Whether you are a grower, producer/distributor or a local dispensary, all the segments of the Marijuana-Industry are exposed to risks that can be protected by Insurance. It is crucial to understand the potential perils operating a business in this industry. This list will help guide you to an understanding of the type of policies and focus on the potential industry risks.
1. Workers Compensation Insurance
If your business consists of 3 employees or 300 employees, a worker’s compensation policy is a great foundation for the caring and safety of your staff. All 29 States with marijuana laws and Washington D.C require a worker’s compensation policy in order to conduct business. If a worker is injured due to a chemical exposure, or a budtender slipped in your dispensary, worker’s compensation insurance will pay for the medical care and lost wages of your employees. On a daily basis, Employees can be exposed to risks due to your business operations. Even one accident can be a precarious and costly expense for any business.
2. Directors & Officers Policies
Many businesses develop leadership positions as they expand. These appointed Directors and Officers can be insured by your business against negative actions. D & O insurance will cover lawsuits brought by shareholders or third parties, as well as legal defense fees, so that your business can continue to operate. In the marijuana industry, many outside investors are attracted to companies with D&O policies in place because investors want the protection D & O insurance provides should an event of a claim be filed against the business.
3. General Liability / product completion
This is the type of insurance businesses look for to protect the products and services that are sold to your customers. Faulty packaging, spoilage, defective products, are risks that any business can incur. Like D & O insurance, this is a policy focused on covering legal expenses brought on by third-party lawsuits. In this emerging industry, there is a high level of exposure to multiple risks. Negligence and hazards resulting from a poorly controlled grow and products can result from issues like mold, mildew and bacterial exposure. Also, products like faulty vaporizer batteries and cartridges can also increase your risk from general liability.
4. Cargo Throughput
Cannabis, like any other consumable product should be insured from Seed to Sale, that means all-cargo transportation from the point of when the seeds are in the ground to when it reaches your customers care, custody and control can be insured against risks of lost. Cargo Insurance is usually written on a reporting basis or businesses can buy an open cargo policy, which can insure the entire shipment from distribution to destination.
5. Employee Protection Liability Insurance (EPLI)
EPLI protects businesses from wrongful termination claims from employees. Aside from wrongful termination claims, EPLI insures against claims made based on discrimination against sex, age, race, disability, or sexual misconduct. EPLI pays for compensatory and legal defense fees against these types of claims. The marijuana industry, like all businesses, is blossoming with changes to how companies can treat their employees and 21st century ideals to promote safe and diverse working environments.
6. Cyber-Defense Polices
21st century technology has integrated into many businesses nowadays, especially marijuana businesses. Most States require growers to keep very accurate records of their inventories. Testing Labs are required accumulate large amounts of product data. Cyber-Defense policies help mitigate the cost of being hacked or data breaches. With regards to sensitive patient/customer data that is normally collected at a dispensary or clinic, your business is legally liable to protect customer data. Data Breach insurance protects business owners from legal liability, cost of rebuilding or replacement of equipment resulting from a data of breach.
7. Property and casualty
P&C Insurance is one of the most common forms of insurance policies. All businesses should have property and casualty policy in place. P&C insurance not only protects your place of business but also your contents including office furniture, computers, your business inventory and other items essential to your business operations. From an industry perspective P & C insurance provides insurance to cover property, equipment, and risks from acts of others. P&C insurance protects against common perils such as Fire, Lightning, Explosion, implosion, Aircraft damage, Riots, Strikes, and Terrorism.
Aside from the 7 types of insurance listed above, there are some additional crucial factors that need consideration. First, your business needs to determine their level of risk and reward, because insurance is a product that mitigates risk. With regards to the risks of the marijuana industry, insurance can be purchased through state-regulated insurance carriers. Second, businesses need a comprehensive understanding of their daily operations and the risks involved. Essential information like sales revenues, number of employees, listing of business properties, annual payroll expenses, and a business operations plan will help a professional insurance broker navigate the marketplace and make sure that your coverage is tailored to your business’ needs.