Understanding Insurance for Cannabis Operators: Nuances and Trends

This guest editorial was contributed by Keith Signoriello, the co-owner and principal of C&S Insurance.

As legalization efforts gain momentum worldwide, the cannabis industry has experienced rapid growth and shows no signs of slowing down. New opportunities have emerged for entrepreneurs and investors in the cannabis industry. However, amidst the excitement, a crucial factor toward long-term success is often overlooked — insurance.

Just like different strains of marijuana, cannabis insurance is nuanced. Whether a business is cultivating, distributing, manufacturing products, or applying to become a registered dispensary, being prepared to face a diverse array of challenges is crucial. One of the best ways to protect a business is with a specialized insurance solution that can swiftly adapt to increases in demand and new regulations while effectively mitigating the risk of crop loss, product liability, theft, and cyber-attacks.

Each business has unique operations and risk profiles, which means the future of cannabis insurance will not be a one-size-fits-all solution. From industry changes to emerging trends, understanding what lies ahead and customizing a comprehensive policy will be key to helping businesses stay ahead of the curve.

Here are important coverages to consider:

Product Liability & Product Recall Coverage
Cannabis and hemp, much like food and alcoholic beverages, are consumer-based products that can cause injury, sickness, or worse. This coverage protects business owners against claims of defective or harmful products.

Professional Liability Coverage
Cannabis professionals, particularly those in healthcare, dispensaries, and labs, can be liable for advice that leads to a negative outcome. Also known as Errors & Omissions Insurance, this coverage is often excluded from standard medical malpractice policies but is essential in shielding against such risks.

Workers’ Compensation
Required by certain states, workers’ comp ensures that employees are protected in case of injury or job-related illness.

Commercial Umbrella Coverage
This coverage extends beyond the realm of those previously mentioned, helping protect against additional driving-related risks that come with product delivery.

Commercial Property Insurance
Typically bundled into a broader program, this type of coverage is essential to a comprehensive business plan and comes with significant variables such as policy limits, named and excluded perils, and claims made versus occurrence.

Commercial Auto Insurance
Generally required by businesses that use vehicles, this type of coverage protects against losses involving cars, trucks, vans, and other vehicles utilized in business operations.

Business Interruption & Business Income Insurance
While often used interchangeably, these coverages offer different forms of protection. Business Interruption coverage is designed to cover expenses during a temporary shutdown. Business Income Insurance covers lost earnings if a business is forced to close due to a covered peril.

Cyber Coverage
With the FBI reporting 4,000 daily cyber-attacks, this coverage helps protect you from breaches in sensitive employee, product, and client data — which is especially important for businesses with access to clients’ medical records.

Despite politicians like Senate Majority Leader Chuck Schumer working to decriminalize marijuana, regulatory scrutiny continues to face the industry at an all-time high. It’s important to know that many standard business insurance policies don’t protect companies from cannabis industry-specific risks. Working with specialized cannabis insurance agents can help navigate local approval processes and ensure policies evolve to address internal and industry-level changes and trends.

For example, the global movement toward decriminalization has already increased curiosity and engagement, fostering a growing user base of cannabis enthusiasts and inspiring diverse emerging trends. Cannabis’ acceptance as a legitimate medicine, growing popularity in cannabis-driven tourism, and the influx of innovative strains and products are already paving the way for a future defined by growth.

Legislative milestones such as the SAFE Banking Act of 2021 and insurance policies tailored to different sectors are a testament to the cannabis industry’s evolution and promise. As widespread acceptance continues to unlock new potential, adequate protective measures will become increasingly vital. By safeguarding ventures from the complexities and challenges presented by this expanding market, these measures will empower businesses to solidify their influence on the global economy for years to come.