A general liability policy is responsible for covering the business and the owner(s) from legal claims resulting from bodily injury or property damage. Most states and many municipalities have set forth requirements for cannabis businesses regarding the requirements for insurance and the commercial general liability policy is one of the most common forms of insurance required. While some cannabis business owners may not enjoy having insurance requirements required of them to operate their business, general liability is a very common form of insurance for businesses.
When a company transports items, either owned by their own business or owned by another business, the coverage for the items is typically covered under a cargo policy. For the cannabis industry, markets are limited in terms of providing cargo coverage to transport cannabis stock and cash. While some carriers are providing cargo coverage for transporters whose sole purpose is to transport product and cash, the policy coverage limits and markets are narrow.
Cyber liability insurance covers the business’ liability after a data breach. This type of risk is normally excluded from traditional general liability policies. Storing important information on a network can make a business a target for hackers and businesses operating in the cannabis industry are just as at risk as any other business storing important information.
By offering employee benefit plans beyond a salary or hourly wage can help make your business more desirable for potential employees and help retain skilled workers. Many prospective employees look for a comprehensive benefits package when searching for a new job. Companies that provide comprehensive benefits have experienced higher employee satisfaction, fewer missed workdays, and a higher level of productivity.
Property insurance provides coverage for damages occurring at the property including building, other structures on the premises, and business personal property. If the business does not own the building in which they are operating, they can purchase tenants improvements and betterments coverage to provide protection for permanent improvements they are installing into the space. Generally coverage includes: fire, wind, hail, fire, ice and snow, lightning, and more. Theft or malicious damage is typically included, but it is important to note when operating a cannabis businesses, some carriers will exclude theft or place strict security guidelines that must be enforced in order to obtain coverage.
Product liability insurance is important for every business, but especially useful when manufacturing, processing or distributing cannabis products. This coverage ensures that your company is protected if there were to be a bodily injury or property damage claim filed by a 3rd party due to the use of your product. With this in mind, such coverage is useful for growers and processors, but also to retailers who may only be a distribution point for products.
One of the most important items to note, is that legal defense costs are covered within the product liability policy’s limit of insurance. The coverage would eliminate one of the biggest fears of a product liability claim – attorney fees and court costs. Product liability claims can be filed even where there is no fault to be found on the business. Therefore, legal defense fees can still be incurred to defend the business.
Owning a vehicle may not be necessary for all businesses but for others it is required. Secure transporters may have a fleet of vehicles hauling cannabis cargo. Testing facilities will have employees on the road collecting and transporting samples. Cultivators, processors, and provisioning centers may not own a vehicle but may have employees running errands using their own cars. Businesses will need a commercial auto policy to cover these exposures. Basic business owner policies do not provide coverage for automobiles that are owned by a business. If a business occasionally rents vehicles or has employees who use their personal autos for business errands, they might consider hired and non-owned auto coverage, which is a coverage that can usually be added to either the business’s general liability or commercial auto policy.
Directors and Officers liability insurance protects the personal assets of directors and officers of an organization for losses incurred while serving on a board of directors or as an officer. Directors and officers can be held liable if they breach their duties or contracts to the corporation, mix personal and business assets, or fail to disclose conflicts of interest. This exposure reinforces the importance of purchasing D&O Insurance, especially with the increase in cannabis companies hiring boards of directors and officers for their companies.
Workers compensation is a state-mandated insurance program that provides benefits to employees who suffer job-related injuries or illnesses. These benefits include payment of medical expenses, lost wages, and rehabilitation costs. Families of employees killed on the job also receive death benefits. Disability payments for lost wages are generally two-thirds of the employee’s gross income and are untaxed. The employee may receive an amount close their take-home pay prior to the injury or illness. Employees are typically eligible to receive benefits regardless of who may be at fault – the employee, the employer, a co-worker, a customer, or some other third party.
Professional liability/errors and omissions (E&O) insurance protects a business from claims if a client accuses the business or their employees of mistakes, errors, careless conduct, or incomplete work that results in a financial loss for the client. Some E&O policies provide additional coverages, such as defense costs. The defense costs coverage is an important coverage to consider – even if a mistake is not made, a business or their employees could still be brought into a lawsuit. And while a settlement or payment may never be awarded, the cost alone of a defense could pose a serious financial risk.
This coverage provides employers with protection against claims from current or terminated employees alleging wrongful termination, discrimination, harassment, and others. Discrimination can be based on age, race, sex, or physical disabilities. EPL coverage protects the employer from the actions of directors, managers, and employees. For example, if you, as the employer, hire a manager who holds back raises or terminates employees based on a racial reasons, then you could be at risk if a lawsuit is filed. Since you are the owner and you made that hire, it may be seen as a sign that you allow those behaviors.