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Commercial General Liability insurance (“CGL”) is a type of business insurance policy issued to medical and recreational marijuana businesses for protecting the company from claims associated with negligence, occurrence, or offense based on each unique circumstance. Depending on the insurance carrier, the issued policy may reference bodily injury, property damage, and personal and advertising injury likely made by a third-party for damages.
Besides the liability limits, the policy may include a duty to defend clause to allow for legal representation benefiting the marijuana company should a lawsuit arise. The insurance policy is a contract between the marijuana business and the insurance carrier issued on standard policy forms with contractual content typical for most industries. In other words, the insurance industry did not dramatically alter their policies just because a business is classified as medical or recreational marijuana.
Depending on the insurance policy and carrier, the most significant difference between the CGL insurance policy issued to a medical and marijuana industry is the likelihood “products and completed operations” may have been excluded on the policy. This means no coverage exists for liability associated with the selling, manufacturing and distribution of cannabis into the marketplace. Fortunately, this type of coverage can be secured through a separate policy.
What exactly is covered or not covered under a marijuana CGL policy?
Depending o the insurance carrier and policy, the insurance provides comprehensive protection that could be associated with bodily injury, property damage, personal and advertising injury, and fire damage legal liability unless it has been specifically excluded in the policy. These policies are either occurrence or claims made basis with the former recognized as being more liberal toward its application of when a claim is to be recognized. Pertinent exclusions include contractual liability, workers compensation, damage to your product, and infringement of copyright or trademarks. As indicated previously, marijuana product liability is purchased on a separate insurance policy since the majority of CGL policies exclude products and completed operations.
What are the typical limits of liability being offered for marijuana liability?
When you receive an insurance quote for marijuana insurance, you might notice different limits of liability being presented. Depending on your coverage needs, the limits may be specified as $1,000,000 per occurrence, $2,000,000 aggregate, $1,000,000 personal and advertising Injury, $100,000 for damage to premises rented and $1,000 for medical payments.
How do I determine the appropriate liability limits for my marijuana business?
This depends on numerous factors such as risk tolerance, company valuation, budgetary and contractual considerations. It’s important to know, the insurance industry has restrictions toward offering high liability limits.
What’s the difference between a CGL and other liability policies?
The CGL encompasses insurance protection particular to the business, premise, and operations association with the marijuana enterprise. Separate and distinct insurance policies include workers compensation that provides employer liability and indemnification due to employee injuries. Product liability indemnifies the selling, manufacturing, and distribution of cannabis and its derivatives. While directors and officers insurance indemnifies corporate officers and directors for negligence associated with their duties at the marijuana company. CGL policies are offered on an occurrence versus claims made basis, with the former recognized as being broader in its interpretation of when the claim was triggered.
How is the price determined for marijuana liability insurance?
Depending on the marijuana insurance carrier, the rates may be determined using numerous factors such as revenue, square footage, type of licensee, location, and specific coverages requested.
Besides the insurance carrier is there any other companies involved?
Yes. Besides the marijuana insurance broker and insurance company there may be an Excess & Surplus (E&S) Lines broker who underwrites, provides insurance quotes, and represents the interests of the insurance carrier. In addition, there is typically a separate company responsible for adjusting a claim.
What exactly is the process to obtain a marijuana insurance quote?
Depending on the marijuana insurance broker or agent, the E&S broker requires an insurance application to be submitted to them for evaluation. Certain E&S brokers use proprietary applications, while others might use standardized forms for all industries. After the underwriting has been completed a quote is issued by the E&S broker and sent to the marijuana insurance broker to be presented to the client.