What Licensed Cannabis Businesses Must Know About Insurance

By Eric Weisbrot

The cannabis business landscape has come into the limelight over the last several years, with some states making historic moves to legalize its production, distribution, and consumption. However, many eager cannabis entrepreneurs and prospective business owners still face an uphill battle. The federal stance on cannabis makes any activities surrounding the drug illegal, and this muddies the waters for companies trying to get started or remain in the industry.

Many states, however, have taken away the illegality of some cannabis products and their use, including medical marijuana, small recreational use, and hemp and CBD businesses.

Unfortunately, the insurance industry has been slow to embrace the growing marketplace for these products, given the state of federal regulations. Companies involved in cannabis need to understand what their options – and limitations – are as it relates to getting appropriate insurance coverage, and how that impacts their business operations and licensing both now and in the future.

Types of Insurance Available by Niche

As the cannabis industry continues to grow, more insurance providers are coming to the table with coverage options for specific business types. Based on the products created and sold, the following niche markets within cannabis may find insurance solutions to meet their needs.

Medical Marijuana

Distributors of medical marijuana, such as licensed dispensaries, have the most access to insurance compared to other business lines. This is mainly due to the fact that legalizing the use of medical marijuana is often the first step states will take to ease laws surrounding cannabis products. Also, medical marijuana dispensaries are required to obtain a valid license in order to operate in states where these types of businesses are legal. One component of the licensing process is securing a surety bond.

A marijuana surety bond provides some guarantee that a dispensary will operate in line with state rules and regulations. Depending on the licensing process imposed in the state where the business is located, the bond may guarantee a dispensary pays taxes on products sold to consumers in a timely fashion. In addition to marijuana surety bonds, medical marijuana companies may also have access to general liability insurance, commercial property insurance, and product insurance in some states.

Recreational Cannabis

Similar to medical marijuana businesses, recreational dispensaries are required to have a valid license in the state where they operate, which means a surety bond may also be necessary. Surety bonds work in the same manner for recreational dispensaries as they do for medical marijuana companies, and they are available from similar surety companies. However, recreational cannabis businesses may not have access to general liability insurance coverage or product-specific insurance. Commercial insurance may be available depending on the ownership and location of the dispensary itself.

Legal Hemp and CBD Products

The legal hemp industry, driven mostly by Cannabidiol or CBD, is growing at a rapid rate, projected to reach a staggering $22 billion by 2022. Licensing may be required for legal hemp and CBD businesses, as does a surety bond requirement. Many CBD and hemp businesses do have access to other types of insurance, including general liability, product coverage, and commercial property insurance. However, the number of insurance providers offering coverage has not kept up with the impressive growth in the industry.

The Process for Getting Insured or Bonded

The good news for cannabis businesses is that insurance companies are beginning to expand what coverage options they offer in several different states. However, that does not mean the process of obtaining the right insurance policy is an easy task. First, businesses need to have a business license which requires submitting an application to the state’s licensing authority. Within that application, companies in cannabis may be asked to provide detailed information about the owners of the company, its financials, and submit to a background check.

Once a license is in place, then insurance coverage or a surety bond can be pursued. The insurance provider will need to know the type of cannabis business that is in operation, the location, and the type of coverage necessary. The insurer may ask for verifying information such as financial documentation, credit history, and licensing details to approve an application. After these details are reviewed and approved, the cannabis business is provided proof of insurance via a certificate. The premium must be paid before a certificate is sent to the company, and it is typically renewed each year.

Although the task of obtaining adequate insurance coverage as a cannabis business is not a simple one, it is becoming less daunting as more states legalize cannabis from a medical and recreational perspective. Business owners and entrepreneurs joining the industry need to recognize that insurance and bonding is a necessary component of operating a sound business, and understanding what coverage is available is part of the process.


Eric Weisbrot is the Chief Marketing Officer of JW Surety Bonds. With years of experience in the surety industry under several different roles within the company, he is also a contributing author to the surety bond blog.

FSD Pharma To Establish Presence In Canada’s Insurance Regimes

Signs agreement focusing on exploring insurance coverage for medical cannabis Canada wide

CANADA: FSD Pharma Inc. announced the signing of a consulting agreement with Joseph L. Romano, a well-respected lawyer with a strong track-record in personal injury law. Mr. Romano has been working with medical cannabis since 2006, assisting people coping with chronic pain to have access to medical cannabis, a viable alternative to opioid based medications.

Pursuant to the terms of the agreement, Mr. Romano will provide consulting on the inner workings of third party actions, WSIB claim handling, first party coverage and no fault benefits across Canada. Mr. Romano will also assist in identifying strategic acquisitions that will enhance shareholder value.

Commenting on the agreement, Dr. Raza Bokhari, Executive Co-Chairman and interim CEO said, “We are very excited to engage Mr. Romano in advance of our anticipated sales license. This is a very timely and important agreement for FSD Pharma to maximize the opportunities in the Canadian market for our products and fits well with our strategy of establishing the company as a leader in medical cannabis.”

In consideration for his services, FSD will pay Mr. Romano consulting fees, warrants and shares in the company, subject to compliance with all applicable securities laws and the policies of the Canadian Securities Exchange.

