Frequently asked questions about cannabis, hemp, and CBD insurance.
Everything you need to know to cover your cannabis business.
With the new and constantly evolving cannabis, hemp, and CBD industry, many growers, manufacturers, distributors, and retailers are looking for the right insurance for their business. Read through our frequently asked questions related to the cannabis industry to learn more about the importance of insurance for your business.
- General Liability: Insurance policy designed to protect your business from personal injury and property damage as a result of your business operations.
- Product Liability: Insurance policy designed to protect your business from claims of sickness or disease as a result of exposure to or consumption of the products you produce.
- Property Policy: Insurance package designed to protect the capital assets of your organization.
- Professional Liability: Insurance policy to protect your business from loss events involving failure to perform your professional duty.
- Workers’ Compensation: Insurance policy designed to protect your business from the expense of a loss that results from an employee being injured while working.
- Crop Insurance: Insurance policy designed to replace the value of an agricultural product following a covered loss event. These policies can take many forms and may be referred to as crop coverage or stock throughput.
- Business Auto: Liability and/or property coverage for automobiles operated by employees in the course of performing their job duties. Coverage can be purchased on vehicles whether they are owned by the business insuring the vehicle or in cases where the vehicle is owned by the employee or someone else.
- Customized Policy Options: Cyber liability, inland marine, product recall, and other options that include claim settlement with claim expense, in addition to (outside of) policy limits that are also available.
Yes, we can help a landlord secure a great policy option from an A-rated insurance carrier that does not mind that you have a tenant engaged in the cannabis industry.
Yes, we are happy to assist with your workers’ compensation policy needs.
Can I purchase any kind of policy to protect the executives, directors, and managers of my organization?
Yes, directors and officers insurance coverage is available to provide protection for your executive team from a possible claim or loss event relating to their fiduciary responsibility. These policies can also include coverage designed to protect the executives and management team from employment practice (hiring, firing, harassment) related claim events.
I am a processor making a CBD based product, my source material originates outside the US. Can I still get coverage for my products?
Yes, there are insurance carriers that provide excellent policy options for CBD and businesses producing products in the cannabis health and beauty aid (CHABA) market segment.
I have been told that it is hard to get proper insurance if I make or fill cartridges intended for use in a vaporizer. Is that true?
Yes, several insurance companies do not like e-cig or vape cartridges and exclude coverage for these items. To make sure you are not paying for insurance that does not properly protect your business it is important to work with an experienced cannabis insurance agent that can help you understand the requirements and limits of your coverage.
Are there any special considerations that I should keep in mind when shopping for insurance for my licensed marijuana business?
Yes, for tax planning purposes, most cannabis businesses segment their operations into multiple business entities. How your business structure is built will determine where policy coverage is purchased. It is important that you work with an experienced agent who understands the industry to make sure your policy coverage effectively protects every segment of your marijuana business.
Because of the impact of section 280E of the US tax code, many cannabis business owners segment their business holding into individual business units for tax planning purposes. For instance, a marijuana dispensary licensee who also owns the building in which the dispensary operates would typically create two independent business enterprises, one for the real estate enterprise (landlord) and a second for the business entity that holds the marijuana license and runs the dispensary. In cases such as these, it often requires the purchase of two or more policies to properly protect the business owner. Failing to purchase policies in the correct business entity name could leave the building uninsured for a loss and/or put the marijuana licensee in violation of regulatory requirements.
What about crop insurance? Is there anything available in the market that could protect my business if there is a catastrophic loss of my crop?
Yes, there are insurance carriers and products in the market that provide coverage for your indoor or greenhouse crops if they are lost to fire, theft, or another qualifying event. However, it is not uncommon for us to suggest our clients consider business interruption coverage instead of crop coverage to enjoy a broader list of covered losses and more cost-effective policy options. Currently, there are not effective insurance products available to secure open-air outdoor growers.
Businesses whose employees drive their own cars on the employer’s behalf should have non-owned auto coverage. We feel that the need for non-owned auto coverage exists for any type of business, but currently there is no Washington state requirement. It is however good to know that certain governmental entities might require you to carry non-owned auto insurance to work with them.
