Insurance in the Cannabis Industry for Marijuana Micro Businesses

Navigating a business or microbusiness in the Cannabis Industry can be a perilous task, especially to those who are first time business owners. Don’t fret, as there are numerous ways to keep your assets safe and protected in case of an unfortunate occurrence. Ideally, if the premium payments are not a deterrent, it is beneficial to maintain full coverage across all lines of insurance to fully protect your business from loss. While there are numerous coverages that may not be necessary for a microbusiness startup until you are post revenue, we wanted to touch on some of the more common and necessary lines of coverage available for your firm.

  1. Commercial General Liability Insurance

A Commercial General Liability (CGL) policy protects your business from financial loss should you be liable for property damage or personal and advertising injury caused by your services, business operations or your employees. It covers non-professional negligent acts. 

What commercial general liability insurance covers

A CGL insurance policy will usually cover the costs of your legal defense and will pay on your behalf all damages if you are found liable—up to the limits of your policy. CGL coverage is one of the most important insurance products, due to the negative impact that a lawsuit can have on a business and because such liability suits happen so frequently. Standard CGL includes:

Coverage A: Bodily Injury and Property Damage Liability

Bodily injury and property damage coverage provides protection against losses from the legal liability of insureds for bodily injury or property damage to others arising out of non-professional negligent acts or for liability arising out of their premises or business operations. Mental injuries and emotional distress can be considered bodily injuries, even in the absence of physical bodily harm.

Coverage B: Personal and advertising injury liability

Personal and advertising injury liability protects an insured against liability arising out of certain offenses, such as libel, slander, a false arrest, copyright infringement, malicious prosecution, etc.

Coverage C: Medical Payments

Limited coverage for medical payments includes payments for injuries sustained by a non-employee caused by an accident that takes place on the insured’s premises or when exposed to the insured’s business operations. Medical payments coverage can be triggered without legal action. This provides for prompt settlement of smaller medical claims without litigation. 

  1. Product Liability Insurance

Product Liability Insurance is a form of general liability insurance meant to protect your business from acquiring financial and legal risk because of the quality of your business’s sold goods or products. Product Liability Insurance covers the legal and court costs of defending any claims of bodily injury, property damage, or financial losses caused by your product.

Product Liability Insurance is a way of protecting your business from financial loss due to legal and court costs brought on by a potential suit by one of your customers. Say a customer alleged that a cannabis product you sold her caused her to have an adverse effect. You could be looking at a serious legal charge against you and your business, one that may end up sapping all the money and resources out of your business. 

Do I Need Product Liability Insurance?

If your business sells any goods or products to the general public, it is necessary for you to consider Product Liability Insurance. There is no guarantee that any of your products will not cause harm to a customer or their property. Even if you are certain of the quality of your products, a dissatisfied customer may very well be able to wage a long and expensive legal battle against you and your company that may deplete you of your time, money, and resources—even if you were to win the case. It is important to note that product liability cases are among the most expensive to litigate.

Product Liability Insurance makes sense to consider for any financially responsible business owner. When you put your products in the hands of your customers, you never know what may happen. Product Liability Insurance gives you the peace of mind that if anything were to occur, you would have a formidable safety net to fall back upon.

  1. Commercial Property Insurance

Commercial property insurance definition

Commercial property insurance protects your company’s physical assets from fire, explosions, burst pipes, storms, theft and vandalism. Earthquakes and floods typically aren’t covered by commercial property insurance, unless those perils are added to the policy.

How much does commercial property insurance cost?

Determining how much you’ll pay for commercial property insurance largely depends on the value of all of your business assets, including your building. 

What does commercial property insurance cover?

Commercial property insurance covers your building, everything in it and just outside of it, including:

Computers

Furniture and equipment

Exterior signs

Fence and landscaping

Important documents

Inventory

Others’ property

  1. Crop Insurance

Marijuana Growers

Our marijuana cultivation insurance programs are designed specifically to protect the unique exposures that are faced in growing operations every day. The most important asset to a cultivation business is the plant itself and is the most at risk. Through the programs we have developed, not only can your Cannabis Crop be protected, we can also offer protection for your buildings and equipment.

Insurance, a necessary evil or an essential part of daily life? This is surely the kind of question that goes through the mind of any business owner, especially one who is involved in a business as inherently risky as cannabis cultivation. No matter your thoughts on the matter, insurance is something that is essential in today’s world.

No business can afford to be uninsured and take the risks associated with potentially losing all of your inventory, equipment and hard-earned cash. At this point, you are probably asking yourself if it’s possible to get cannabis cultivation facility insurance and the answer is yes, it’s actually quite a bit easier and more affordable than you think.  With our years of insurance experience, AFIG Cannabis underwriters will guide you through the process to help you fully understand the coverage options available to you and your business.

