Consistency is not a word that is used to describe the regulatory environment that the cannabis industry currently finds itself in. This leaves many businesses like cannabis cultivators susceptible to more risk than is ideal to have. Cannabis cultivators who are new to the market, or even those who have been in the industry for a while, aren’t always aware of what coverage they need.
Top Four Liabilities Michigan Cannabis Cultivators Face
To assume that your insurance policy will cover all your bases is risky. If you are hoping that the policy that you chose for the price will be adequate, it may be even more devastating when something happens. Being underinsured or uninsured can cost your business a substantial amount from one event or liability claim. That’s just not the scenario you want to be in when you’re running any business. Here’s a list of four liabilities that cannabis cultivators in Michigan face.
Equipment Breakdown
Your cultivation operation consists of many essential pieces of equipment and machines to run. Heat lamps, hydroponic watering systems, security systems, industrial fans, and computers are among the items that can typically be found in a grow operation. If your equipment stops working, it can slow down or even halt your entire operation. The application fees and license costs are already a big investment in states that have legalized cannabis.
Indoor cultivators spend, on average, $74 per square foot to set up their operation. For Michigan cannabis cultivators, this is the way to go to take advantage of multiple harvests per year. A cannabis insurance policy should have Equipment Breakdown Insurance coverage to protect your equipment investment.
This policy will cover certain incidents to provide you with assistance to repair or replace a broken piece of equipment. These policies will have a coverage limit, so you should know that after the limit has been reached, you must cover the rest of the costs. Equipment Breakdown Insurance also doesn’t cover machinery or equipment that’s no longer working because of not following proper maintenance or due to the age of the unit.
Loss Of Income
Another liability that cannabis cultivators may face occurs when a natural disaster or other peril occurs which leaves you unable to run your operation. For example, let’s say that there was a fire that was accidentally started and causes damage to half of your operation. In order to repair the damages, you have to shut down your operations for over a month. During this time you still have responsibilities to pay for any mortgage or rental payments, taxes, payroll, and other expenses that will continue despite your situation.
Loss of Income insurance is a policy that helps protect your business from the income you lose from a covered loss. It will provide you with funds for a certain period of time while you’re able to get your operation back up and running. While your location is being repaired, Loss of Income insurance can cover costs to set up a temporary location while your primary location is being fixed. It might even cover relocation costs if you have to move your entire operation to a new location.
Contaminated Plants
If your plants are contaminated accidentally and your product is then sold to a customer who ends up becoming sick, you and everyone else in the supply chain could be held liable. Product liability is a key challenge that cannabis business owners face. There are three areas where they face exposure to product liability claims, including:
- Product Contamination – Cannabis sold in an edible form that causes food poisoning or illness is one potential risk that business owners face. Another risk exists for products which are smoked due to the potential health claims related to the long-term exposure of these contaminants, mislabeled or misrepresented product.
- First party claims – An injury, accident or other incident that is claimed to have occurred due to a manufacturing defect, inadequate labeling, product-related defect or other types of exposures.
- Third-party claims – When a person claims a product purchased from a cannabis business owner resulted in a DUI, loss of wages, medical expenses, or related liabilities they may possibly seek to hold the business accountable.
Logistics Breakdowns
The logistics of how your product reaches your customers will vary by cultivator. What is certain is that anyone who transports cannabis must be properly licensed in a state where cannabis is legal. In many states, there are certain laws that differ depending on whether the product is being transported by a business or individual.
If your business is using commercial vehicles to run your business, a commercial automobile insurance policy is necessary. Whether these vehicles are owned, borrowed, hired, or non-owned, they are a potential liability if an accident occurs.
Get Michigan Cannabis Insurance Coverage
Work with the cannabis insurance experts at MFE Insurance to get your Michigan cannabis cultivation operation the protection that it needs. Contact MFE Insurance today to learn more about protecting your business with the right insurance coverage.