Insuring Your Cannabis Business

While insurance is not always a favorite topic among business owners, it’s certainly an essential part of protecting your business.  The main purpose of purchasing an insurance policy is to transfer the risk associated with owning a business, over to an insurance company.  There are many different types of insurance available to protect your business, as well as yourself, when it comes to risk transfer.

Within the cannabis industry, it is very important to cover yourself from a liability standpoint as well as covering your product from start to finish.  You’ll want to review your options very carefully with your insurance agent to ensure that you are covered appropriately. Outlined below are the types of insurance you need to protect your medical cannabis business.

Liability Insurance

  • General Liability Insurance – This is the basic liability coverage that protects you against lawsuits for bodily injury and property damage, arising out of your operations or occurring on your premises.  Excess liability coverage can also be purchased to increase your liability limits overall.
  • Product Liability Insurance – This provides coverage for defense or indemnity costs associated with a lawsuit filed due to potential adverse affects or dysfunction of your products.
  • Professional Liability InsuranceThis insurance comes into play when there is an alleged error or omission that causes an economic or financial loss to a 3rd party.
  • Director’s & Officer’s Liability Insurance – Corporate directors and officers, as well as members of an LLC, are personally at risk when it comes to claims resulting from managerial decisions that have adverse financial consequences.  This coverage will respond to protect these members and their personal assets in the event of a lawsuit.
  • Employment Practices Liability – This type of insurance offers coverage for lawsuits filed by employees for such reasons as wrongful termination, discrimination, sexual harassment and retaliation.
  • Pollution Coverage – Pollution coverage is something that is generally excluded from your standard liability policy and is often overlooked.  Pollution losses can occur due to improper waste disposal, accidents during transit, or on your premises. Purchasing this coverage will offer monetary relief in the event of a claim.
  • Commercial Auto Liability – Auto liability is very important even if you do not own your own vehicles.  Hired and non-owned auto liability is very affordable and will protect your company in the event that a lawsuit arises while an employee is utilizing their personal vehicle for work purposes.

Property Insurance

  • Business Personal Property – This coverage protects all of the property inside your building aside from the crop and finished stock.
  • Building or Tenant Improvements Coverage – This type of insurance covers your building as the owner or any interior improvements owned by your business as the tenant.
  • Crop and Finished Product Insurance – This is where your product will be covered from seed to finished stock.  If you are a grower/processor, be very cautious while purchasing this coverage.  You will want to confirm that living plants and drying/curing/processing are all covered by your policy.  Many programs cover the cannabis stock, but only once it’s harvested and completely processed. You will also want to ensure that the product is fully covered for theft, as there is a very high risk of theft within this industry.  Many policies include theft, but at a very low sublimit, covering only a small portion of your product.
  • Property in Transit – This is another important coverage that is commonly excluded. If you are transporting or shipping product, you will need to make sure that your product is covered while it’s on the way to its final destination.
  • Crime Coverage – Theft is very common within the cannabis industry and will only be covered under a crime policy.  Other coverage options offered under a crime policy are forgery or alteration, computer and funds transfer fraud, as well as money orders and counterfeit money.
  • Business Income & Extra Expense Insurance In the event of a large property loss causing shutdown of your facility, business income and extra expense coverage will replace the lost income and cover any additional expenses associated with the loss (i.e. relocating to another premises).  

Worker’s Compensation

  • As with any business, it’s important to cover your employees in case of injury or sickness arising out of your day-to-day operations.  In Maryland, any business with one or more employees is required to provide worker’s compensation insurance.

Rebekah Martin is a commercial risk advisor at Kerxton Insurance Agency, a Brown & Brown Company.