June 29, 2015 Cannabis Business Summit Workshop: Marijuana Risk Management- Navigating your Client or Cannabis Company Through the Weeds CLICK HERE
Medical and Recreational Marijuana Business Insurance
Our Experience. Since 2009, Colorado based Greenpoint Insurance Advisors, LLC has provided medical and recreational marijuana business insurance to hundreds of cannabis businesses from approved insurance carriers. What makes us unique:
- Started from scratch as a privately held insurance brokerage insuring clients one at a time.
- No intention of being the biggest marijuana insurance brokerage. However, we do want to be the best at it.
- Our mission: treat the marijuana industry with respect and legitimacy.
- We have no conflicts of interest, affiliations, or ownership positions in other marijuana companies.
- We provide clients with proper insurance coverages. We believe in clients managing their risk exposures.
Notice to potential new clients our business services and product offering is limited. We typically don’t offer our services to the open marketplace.
- We’re not insuring ancillary companies at this time. We think you’re great, but the insurance industry is still trying to figure out this segment.
- Our focus: exclusively marijuana stores, dispensaries, cultivation, grow facilities, and infused product manufacturers in states we are licensed and,
- We prefer if you’ve been referred to us by another satisfied client, law firm, or professional association.
- We’re not licensed in every state.
If you don’t meet the above conditions, fortunately there are other insurance brokers or agents you may select.
Notice to members of the insurance industry or any regulatory agency. We know you’re a great person and would just like to “chat”. However, we sincerely appreciate if you would refrain from contacting our agency for the following reasons:
- Time is a finite resource we’ve been given by our “almighty” and prefer to control and own it.
- Our insurance carriers and relationships are trade secrets.
Highly competent marijuana businesses seem to have less insurance and legal implications
Success factors. We believe education is important for everyone involved in this wonderful industry. One of the advantages of being around in the cannabis insurance industry since 2009 is our ability to observe those businesses who’ve succeeded or failed. Yes, we’ve seen many great people who had BIG dreams end up closing their doors. While we don’t claim any official study was conducted, we have made certain observations that successful marijuana businesses are highly competent at:
- Attracting the best employees
- Provide ongoing training for their employees
- Hire or surround themselves with competent lawyers and advisors
- Offer superior products
- Implement efficient systems to operate their company
- Prudent with their business relationships and agreements
- Adapt to changing circumstances
While no business is immune from risk, claims, or litigation, the highly competent marijuana companies seem to have less marijuana insurance claims or legal ramifications than most. As illustrated below, the higher the competency level the more likely claims will be accidental or fortuitous in nature. The lower competent operators tend experience incidents that could have been avoided if they had used their 6th sense.
Sixth Sense: What do I need to know about marijuana insurance and risk management?
First: Consider carefully what insurance carrier and broker or agent you buy from:
- Is the insurance carrier approved for medical or recreational marijuana?
- Do you believe the insurance broker or agent is competent in offering these coverages?
- Have you discussed your insurance needs with several brokers or agents?
Potential consequences. The standard insurance market typically does not insure medical or recreational marijuana (Denver Business Journal, 12/23/2013, More on the cover story: Marijuana businesses can get insurance, but it’s pricey). The results of poor decision making may include the cancellation of your insurance protection. Transparency and compliance are important in every industry, but especially in the cannabis industry. If you have questions regarding this matter, please discuss them with your licensed insurance agent or broker in your state.
Process for purchasing marijuana insurance. There are multiple layers involved when buying commercial marijuana insurance, specifically general liability and property coverages.
- Marijuana store, grower, manufacturer contacts a marijuana insurance broker who is contracted with a excess and surplus (“E&S”) lines broker.
- The E&S broker underwrites and provides the marijuana insurance quote to the insurance broker you contacted. The E&S broker has a contractual relationship with the marijuana approved insurance company.
- When you decide to buy the insurance coverages through the marijuana insurance broker, the policy will be issued by the insurance company and is between you and that insurance carrier.
Second: In essence, each marijuana business insurance policy is basically split in two between liability and property coverages. When you own a marijuana business you might be concerned with being sued from third parties. This is where liability protection is likely to step in to provide coverage for a variety of reasons such as bodily injury, property damage, negligence, occurrence, or offense. Liability insurance protection can go even further through the purchase of additional coverages to defend against claims for your product, suits against directors and officers, employment liability, commercial automobile, and workers compensation for employee injuries.
Property coverage provides insurance protection for your computers, grow equipment, marijuana, crops, building etc… Yes, you can actually obtain insurance coverage for your marijuana! This means you’re indemnified or made whole should a covered loss such as fire destroy your grow facility and you’ve procured the right coverage.
Third: Consider what is your risk tolerance level.
- What areas of your medical or recreational marijuana business are likely to keep you awake at night.
- Marijuana insurance policies are predicated on fortuitous, accidental losses such as fire, theft, or negligence. These are policies not typically meant to correct your mistakes related to poor performance.
Fourth: At this time, recognize the medical and recreational marijuana insurance industry has lagged behind with offering particular coverages for the cannabis industry. This means you may need to lower some of your expectations for obtaining extensive, comprehensive, and broad coverages. In fact, marijuana product liability is a relatively new product coverage that has been secured from stable and reliable insurance carriers.
That being said, a healthy level of “self insurance” has been absorbed within the cannabis industry. This means losses have been likely remedied without insurance through private settlements.
Fifth: In our experience, the most common marijuana insurance claims (not frequent or severe) has been theft of marijuana and employee injuries. We’ve experienced small and contained cultivation fires due to a variety of reasons such as defective lighting (electrical) or individual negligence.
Fire due to lighting or electrical failure. You may want to contemplate the following when installing and operating your marijuana cultivation facility:
- Hire professional and competent electricians for proper installation.
- Read and install your lighting equipment based on the manufacturers installation procedures
- Read the manufacturers expressed warranties
- Contact your local fire district for a safety inspection.
That being said, it’s important to consider what coverages to consider or not for your unique situation with a licensed insurance broker in your state.
Sixth: Discuss with your attorney:
- lease agreements, contracts, legal structure,
- laws and regulations, licensing, business model for compliance and regulatory adherence.
- and risk concerns, and insurance.
Your right to counsel. We love attorneys. Yes, we understand they’re expensive. However, the initial cost far outweighs the potential expense of lawsuits from poor decisions on your part. A good lawyer will understand your needs and concerns, diffuse some of the liability, avoid litigation, and allow you to focus on what you do best–grow and sell medical or recreational marijuana.
Keep your attorney close to you at all times in your phone and next to your heart. We know we do….