By Susan Preston and T.J. Frost
Basic business property coverage is no longer enough for those cultivating, selling and distributing cannabis. General liability, property and even commercial renter’s insurance policies all exclude aspects of cannabis operations, leading to significant gaps in coverage when owners/operators think they’re insured.
Consider the following exclusions that could lead to a costly business interruption – or worse – a shutdown of operations if you’re not properly insured:
- Traditional property coverage will not cover crops. Cannabis crops require stand-alone coverage for different growth stages, including seedling, living plant and fully harvested. This could come into play if, for example, pesticide use from your operation, or a neighboring farm, contaminates the end product. Assess location risks and identify what businesses and organizations are near or adjoining dispensary locations and grow facilities. Additionally, review your property contracts and insurance coverage to see if there’s a potential exposure that needs to be addressed.
- Business and personal auto policies do not cover cannabis transport. Some states require separate permits for transportation as well. Implement regular driver training sessions, conduct background checks and review MVRs prior to hiring drivers. Make sure drivers understand how to handle accidents on the scene, including informing law enforcement of the cargo and the employer.
- Rental policies exclude coverage for buildings engaged in activities deemed illegal by the federal government. Although the production, sales and distribution of cannabis is legal in multiple U.S. states, it is still illegal federally. This disparity can cause confusion when it comes to insurance policy compliance. Work with your HUB broker to review your property policy and any potential exclusions related to cannabis operations. Also, review all HVAC, general contractor, and vendor agreements to ensure your business is not taking on additional unforeseen risks in contracting with third parties.
- Equipment damage and/or breakdown coverage is excluded from property policies. Mechanical or electrical breakdown of any type of equipment due to power surges, burnout, malfunctions and user error can mean extra expense to repair or replace damaged equipment and loss of revenue for your cannabis operation. Having the right equipment breakdown insurance will help you quickly get back into full operation, with minimal costs. Conduct an onsite risk assessment of your equipment to get a comprehensive picture of your risk exposure, and review current insurance policies to identify key exclusions.
Contact HUB’s Specialists to assess your current property policy and uncover any gaps specific to your cannabis business operations.