Embroker’s Cannabis Practice

Redefining the way cannabis companies purchase insurance, utilizing technology and deep insurance expertise from brokers who genuinely understand and support the industry.

In the quickly evolving cannabis business, it’s imperative to have an experienced risk management partner who understands the industry nuances and the possible exposures associated with your business’s growth.

Staying in compliance in order to maintain your license to operate, mitigating claims from customers who use your products, and transferring the financial risk of theft are just a handful of issues cannabis businesses face. We understand your issues are unique and can help tailor solutions that accurately reflect your business’s risk profile.

Our cannabis experts have 6+ years of industry experience working with clients not only on detailed risk management programs but venture funding and licenses in emerging markets as well.

We wrote this guide to help you, the reader, understand both the basics of insurance for cannabis companies as well as some more advanced considerations. Our hope is that you walk away from this article a more empowered buyer, with a better understanding of the risk you can transfer to other parties via insurance.

If you’d like help, we’d invite you to talk with a broker or get started by creating an Embroker account.

Key Insurance Considerations by Type of Business

Cannabis Dispensaries

Having robust coverage that can help you withstand the evolving legal climate, regulation changes, and general business risks is crucial to running a successful dispensary operation.

In addition to general liability insurance and worker’s comp, which are typically required, there are a number of other insurance policies that can help protect your dispensary from loss. A property insurance policy will protect your business personal property including inventory, from perils of fire, theft, and natural disasters. The right product liability coverage is critical for dispensaries and is often something that will paired together with a strong Commercial General Liability policy.

In the event that a product results in harm, illness, or unwanted side effects the customer may hold you liable. The point of sale is typically the first point of litigation, even if the incident wasn’t your fault. Utilizing risk transfer tools such as requesting an Additional Insured status from your partners is critical in the cannabis supply chain. Depending on the state you are operating it , a seed to sale tracking technology will be required for your dispensary to operate.

Running a Point of Sale (POS), inventory management, customer loyalty, or delivery service through technology is critical to keep up with demand and stay in compliance. A strong Technology Errors & Omissions and Cyber Liability policy will protect against a plethora of claims that could cripple any dispensary.

Suggested Options:

  • General Liability
  • Product Liability
  • Property Insurance
  • Workers’ Compensation
  • Business Income Coverage
  • Cyber Liability
  • Technology Errors & Omissions

Cannabis Cultivators

Cultivators face a wide variety of risks and perils to their operations, including but not limited to fire, equipment breakdown, theft, and vandalism. Cannabis and hemp cultivation takes a tremendous investment in infrastructure including equipment, lighting, seeds, security, and the crop growing at various stages of value, all of which can be points of vulnerability. Fortunately, the right insurance program can protect your investment.

Crop and property insurance are 2 of the most important insurance solutions for cultivators. When grows are in controlled environments such as greenhouses or warehouses, crop insurance is more readily available. With the boom in the hemp cultivators and the farm bill, outdoor crop is becoming more of a need that underwriters are currently warming up to.

An Inland marine or Cargo policy would be a good addition to protect inventory in transit as the businesses interact with wholesalers and dispensaries.

Suggested Options:

  • General Liability
  • Product Liability
  • Property Insurance
  • Workers Comp
  • Business Income Coverage
  • Crop Coverage
  • Commercial Auto
  • Cargo

Cannabis Manufacturers

Cannabis and hemp manufacturers face significant regulatory requirements around licenses based on the inherent risks that are byproducts of the license-type.

Processing cannabis flower or hemp biomass often can change (typically increase) the value of the product and mistakes can lead to significant losses if the entire plant is not utilized to its full potential. Additionally, manufacturing plants and equipment are expensive investments and should be protected by a good commercial property policy.

Depending on the equipment that a business is using, you can specifically list valuable pieces on the equipment policy for their full retail value.  Equipment breakdown language can be added to further strengthen the value of the policy. A product liability policy can protect you in the case of a customer getting sick and will typically be required to sell products wholesale to dispensaries.

Suggested Options:

  • General Liability
  • Product Liability
  • Commercial Property
  • Workers Comp
  • Business Income Coverage
  • Cargo / Inland Marine

Software

No matter what license type you hold, software is a critical part of any scaling cannabis or hemp business. Seed to sale technology is required by every state with both medical and recreational products being traced back to the state regulatory divisions.

Wholesale platforms, Loyalty programs, advertising, POS systems, and even employee training is done through technology. Putting in place a proper Technology Errors & Omissions and Cyber Liability program will cover a wide array of issues tied to the critical nature of software.

Many software businesses have raised angel rounds of funding, eventually growing into venture capital as the company continues to grow. Having a strong Directors & Officers policy will protect the company in cases against lawsuits attacking the board, individual investors, or C-level executives in their management of the business.

As companies grow past 10 employees, adding Employment Practices Liability strengthens this policy even further.

