Deciding which insurance coverages you need for your cannabis operations can be a perplexing, confusing and frustrating process. This decision is further compounded by ever-changing regulations that vary from state-to-state. Purchasing only General Liability Insurance from some major, traditional insurance company won’t work in the world of cannabis. Your business needs certain coverages that are tailored to your specific operations. Having the right coverage in place is critical as an unexpected event like a theft, fire, data breach, product defect, wrongdoing by Directors or Officers or an employee accident can trigger a devastating effect on your business. Below is a summary of five insurances that should be part of your policy:
Property & Casualty
Property & Casualty (P&C) Insurance is one of the most common forms of insurance policies for any business; however, our industry is unique and requires cannabis-specific P&C insurance. The Property piece of the policy protects not only your place of business, but also its contents, including office furniture, computers and inventory, from common perils such as fire, lightning, explosion/implosion, riots, strikes and terrorism.
The Casualty (aka General Liability) piece of the policy will cover the business if you’re sued for negligence. For example, if someone slips and falls in your dispensary and requires medical attention, that person might file a lawsuit against your business. With this form of cannabis insurance, you’ll be covered not only for the damages but also the costly legal fees.
Product Liability Insurance
Product Liability Insurance is designed to protect your cannabis company from claims that can happen anywhere along the supply chain, including product contamination, mislabeled products, false advertising or defective products. With proper coverage, your insurance company will pay for damages and legal expenses if you are sued, up to your policy limits. Your Product Liability policy will also cover any medical expenses for those who are harmed by your business. Product Liability Insurance is often overlooked, especially by small to mid-size businesses. However, your cannabis business needs this type of coverage if you sell any goods or products that end up in the hands of the public. In fact, your business may be contractually obligated to have Product Liability Insurance.
The most common cause of loss facing cannabis businesses today is theft. The only way to ensure you get reimbursed from losses caused by a burglary, destruction of property or theft of finished product is to have Crime Insurance. Below are some of the common scenarios that Crime Insurance covers:
Employee theft of money, securities or property inside the premises.
Non-Employee theft both inside and outside the premises.
Forgery or Alteration, including inadvertently accepting forged checks or counterfeit money or employees altering checks, bank drafts and other financial documents.
Computer and wire transfer fraud.
Robbery of valuables while in transit under the care of a messenger or armored car.
Many owners are not aware that Cannabis Crime Insurance isn't automatically bundled into a Cannabis Insurance Policy, and therefore, find out the hard way that they are not covered. Making sure your insurance policy includes Crime Insurance should be a top priority for any cannabis business owner.
Cargo coverage is a protective cannabis insurance designed to recover the loss in such an event that your product is lost, damaged, or stolen while being either loaded, transported, or unloaded. Many business owners and distributors do not have cargo coverage because they mistakenly thought it was covered by property coverage insurance or their commercial auto insurance, which does not cover the contents within the vehicle. Having this type of insurance policy is a necessity for any cannabis business owner that relies on any form of shipping.
Cyber Fraud & Data Breaches
Cyber fraud is a very real and costly risk that is largely unaddressed within the cannabis community. Even the smallest of cannabis businesses are at risk of data breaches because they are part of a larger interconnected network of seed to sale vendors. In fact, Cyber Liability is actually the new General Liability for growing number of business that sell exclusively online (versus brick and mortar storefronts). The impact of a data breach can have a costly impact on your operations. To help mitigate risk, it is strongly recommended that you have Cyber Defense & Data Breach Insurance to protect you from costly legal claims. Cyber liability insurance will protect you against lawsuits, as well as penalties/fines from regulators.
Choosing the right insurance policies is one of the most important decisions you will make for your business. By working with an independent insurance broker like S2S Insurance Specialists, you can rest easy knowing you have the right amount of insurance - not too little, not too much - and the most important coverages for your business. Click here schedule a free 15-minute consultation with us so we may examine your current insurance policies, help you understand what is and what is not covered, and adjust your policy, as needed.