By Susan Preston and T.J. Frost
Did you know: The use of personal autos for transporting cannabis products is one of the most troublesome claim areas within the cannabis industry? It surpasses property, product liability, and theft.
Businesses are either unaware of the risks involved in using personal vehicles for transporting cannabis or they aren’t taking them seriously. The strict statutes many states have placed on transporting cannabis should be reason alone to be more diligent.
For example, California Bureau of Cannabis Control’s proposed regulations require cannabis owners to ensure their drivers have designated permits to transport the product. The state’s legislation also mandates inspections at any licensed premises at any time, and requires employers to provide detailed tracking and schedules on the transport of product. Further, the state prohibits using minors to transport cannabis and/or exchange cannabis with a minor making it a felony to do so.
Regulatory concerns, combined with the potential liabilities that could come from driver behavior, are keeping insurers from offering auto coverage to the cannabis industry. Currently, just four insurers offer the industry auto coverage with premiums running $17,000 per auto on average. And, it’s important to note that personal auto insurance falls short because it doesn’t cover for cargo loss.
As an alternative to using personal vehicles, many companies are using courier services to transport cannabis product. But cargo insurance is still an issue. Without it, the care, custody and control of someone else’s products, and insurance limits are lacking. If something happens to your product, it’s likely not covered by the courier’s current insurance without cargo coverage. Even if the courier has cargo coverage, because they are delivering for multiple companies, the claims payout would have to be split amongst all the customers – likely below the value of your loss.
- Use unmarked vehicles – Drivers carrying a significant amount of product and/or cash are tempting targets for thieves. Company cars used for transporting product should be newer and have no fleet serial numbers or anything identifying the company.
- Implement quarterly driver training – Educate employees on proper transportation procedures. While minor fender benders and sideswipe accidents are the most common type of accidents, even these can be costly if not handled properly. Teach drivers how to handle accidents while on the scene, including informing law enforcement about the cargo and the employer.
- Conduct background checks/review DMV records – Uncovering any potential driver issues prior to hiring is critical. Look for previous DUIs or drug related history. Employees who might use product before getting behind the wheel are a significant danger to other drivers and a major liability to the employer. Even after hiring, be on alert for signs that indicate poor driving performance. Use check-in/check-out processes for all drivers, and conduct regular vehicle walk arounds to look for scratches, dents or other damage that otherwise might be unreported to the employer.
HUB International’s advisors and cannabis specialists are available to work with you to review and assess your risk mitigation options. We can help you understand what processes need to be in place in order to secure insurance coverage and provide recommendations to best mitigate your transportation, delivery, and cargo exposures.