Suggested Options:

  • Cyber Liability
  • Errors & Omissions
  • Directors & Officers
  • Business Income Coverage
  • Employment Practices Liability

Venture Capital

The rapid nature of evolution in the cannabis and hemp industry is largely driven by investors who see opportunities to get in early. Any company that becomes a fiduciary by managing investments on other peoples behalves has a large amount of risk.

Providing upside protection marrying Directors & Officers coverage with Professional Liability creates a policy often referred to as VCAP, short for Venture Capital policy.

This policy ensures the decisions made on behalf of investors are protected as are the individuals making the management calls.

Suggested Options:

  • Workers Comp
  • General Liability
  • Directors & Officers
  • Professional Liability
  • Employment Practices Liability
  • Business Income Coverage

Landlords

Landlords in the cannabis industry face a unique set of risks and challenges. Many insurance carriers may refuse to cover claims from landlords who rent to cannabis businesses if this is not discussed upfront with the yearly insurance renewal.

This is why working with a broker who has a dedicated cannabis practice can help you avoid unpaid claims for fire, vandalism, and other damages. Being as transparent as possible with your broker on who you are renting to can drastically change your experience and ability to recoup claims.

When establishing a growing real-estate portfolio of cannabis businesses, there are ways to consolidate coverage with common ownership and assets in the same state.

Suggested Options:

  • General Liability
  • Property Coverage
  • Loss of Income
  • Business Income Coverage

Testing Laboratories

Testing labs are a key component for ensuring the health of the cannabis ecosystem. However, evolving state and federal regulations create a potential minefield of potential lawsuits that the right insurance policy can help you traverse, ensuring you against potential errors or mistakes made in your operations. Professional Liability, also known as Errors & Omissions, is key for laboratories reporting to the state on data points that impact public safety. Once again property coverage is critical with the amount of equipment that is required to operate a high-volume cannabis lab.

Suggested Options:

  • General Liability
  • Property Insurance
  • Product Insurance
  • Errors & Omissions Insurance
  • Business Income Coverage

Delivery

Delivery is one of the most exciting areas of the cannabis industry. Whether you are a delivery-only dispensary or strictly distribution companies in this area face a complicated set of risks. Employee personal auto insurance will not provide coverage in the event of an accident or robbery, as this policy usually excludes business use. That means that your business can be held liable for damage to vehicles, injuries, and medical bills. Leveraging a Hired Owned and Non-Owned Policy can improve your risk management program. Additionally,  leveraging a cargo policy for your products once they leave your premises is a best practice. If a license holder is establishing a fleet of cars, Commercial auto coverage is required.

Suggested Options:

  • Commercial Auto
  • Hired Owned & Non-Owned Auto
  • General Liability
  • Business Income Coverage
  • Product Liability
  • Commercial Property
  • Cargo Insurance
  • Worker’s Compensation

Medical Cannabis Physicians

Most insurance providers refuse to provide coverage for physicians that offer non-FDA medications. Embroker’s cannabis practice offers tailor-made coverage that will protect medical cannabis physicians from malpractice lawsuits.

Suggested Options:

  • General Liability
  • Errors and Omissions / Professional Liability

Hydroponic Shops

Hydrophonic shops that work with cannabis businesses have access to a variety of coverages to ensure that they are protected from claims or damages. Commercial property coverage will protect your shop from the perils of fire, theft, and vandalism.

Additionally, product liability will protect you from claims that could arise from the equipment you sell malfunctioning and causing losses to your customers.

Suggested Options:

  • General Liability
  • Product Liability
  • Property Insurance
  • Business Income Coverage
  • Cargo

Why Your Cannabis Company Needs Coverage

The cannabis industry is projected to grow to $146.4 billion by 2025. As the industry grows and becomes more regulated, it will become increasingly more difficult for businesses to avoid risk exposure.

Additionally, there are unique risks that cannabis businesses face. A minor problem can result in an expensive lawsuit or result in a loss of your business license. The legal status of medical and recreational cannabis is in constant flux and varies wildly from state to state, creating a legal minefield that the right insurance coverage can help you traverse.

Highly-Publicized Examples of Insurance at Work for Cannabis Companies

Cannabis Insurance Costs

When applying for insurance, there are many factors that carriers take into consideration while underwriting new coverage. Cost drivers will always be different based on the policy type, limits needed, and stage of the business. Working with the right partner will ensure they are not only negotiating the right coverage but the best possible pricing options for your company.

Additionally, cannabis startups are unique in the eyes of underwriters because their growth tends to outperform the expectations associated with more traditional startups.

Getting Started

Now that you have a better understanding of insurance for cannabis and hemp companies, you may be wondering how all of this affects your business and where to go from here. If you need more help or information, you can reach out to our team of expert brokers. If you prefer to get started on intelligent quotes, create your Embroker account today.

Cannabis companies require unique insuring expertise and experience. Our Cannabis Practice team is redefining the way cannabis companies purchase insurance, combining technology with deep insurance expertise and genuine understanding and care for your business.

Embroker is the easiest way to intelligently insure any business. We’re here to help!