Insurance Carrier Mandating General and Product Liability Be Bought Together
©2017 Greenpoint Insurance Advisors, LLC
Just imagine you visit an appliance store to buy a washer. The salesperson says you must buy a dryer or we won’t sell you the washer. Our store policy is to sell both appliances together. You tell the salesperson your dryer works perfectly or you don’t need a dryer. The appliance salesman says you won’t be buying a washer today.
This is an emerging trend in the marijuana insurance industry as a carrier mandates their requirements to the insureds or customers. Unlike washers and dryers, the cannabis industry has a limited number of companies offering insurance. Product liability for cannabis companies continues to be the most difficult to obtain.
Cannabis licensees are being offered or in some cases required to buy commercial general liability with product liability insurance on a combined basis. Is this even legal? Not sure, but seems a little sketchy and reminds me of the game monopoly. Research on the internet does indicate the tying of insurance has resulted in penalties. According to the Missouri Department of Insurance, Humana Insurance Co paid $4.5M in settlement fines and restitution for insurance tying. A statement by the Missouri Insurance Director provided further clarity that protects the insurance buyer.
“Policyholders should be able to choose individual insurance products without insurers bundling products together” said Missouri Insurance Director John M. Huff. “I am pleased our team was able to collaborate on a settlement with multiple states to benefit consumers.”
However, the purchase of cannabis commercial insurance is purchased through different channels and may not be treated the same statutorily by insurance regulators. And, some may argue being required to buy product liability isn’t all bad because the protection may be justified.
This requirement is not only for new businesses, but exiting clients who were able to “sneak in” and buy what they needed which was just one policy. We’ve witnessed in Colorado, a cannabis insurance carrier not offering to renew a client’s insurance unless a separate and distinct policy was tied to the purchase.
Other Insurance Carriers Who Don’t Require Buying Commercial General Liability and Product Liability Insurance Tied Together
As a result, many cannabis business would like the choice to determine through their insurance broker what is in their best interest versus the insurance carrier. Those options do exist by choosing a retail insurance broker that offers cannabis insurance for a single product. In our opinion, the needs for insurance and coverages should be based on the relationship between the retail insurance broker and their client. Not the needs of the insurance carrier. When an insurance carrier conditions and ties the sale of insurance it interferes with that relationship and may have other unintended consequences.
Questions to ask your retail insurance broker:
- I want to buy commercial general liability insurance only. Can you offer me just this product? If not, keep searching in Google.
- Does your cannabis insurance carrier require you to offer the commercial liability and product liability tied together?
- Do you have other insurance carriers who will provide insurance that meet my needs versus theirs?
- What should I consider if I cancel my other insurance policy because I was required to buy the two products together?
- Are there any financial losses when cancelling my other insurance policies?
Smart Retail Insurance Brokers Must Meet the Needs of Their Clients First
Retail insurance brokers realize they must meet the needs of their client and determine if the insurance carrier can fulfill those requirements. The selling of cannabis business insurance based on two products tied together is a business practice we don’t support or recommend. In fact, we continue to see the major cannabis retail insurance brokers gravitate toward insurance carriers who will not adopt this requirement. Furthermore, the insured or client enjoys having options in choosing how to protect their companies and other cannabis insurance carriers are available to meet those needs.
Fortunately, as more states legalize cannabis and medical cannabis it will invite more competition. The insurance carrier that mandated insurance and tied it together will be left without clients who may chose to go elsewhere.
DISCLAIMER: Material presented by Owner website is intended for information purposes exclusively. It is not meant for professional insurance or legal advice, to induce or solicit new clients, and shall not be construed as such. Each individual situation is unique and requires a licensed insurance broker or attorney in your state to evaluate and recommend insurance or provide legal advise respectively. Each insurance company, policy, and broker are unique with their terms,conditions, and product offerings placing the responsibility of the user to conduct and rely on their own due diligence.