What Is Marijuana Growers Insurance?

This is marijuana crop insurance that is specifically designed to cover your needs as a legal marijuana supplier.

What Can Be Covered?

We can provide marijuana crop insurance for plants in three stages of growth, from seed to sale. The stages are:

Living Plant Material: Seeds, marijuana plants in the stage of vegetative growth, immature marijuana seedlings, and flowering mature plants in the growing medium.

Harvested Plant Material: Mature marijuana plant material that is not situated inside the growing medium, but is in the drying and curing process.

Finished Stock: Mature marijuana plant material no longer in the growing medium, which has been completely processed and is ready for sale.

What Will I Be Covered Against?

Among others, coverage is available against the following potential dangers:
lightning, theft, fire, explosions, hail, wind, vandalism, smoke, water damage from onsite HVAC devices, etc.

  1. Directors and Officers Insurance

Directors and officers liability Insurance (often called “D&O”) is liability insurance payable to the directors and officers of a company, or to the organization(s) itself, as indemnification (reimbursement) for losses or advancement of defense costs in the event an insured suffers such a loss as a result of a legal action brought for alleged wrongful acts in their capacity as directors and officers. Such coverage can extend to defense costs arising out of criminal and regulatory investigations/trials as well; in fact, often civil and criminal actions are brought against directors/officers simultaneously. Intentional illegal acts, however, are typically not covered under D&O policies.

It has become closely associated with broader management liability insurance, which covers liabilities of the corporation itself as well as the personal liabilities for the directors and officers of the corporation.

  1. Employment Practices Liability Insurance 

What is employment practices liability insurance (EPLI)?

Employment practices liability insurance, known in the trade as EPL insurance or EPLI, provides coverage to employers (PDF) against claims made by employees alleging:

Discrimination (based on s….x, race, age or disability, for example)

Wrongful termination

Harassment

Other employment-related issues, such as failure to promote

Large corporations typically have substantial employment practices insurance coverage in place and are prepared to deal with just about any employment lawsuit. However, small or new businesses are often the most vulnerable to employment claims (PDF). That’s because they usually lack a legal department or employee handbook detailing the policies and procedures that guide hiring, disciplining or terminating employees.

New hires pose an employment practices liability risk

You’re at risk of an employment claim from the moment you interview a prospective employee. For example, if you choose not to hire the interviewee, that individual could allege some sort of discrimination.

Or, if you hire that person and later fire them due to poor attendance, that discharged employee could claim wrongful termination.

  1. Workers Compensation Insurance

What is workers’ compensation insurance?

Workers’ compensation insurance provides medical and wage benefits to people who are injured or become ill at work.  The coverage is mandated by each state and the wage and medical benefits vary by state. Workers’ compensation provides medical expenses, lost wages, and rehabilitation costs to employees who are injured or become ill “in the course and scope” of their job.  It also pays death benefits to families of employees who are killed on the job.

Who is required to carry workers’ compensation insurance?

All states, with a small number of exceptions, require businesses with employees who are not owners, to purchased workers’ compensation coverage for those employees.

Businesses that fail to provide workers’ compensation coverage can face severe and costly repercussions including payment of claims out of pocket, fines and possible imprisonment, as well as possibly losing the right to conduct business in the state.

  1. Cargo Insurance

Cargo Insurance provides coverage against all risks of physical loss or damage to freight during the shipment from any external cause during shipping, whether by land, sea or air.

Also, known as Freight Insurance, it covers transits carried out in the water, air, road, rail, registered post parcel, and courier.

Importance of Cargo Insurance

The risk then continues during the ordinary course of transit to terminate on delivery.

Cargo insurance has coverage of loss or damage caused by war, civil war, revolution, rebellion, insurrection or civil strife or any hostile act, capture, seizure, arrest, restraint detainment, general average and salvage charges, strikes, riots, etc.

Trade coverage covers the insurance needs of the various type of cargoes of general nature.

Following aspects are covered under the benefits of this insurance:-

Damages due to inappropriate packing.

Infestation.

Cargo abandonment.

Customs rejection.

Employee’s dishonesty.

Damages due to Collision.

Damages due to Heavy weather, Sinking, Derailment.

Non-delivery.

Theft.

Fire.

Types of Cargo Insurance Coverage

Different cargo insurance policies are available for transporting cargo by land, sea, or air.

  1. Cyber Insurance

What is cyber insurance?

A cyber insurance policy, also referred to as cyber risk insurance or cyber liability insurance coverage (CLIC), is designed to help an organization mitigate risk exposure by offsetting costs involved with recovery after a cyber-related security breach or similar event. With its roots in errors and omissions (E&O) insurance, cyber insurance began catching on in 2005, with the total value of premiums forecasted to reach $7.5 billion by 2020. According to PwC, about one-third of U.S. companies currently purchase some type of cyber insurance.

