The cannabis industry has seen incredible growth in recent years, and while that is a good thing, it does create some challenges. Cannabis is still classified as a Schedule 1 controlled substance by the DEA, even though it is legal in an increasing number of states. This means that insurance coverage for cannabis dispensaries is even more important than it might be for other small businesses. There is a potential for coverage gap to be apparent in the policies offered.
Coverage in the Eyes of the Law
As long as cannabis is illegal at the federal level, financial institutions will be hesitant to get involved with cannabis dispensaries. These institutions could be subject to prosecution for their involvement with a cannabis-related business. That is one of the reasons most cannabis dispensaries only accept cash payments, even though it makes paying taxes and salaries more difficult.
There is legislation in the works that would end this legal problem, but in the meantime, the current legal framework can not only make it difficult for cannabis dispensaries to find banks, but also to find insurance. At the federal level, insurance for a cannabis dispensary is unlikely to be recognized as valid. At the state level, this is less of an issue.
Supply Chain Details
There are several potential coverage gap areas that can arise through the supply chain for a dispensary.
Cultivation
For dispensaries that produce their own cannabis, there are three types of important coverage that can avoid costly losses: Goods in Process, Finished Stock and Outdoor crop coverage.
Goods in Process and Finished Stock coverage are often overlooked, but they are vital. Goods in Process covers you in the event that crops are damaged before they can be harvested, and Finished Stock coverage protects you in the event that you lose product that has been harvested but not yet processed and transported to a dispensary for sale.
Outdoor crop coverage can be hard to find, but it is vital if your product is being grown outdoors. Outdoor crop coverage will cover you from potential hazards that are unique to outdoor crops.
Manufacturing
In the manufacturing process, it is common for raw products from many different sources to be mixed together. This creates a much greater potential for contamination, and you will need Product Liability coverage to ensure that you are not liable for damages to your customers.
It is expected by most customers that lab testing results will be available for many of the products they buy, especially CBD. Since testing labs can make mistakes, Product Liability coverage is necessary. It is always possible that the lab will fail to identify dangerous contaminants, and you will be liable for any resulting harm to customers. This type of coverage will cover expenses in the event such a lawsuit is filed against you.
Distribution
Far too many cannabis businesses do not have any sort of coverage for their product while it is in transit, creating a coverage gap. Without stock in transit coverage, you could face disaster if your product is lost or damaged during shipping. This is important for major dispensaries who cultivate their own cannabis on larger farms and ship their product to multiple retail locations.
Retail
General Liability coverage is a must for any business. General liability covers businesses in cases of personal injury, such as a slip and fall scenario in a retail location. This coverage helps pay for medical bills and property damage.
Employee Coverage
Like any business, you will need good Workers’ Compensation coverage. There are countless scenarios in which your employees could get injured in the line of work, and you will be required to pay medical benefits and replacement salary if that is the case. Workers’ Comp insurance covers those payments for you so that your business is not financially ruined by a Workers’ Comp case.
Ensuring the Safety of Your Business Lot
Many new businesses do not realize that they are responsible for security in their parking lot. Parking lots that are unlit or out of general view can be prime targets for car theft or robberies. You will want to be sure that your liability coverage includes such events.
Protecting Your Customer Information
Even if you do not accept credit cards, you likely store some of your customers’ information digitally. If you store any information digitally, you need Cyber Liability insurance. Cyber liability coverage protects you in the event of a data breach. You will be liable for customers’ damages after a data breach, in addition to bearing the costs of notifying all of your customers of the breach and possible PR expenses to restore your image. Cyber Liability covers the cost of all of these things.
Consult With Professionals for Your Specific Needs
Whatever business you operate, you need insurance that is tailored to your needs. When operating a cannabis dispensary, it can be difficult to find insurance providers who are willing to provide coverage. MFE Insurance is one that will cover you and bridge any gap found in your coverage. Contact us today, so our experts can set you up with an insurance plan that meets your needs.