to make sure that neither you nor your tenant is taking on any undue liability risk.
If you’re signing a lease, purchasing a building, kicking off construction, or moving into the operations phase after construction, these are all great reasons to reach out to your insurance professional to discuss a new cannabis insurance policy or to make adjustments to your current coverage. In addition, if your coverage is coming up for renewal, it’s a good idea to have a conversation with your insurance professional to discuss any changes to the operation.
If you have additional questions about cannabis insurance, David is here to answer them. He would also be glad to review insurance coverage options with you and assist you in making informed decisions about the policies that should best safeguard you and your cannabis operation. Once you are a client of Gilbert Insurance, you can count on David to periodically check in to see how your CRB is progressing and to help make sure that your insurance coverage adapts to your business’s constantly changing risks and needs.
Helpful Resources for Cannabis-Related Businesses
- Apply for a Registered Marijuana Dispensary (RMD) Certificate of Registration
- Cannabis Control Commission (CCC)
- Massachusetts Cannabis Association for Delivery (MCAD)
- NORML, a nonprofit organization working to reform marijuana laws
- National Cannabis Industry Association (NCIA)
- California Cannabis Industry Association (CCIA)