More cannabis dispensaries, farms, and processors get their state license every month for what is becoming a billion dollar industry, but a surprising number of those businesses still struggle to get proper insurance coverage to protect their assets and their future. The need continues to grow, but who will meet it?
The stigma of covering cannabis, a still-illegal Schedule I drug at the federal level, prevents many mainstream, multi-state insurance agencies from providing coverage to these in-need businesses. Even as cannabis becomes more and more accepted as part of the business landscape, these businesses continue to have unequal access to financial resources and protections.
Part of the barrier is that cannabis-related businesses don’t just need the same insurance coverage as some other kind of business. They need policies that are tailored to the needs of their operation and also meet the individual state’s requirements.
Most carriers are waiting for a better opportunity to jump in. While California is making progress on cannabis insurance coverage within the state, the major hold up for most companies is federal prohibition, according to a recent insurance industry report. The fact remains: Whether you’re harvesting cannabis, selling it to customers, or handling it somewhere in between, there are certain kinds of coverage that just aren’t very available.
Often considered a bare minimum kind of coverage for businesses in other sectors, most cannabis-related businesses have trouble accessing general liability insurance. This kind of coverage protects a business’ site from lawsuits involving public contact, but standardized policies across the nation exclude Schedule I substances (like cannabis) from being covered. That doesn’t mean options don’t exist. You can see what your options are for dispensary and laboratory general liability coverage to get started.
Cannabis is a relatively new product on the consumer market, and first-time buyers are in for a unique experience. If a consumer claims they experienced negative side effects or injured themselves as a result of using your product, lawsuits could be coming. You may be held liable if there are design errors, manufacturing problems, or poor instructions. Product liability covers the legal fees in the event of a lawsuit plus compensatory and punitive damages. State track-and-trace programs intend to be able to track products along the supply chain to determine where responsibility lies.
A dispensary may need product liability insurance if they produce their own products or are named in a lawsuit against a manufacturer for buying a faulty product at their store. Infused product manufacturers, however, face potentially more liability due to the number of processes the product must go through and the potency of the end product.
Cannabis is a plant unlike any other, which makes it harder to insure than other agricultural products like apples or oats. While there are options available for cannabis crop loss coverage, they are limited and can be expensive. Indoor crop coverage may cover loss from disasters like fire or earthquakes, or from theft or equipment malfunction, but it won’t often cover losses from other problems like spider mites, rot, mold, or disease.
Outdoor cultivation is hard to insure at all if you don’t have a secure greenhouse. California’s widespread wildfires have made insurers even more hesitant than before to cover outdoor crops. There are options available for growers insurance, and there may be measures you can take that will make your farm insurance-ready. The first step is to get quotes to compare.
Cannabis insurance options may be limited, but there is indication that federal prohibition may not last forever. Passing the SAFE Banking Act would be the first step, but legalization may not materialize until 2021. Even when it does, cannabis-related businesses must review any policies they intend to get. You’ll want to work with an insurance carrier and agent that actually understands the cannabis industry and the needs you have.