Cannabis cover essentials in a fast-changing marketplace
The US cannabis industry is expanding rapidly. So far, 33 states have legalized medical marijuana, and 11 have passed legislation to allow consumption and/or the sale of recreational weed. In 2020, a major election year, a new batch of states looks poised to jump on the recreational cannabis bandwagon. States like Arizona, Florida, Arkansas, Missouri, New Jersey and South Dakota have all been thrown into the mix as potentials to ‘go green’ next year.
As more states come online, the cannabis industry’s insurance coverage needs are growing in tandem. The insurance industry has acknowledged cannabis as a risk it can no longer ignore, and yet, many remain tentative about providing coverage due to the federal illegality of the drug. To this day, cannabis is still classed as a Schedule 1 controlled substance in the US – an issue that’s causing some regulatory and fiduciary headaches for insurance corporations.
To tackle these challenges and more, Insurance Business America is bringing its Cannabis Cover Masterclass to Denver and Los Angeles in March 2020. Both events will feature the best and brightest minds in the emerging cannabis insurance industry, who will cover topics like cannabis regulation, insurance coverage essentials, effective claims handling, product liability, and the booming hemp and CBD industries.
One of the key issues concerning cannabis enterprises and their insurance partners revolves around the actual insurance coverages. Essentially, the questions are: What are the key risk areas unique to the commercial cannabis industry? What constitutes a best-in-class policy? What are the common policy exclusions and/or limitations, and how can those gaps be filled? And, what do agents and brokers need to know in order to avoid E&O exposure?
Chris Boden, cannabis practice group team leader at Crouse and Associates Insurance Brokers, will be on the panel addressing this topic at both Cannabis Cover Denver and LA. He told Insurance Business: “In the cannabis industry, every operation is different and has unique insurance needs. For example, a cannabis retail agency will have more cyber risk than a cannabis crop cultivator for obvious reasons. Some insureds are backed by financial institutions or have lots of investors. In those instances, they’re going to require higher value coverage and higher limits than a small mom and pop shop that can’t do all the bells and whistles.”
While progressing rapidly, cannabis insurance policies are “not yet as robust” as mainstream business owners’ policies, according to Boden. As such, insurance agents and brokers have some gap filling to do, which may require them approaching markets for specific policy endorsements, like employee dishonesty or crime coverage. There are also policy limitations and exclusions for people to watch out for, including health hazard exclusions, vaporized cannabis limitations, and some quite extensive insurer mandated background check requirements.
One thing to remember, Boden stressed, is that the cannabis insurance industry is changing daily. A carrier might have a coverage exclusion today, which they’re going to remove tomorrow. Boden commented: “This is a rapidly changing environment. Agents should never be afraid to ask for specific coverages or endorsements, or to ask if a limitation or an exclusion can be removed.”