Needing insurance for a cannabis business is like needing a parachute. If it isn’t there the first time, chances are you won’t be needing it again.
Too often is the case of wrong coverage, or inadequate policy limits running businesses out of business.
With the exponential growth in the cannabis industry comes growing pains. The cannabis market is growing faster than the legislature can produce rules and laws to govern the industry. Likewise, the insurance industry is trying to understand cannabis and how they can offer affordable coverage that is valuable to growers, processors, and provisioning centers. Regardless of growth and regulation insurance for a cannabis business is important for your security.
Many insurance companies are taking a “wait and see” position. Meaning, they do not have enough of a comfort level to provide coverage yet. What is left for business owners, is trying to sift through new policy language and determine what is covered. No two cannabis insurance markets are the same. Insurance policy language is significantly different from one insurance company to the next and understanding coverage can be a challenge.
Crop insurance is the single most difficult part of the cannabis package to understand. Is there a sub-limit? Is that sub-limit per plant? Does the policy pay on a replacement cost, actual cash value or stated amount? Is the crop insurance separate from the finished product? How do I cover my seed? The variations of crop coverage, along with other business property, can leave a business owner not really understanding how the loss payment would be calculated.
If you are or are becoming a tenant in a commercial building, it is imperative the landlord completely understands your business. The building owner could have a cannabis exclusion on his/her current policy. If large sums of money are put into the additions and alterations of your building, the lease will answer how much in additions and alterations you need to insure. Working with your landlord on these issues will avoid confusion when it matters the most.
The attestation filing is not liability coverage. There is a lot of confusion that exists between liability insurance and financial responsibility filings. The simple answer is you need to file your attestation paperwork and purchase product liability insurance. The attestation filings are approved by the insurance companies and signed by a representative of the insurance company. Insurance agents cannot legally sign on behalf of the insurance company.
Worker’s compensation has the least amount of insurance carriers willing to offer coverage. There are options outside of the State of Michigan insurance pool, but you must do your research. Rates can vary as much as 100%. Insurance companies will start to gain a better understanding of cannabis, which will result in additional markets and lower pricing on Workers Compensation.
More insurance companies will enter the cannabis space as it continues to grow, which will drive down pricing and increase coverage options. Policies will continue to vary widely in their coverage and should be assessed individually and with the help of an agent.
At Olivier-VanDyk we’re fortunate to be working with cannabis entrepreneurs every day on their insurance needs. If you have questions regarding insurance and financial filings please contact us, we’re happy to help.
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Thanks to Peter Vredeveld for this blog.