It is also important to keep in mind that as a business owner, you may be held legally liable for an accident caused by your employee who is driving on your behalf. The employee’s policy may pay to protect both the employee and the employer, but many employees have policies with very low limits (i.e. $25,000 per accident). Any amount of damages not paid by the employee’s policy may become the responsibility of the business owner. The insurance coverage that will cover the employer’s portion of a claim is called non-owned auto coverage. This insurance is readily available if employees drive their own cars on company business on an incidental basis—e.g., taking deposits to a bank, salespeople attending a business lunch, etc. If employees make multiple trips per week for the employer, like to deliver product or routinely pick-up supplies in their personal vehicle, non-owned auto coverage will be either very expensive or completely unavailable to purchase. At that point, you might find that your best option is to get official company vehicles and pay for commercial auto insurance.
We can help you figure out what options are best for you. Give us a call at 425-320-4280, and we will develop a plan and get you a free quote.
Business income coverage pays for loss of income that the insured sustains due to a direct physical loss from a covered peril that forces the insured to suspend operations. The policy will pay (up to its limits) until the property can be repaired, rebuilt, or replaced with reasonable speed. The policy will pay lost profit plus fixed expenses—e.g., rent, salaries for key employees or owners, interest payment on debts, etc. This type of insurance is not a standard part of any property insurance policy and must be specifically requested. Some people like to think of business income coverage as disability insurance for a business.
The protection that product liability insurance provides includes not only payment for injuries your product may cause to a person, but it also includes payment for your defense costs. Product liability defense attorneys tend to charge $400+ per hour, and legal expenses can increase quickly. One of our clients located in the Pacific NW is involved in a lawsuit related to vaping products he sold. The case was filed 18 months ago, and defense costs are now over $100,000. No actual damages have been paid to the plaintiff, and our client expects to be dismissed from the litigation soon. Without product liability insurance, our client would be out of business, despite the fact that he has not been determined legally responsible for the plaintiff’s injuries. The legal fees would have buried him.
It is important to keep in mind that product liability cases typically involve everyone involved in the delivery of the cannabis product, including the producer, processor, marketing consultant, packaging designer, and retail store.
It is also important to know what is going on in the industry that is affecting other businesses like yours. Keeping in the loop can protect your business by helping you understand what claims you could also end up filing, what lawsuits could also be charged against you, and what coverage can protect you in certain scenarios. For instance, the first cannabis related product liability suit was recently filed in California. Here is a link to the specifics of the case.
State insurance laws vary across all lines of business. When it comes to cannabis business insurance, there are very strict guidelines and penalties. Therefore, state requirements need even more observation to make sure that your cannabis company has the minimal required insurance in case of a claim or audit. That is where Mosaic Insurance Alliance comes in. Our team of professionals can discuss with you what you need for the state(s) that your store(s) and other business entities are located in.
Whether you are a cannabis wholesaler in California growing product for other businesses in your area, a cannabis vape shop in Washington selling to individuals in your community, a marijuana bud tender with stores in multiple states, a CBD topical lotions manufacturer in one state producing product for CBD shops in other states, or some other cannabis business, Mosaic can chat with you about your insurance needs for where your head office and store branches reside in. For example, as of January 2021, if you are in Washington, by law you have to have general and product liability insurance for your cannabis business. However, currently, if you are in Oregon or California, your cannabis company only has to have general liability insurance by law. What about the requirements for other states? We are happy to discuss your state insurance requirements with you. Give us a call at 425-320-4280 or email us at firstname.lastname@example.org.
Also, it is good to keep in mind that just because your state requires only certain types of insurance, those requirements alone might not be enough coverage for the type of business you have. If you have a claim that needs more protection than the state minimum, you might find yourself paying out-of-pocket for certain claim types that are common for your line of business and the location you are in. We can help you determine what coverage you must have, as well as what additional coverage would create a nice safety net for the company that you have worked so hard to grow and keep in business. Call or email us for a free insurance quote! We look forward to helping you and we LOVE questions.