Cannabis and hemp businesses – large and small – are increasingly becoming prime targets for litigation. There have been a slew of lawsuits filed recently by shareholders of cannabis companies, including Aurora Cannabis Inc., Medmen Enterprises, Canopy Growth, CannTrust Holdings, Aphria Inc. and Columbia Care, to name just a few. The only way to protect executives of your business from being personally liable is with Directors & Officer’s (D&O) Insurance. Here’s what a D&O policy covers and why it should be your top priority.
Industry experts expect a 50% spike in lawsuits as cannabis companies face heightened risks. Investors who wanted a piece of our explosive industry poured money into cannabis businesses. Not all companies delivered on their big promises. The coronavirus pandemic, rising costs and slower-than-expected demand caused some companies to – knowingly or unknowingly – overstate revenue and make misleading forecasts. Aurora, for example, allegedly did not inform shareholders it was planning to halt construction at one of its facilities, suggesting a decline in its business, and now it is embroiled in a multi-million dollar class action lawsuit.
One lawsuit can fold your business and put your personal assets at risk. Disgruntled shareholders alleging fraud and misinformation are seeking to recover significant damages – half-a-million dollars in the case of Canopy Growth. The only way to shield corporate officers from personal liability for negligence or misconduct is with D&O Insurance.
D&O coverage is often the most overlooked coverage because many cannabis and hemp businesses are small or independently run, and no one foresees the potential for operational failures and mismanagement. However, with all the risks cannabis companies face everyday, D&O should be a top priority in 2021 as one expensive lawsuit can put a company out of business. More frequently, we’re seeing prospective investors and board members requiring D&O insurance prior to engaging with a company in order to ensure adequate protection in the event of litigation. With proper D&O coverage, your company’s executives will be protected and your insurance will pay for legal damages and fees.
Summary
Finding an insurance carrier to provide you with D&O insurance can a challenge. Most major insurers do not offer cannabis D&O policies because cannabis is not legal under U.S. federal law. S2S Insurance Specialists insures the most difficult risks facing your company and is a leading provider of D&O Insurance. To learn more about how we can protect you your business,
click here schedule a free 15-minute consultation or call us at (954) 790-6604.