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Professional Liability Insurance in the Cannabis Industry
Professional liability insurance is a type of liability coverage for those in the cannabis industry that typically provide advice to others. Examples of when this type of coverage may be needed include professionals such as pharmacists, consultants or medical doctors who are giving advice to patients or others.
The need to buy this type of insurance could be the result of contractual requirements, protecting company assets, or high degree of concern by the consultant of being sued.
The cannabis professional liability policy is offered through a limited number of insurance carriers with coverage amounts that typically start at $1,000,000 of coverage. The insurance policy is most likely offered on a “claims made basis.” A complicated insurance term, but essentially means a policy must be active within a particular time period for indemnification for a claim to be covered. The reasons insurance carriers structure the insurance policy in this format could be the difficulty of predicting claims in the future.
What important factors to consider when buying cannabis professional liability insurance?
In order to protect your company from a professional liability lawsuit using insurance, the purchase of a separate policy is typically required. If you currently have a commercial general liability policy that policy does not provide coverage for professional activities.
The following are important factors to consider when purchasing this type of coverage:
- Professional liability insurance is typically a separate policy.
- Professional liability provides liability protection for the advice you are providing to others who rely on this information.
- Professional liability is most likely offered on what is known as a claims made contract. This means an active policy must be in force that recognizes a particular time period should a claim arise.
- The professional liability insurance policy will contain exclusions. This means a coverage provision has been removed. The cannabis consultant must read through the policy and pay close attention to the exclusions.
- Determine if legal defense costs are included within the limits of liability. For example, if you have a $1,000,000 limit of liability and legal expense to defend your lawsuit was $100,000. Does the $1,000,000 become reduced by the $100,000 or is it separate and distinct?
- Choose a knowledgeable and professional insurance broker before buying professional liability insurance.