Business losses: A cyber insurance policy may include similar items that are covered by an errors & omissions policy (errors due to negligence and other reasons), as well as monetary losses experienced by network downtime, business interruption, data loss recovery and costs involved in managing a crisis, which may involve repairing reputation damage.

Privacy and notification: This includes required data breach notifications to customers and other affected parties, which are mandated by law in many jurisdictions, and credit monitoring for customers whose information was or may have been breached.

Lawsuits and extortion: This includes legal expenses associated with the release of confidential information and intellectual property, legal settlements and regulatory fines. This may also include the costs of cyber extortion, such as from ransomware.

Keep in mind that cyber insurance is still evolving. Cyber risks change frequently, and organizations tend not to report the full impact of breaches in order to avoid negative publicity and damage the trust of customers. Thus, underwriters have limited data on which to determine the financial impact of attacks. Essentially, the true risk of cyberattacks is not completely understood.

  1. Health Insurance

What Is Health Insurance?

Health insurance is a type of insurance coverage that pays for medical, surgical, and sometimes dental expenses incurred by the insured. Health insurance can reimburse the insured for expenses incurred from illness or injury, or pay the care provider directly. It is often included in employer benefit packages as a means of enticing quality employees, with premiums partially covered by the employer but often also deducted from employee paychecks. The cost of health insurance premiums is deductible to the payer, and the benefits received are tax-free.

KEY TAKEAWAYS

  • Health insurance is a type of insurance coverage that pays for medical and surgical expenses incurred by the insured.
  • Choosing a health insurance plan can be tricky because of plan rules regarding in- and out-of-network services, deductibles, co-pays, and more.
  • Since 2010, the Affordable Care Act has prohibited insurance companies from denying coverage to patients with pre-existing conditions and has allowed children to remain on their parents’ insurance plan until they reached the age of 26.
  • Medicare and the Children’s Health Insurance Program (CHIP) are two public health insurance plans that target older individuals and children, respectively. Medicare also serves people with certain disabilities.
  1. Dental Insurance

Dental Insurance Law and Legal Definition

Dental Insurance is an insurance coverage for individuals to protect them against dental costs. It insures against the expense of treatment and care of dental disease and accident to teeth. The most common types of dental insurance plans are Preferred provider organizations (PPO) or dental health maintenance organizations (DHMO). Both types are considered managed care.

Preferred Provider Organizations:

A preferred provider organizations ( PPO) falls somewhere between an indemnity plan and a dental HMO. This plan allows a particular group of patients to receive dental care from a defined panel of dentists. The participating dentist agrees to charge less than usual fees to this specific patient base, providing savings for the plan purchaser. If the patient chooses to see a dentist who is not designated as a “preferred provider,” that patient may be required to pay a greater share of the fee-for-service. A group of dentists agrees to provide services at a deeply discounted rate, giving you substantial savings — as long as you stay in their network. Unlike the more restrictive DHMO, though, you can go out of network and still receive some benefits. Some typical features of these plans:

Monthly premiums

Annual dollar cap

You must stay within the approved network of dentists or pay higher deductibles and co-payments

Your average monthly cost: $20-25

Companies selling these plans are regulated by state insurance departments.

Indemnity Plans:

This type of dental plan pays the dental office (dentist) on a traditional fee-for-service basis. A monthly premium is paid by the client and/or the employer to an insurance company, which then reimburses the dental office (dentist) for the services rendered. An insurance company usually pays between 50% – 80% of the dental office (dentist) fees for a covered procedures; the remaining 20% – 50% is paid by the client. These plans often have a pre-determined or set deductible amount which varies from plan to plan. Indemnity plans also can limit the amount of services covered within a given year and pay the dentist based on a variety of fee schedules. Some typical features of these plans:

  1. Vision Insurance

The term “vision insurance” is commonly used to describe health and wellness plans designed to reduce your costs for routine preventive eye care (eye exams) and prescription eyewear (eyeglasses and contact lenses). Some vision plans also offer discounts on elective vision correction surgery, such as LASIK and PRK.

But unlike major medical insurance policies that may provide unlimited benefits after a certain co-pays and deductibles are met, most vision insurance plans are discount plans or wellness benefit plans that provide specific benefits and discounts for an annual premium.

In effect, these vision discount and wellness benefits plans offer savings much like a gift card. As such, they can be used to cover much of the cost of basic eyewear, or they can be used to make premium eyewear products and enhancements — such as progressive lenses, anti-reflective coating and photochromic lenses — significantly more affordable.

When purchasing “vision insurance,” be sure you fully understand the costs and benefits associated with the plan(s) you are considering. Also, if you have vision care coverage through a plan at work, be aware that “vision insurance” plans usually operate differently than other health insurance plans or major medical insurance.