The cannabis business is still very new compared to other industries. Its landscape is ever-changing, partially due to adjustments in state regulations. What doesn’t appear to be changing, however, is the global market’s growth. New Frontier’s data indicates that the cannabis industry is expecting an increase from last year’s $13.6 billion to $23.2 billion by 2022. A business that is growing at such a rapid rate should be protected with adequate insurance coverage, but seeking out coverage can be difficult. In addition to the difficulty of finding an insurance company that is willing to insure a cannabis company, there are some myths about cannabis insurance that deter business owners from seeking the right amount of coverage.
Common Cannabis Insurance Myths Debunked
Allowing these myths to discourage a business to seek out adequate coverage can leave them open to risk. Let’s look at five of the most common cannabis insurance myths and dispel them below.
It Doesn’t Exist/Nobody Will Insure My Dispensary
Not every insurance company offers insurance for the cannabis industry. However, to say that it doesn’t exist or that there’s no company that will provide it is not true. With a cannabis insurance policy, you will have the same standard of coverage as you would find for other companies. This includes property and casualty, EPLI, D&O converge and product liability. Coverage plans that are especially important to cannabis cultivators are also offered and recommended.
Cannabis insurance policies and services can be tailored to the needs of your dispensary. An insurance broker with experience dealing with the cannabis industry can review what your business needs are regardless of whether you’re running a small dispensary or operating a full-service grow production. They will use this information to draft a policy that adequately covers your risk factors.
Dispensaries Don’t Need Product Liability Insurance
Your dispensary can still be held liable even if your business isn’t the one creating the product. One of the biggest risks in the cannabis industry is the possibility of product liability at each level found on the supply chain.
This is called the “trickle-down” effect and begins with the production stage before going on to the distribution, sales, labeling, product branding, and, finally, arriving at your dispensary. This is particularly a risk for products that are inhalable, ingestible or edible, or products that have many different people “touch” the product throughout the process.
You should have all your vendors that are involved in the supply chain including extractor and producer provide a certificate of insurance. They should have a level of insurance that adequately covers the risk. Work with your insurance broker to determine what level of product liability insurance would provide your dispensary with the necessary protection.
Property Insurance is Unnecessary for Leases
It’s not likely that a landlord’s insurance policy will cover losses from a cannabis business. Their insurance policies are usually not sufficient by themselves, and their insurance could even be nullified for renting to a cannabis business. Read your lease agreement carefully for details regarding insurance requirements. Most will require that the tenant obtain insurance for any improvements that are conducted on the property during the period of occupation or use.
For example, let’s say your dispensary is also going to build a cultivation operation. The upgrades and equipment that’s necessary for that will come with a big price tag. Your landlord will most likely have a policy that protects the building itself. All those improvements, however, are almost certainly not covered under your lease agreement. For that reason, it might be necessary to have either an attorney or insurance broker review the insurance section of your lease agreement to determine the best way to cover your assets.
Supply Chain Losses Can’t Be Recouped If it Happens Outside the Shop
A cannabis property insurance policy can actually be written to cover property damage that may occur outside your shop. This can include expenses such as repairing or replacing property that is covered in your grow operation or dispensary, and even enhancements to coverage like loss of income. For example, let’s say that you experience a pipe that breaks in the off-site hydroponic system used to water the plants in your grow operation. With the right property insurance policy, you can get help with repair or replacement expenses.
Cannabis Dispensaries Aren’t Liable
As portrayed by the product liability section, dispensaries can be held liable even if they are not producing the product itself. With so many changes to this industry and uncertainty as to liability, your dispensary can’t afford to have inadequate coverage. There are many examples of lawsuits currently, and as the industry grows, the risk will continue to grow with it.
Call The Cannabis Insurance Brokers
Whether it’s a small dispensary or full-blow grow operation, you can be sure to protect your business with the right amount of insurance coverage when you call MFE Insurance. We have experienced cannabis insurance brokers that are available to help protect your interests based on your specific needs, and we have a variety of policies that we can tailor to your organization’s coverage goals. Contact us today to learn more.