420MEDIA Trailblazers In Cannabis: Norman Ives, Broker & Cannabis Specialist Worldwide Facilities

Trailblazers In Cannabis

Digital marketing agency 420MEDIA and the Marijuana Business Association (MJBA) have joined forces to create a series highlighting entrepreneurs trailblazing the cannabis scene. Each week, we profile a noteworthy business pioneer, and ask each 5 questions. This week we talk to trailblazer Norman Ives, Insurance Broker and Cannabis Specialist at Worldwide Facilities. 

Tell us about your company: 

Established in 1970, Worldwide Facilities is a national wholesale insurance broker, managing general agent and program underwriter. For nearly 50 years our team of insurance specialists have provided innovative solutions to the specialty US and international insurance markets. More recently through a combination of organic growth, recruitment and acquisitions Worldwide Facilities has aggressively expanded presence, standing and financial strength more than tripling its size to more than $1.5 billion in premium and is among the four largest wholesale brokers in the US.

Norm at MJBA Booth

Why did you choose the cannabis/hemp business?

Did I choose the cannabis industry, or did it choose me? It was not long after Initiative 502 passed in Washington legalizing the production and sales of adult-use/recreational marijuana that I started receiving inquiries from business owners and investors trying to understand what kind of insurance policy options were available for a marijuana license holder and other marijuana related endeavors. Not long after some of the first policies issued to license holders I began speaking business networking groups like the Marijuana Business Association (MJBA) and Washington Marijuana Association (WAMA) to help educate the community and committed myself to volunteering in the community like the non-profit Cannabis Coalition for Standards and Ethics (CCSE) and later The Cannabis Alliance. I am honored to be able to contribute my time and energy in support of the cannabis movement and the many amazing, caring, compassionate individuals who have been doing this meaningful work at great risk and often their own expense to deliver meaningful healthcare services to some of our communities most vulnerable members.

norm at dope mag party

What change will your firm address in the industry? 

Progress & solutions!  With more than 20 years of experience in the nutraceutical space, Worldwide’s NutraRisk practice group is already the recognized leader delivering insuring products for dietary supplements, CBD, vitamins, health, nutrition and naturalist products. The expansion into regulated cannabis is a natural progression of our continued commitment to its core institutional strengths. Over the course of the last year, they have done more than any other insurance organization to improve the market following the launch of two new insurance carriers (both highly regarded A+ XV carriers) including their best in class, exclusive cannabis offering that was announced in September of 2018.

MJBizCon on the bus

What has been the reaction to your product?

Over the past four years I have placed more than 1,000 policies generating $4.5 million in insurance premium delivering insurance protection to more than $400 million dollars in legal/regulated cannabis sales.

What have been some key milestones for you? 

This past year, I have been honored to serve as an elected board member of The Cannabis Alliance, Washington State’s largest and most influential non-profit advocating for the advancement of a vital, ethical and sustainable cannabis industry.

I am proud to serve my fellow insurance professionals as a panelist for Business Insurance Master Class “Cannabis Cover” held in Denver & Los Angeles in March 2019.

This spring I have been invited to speak by the Defense Research Institute, Washington DC, to the international organization of attorneys defending the interests of business and individuals in civil litigation for their May 2019 installment of “Marijuana Law”.

Where can readers learn more?

Nives@wwfi.com

LinkedIn:              https://www.linkedin.com/in/normanives/

Instagram:           @Cannabiznorm

Twitter                 @CannaBizNorm

 

 

NutraRisk Expands Cannabis Program For Recreational And Medicinal Operations

CALIFORNIA: NutraRisk, a division of Worldwide Facilities, announces that it is expanding its offering to include an exclusive cannabis program, providing General and Product Liability for medicinal and recreational operations.

NutraRisk can also place risks, in the eight states where recreational cannabis is legal, in another new and expanded Recreational Cannabis Program. In addition to these new General Liability Products, they can now provide a Crime option for the cannabis industry as well.

These programs represent some of the most tailored insurance coverage available for cannabis, CBD and hemp manufacture and sale.

“These insurance products are not yet mainstream, and the regulatory landscape is challenging. The cannabis industry at large faces significant challenges in finding comprehensive coverage,” says Morgan Moore, Life Science Practice Leader at NutraRisk.  “Many carriers hesitate to write these exposures and those that do often have very restrictive exclusions.”

NutraRisk has partnered with a few carriers that have decided that now is the time to enter into this sector and provide coverage for the various types of exposures. Coverage options include General and Product Liability up to $2 million, as well as Excess Liability up to $5 million. The approved classifications include (but are not limited to): cultivation – indoor, greenhouse, and outdoor operations, dispensaries / retail shops, growers, laboratories, transporters, recreational and medicinal marijuana.

“There are huge opportunities for retail insurance agents to increase their presence in this untapped and growing market,” Moore adds. “NutraRisk continues to partner with the innovative insurance carriers who are willing to explore cannabis coverages. Our Cannabis team consists of Casualty, Property and Financial Service Brokers who specialize in this space and have proprietary coverages available that are inclusive of the risks involved.”

“The cannabis industry represents the most tangible Crime risk in the history of insurance,” says Brian Savitch, Financial Services Specialist at NutraRisk. “With no banking solution in sight, this will remain a cash business. Unfortunately, most businesses have no idea that their cash on hand is insurable or that this type of insurance even exists.” Savitch adds, “Fortunately, we’ve partnered with a carrier, that is committed to cannabis, to offer a proprietary Crime product that will help bring peace of mind to cannabis business owners.”

Brian Savitch has an extensive background in D&O, E&O and Cyber. Over the past two years he has focused that expertise on the cannabis industry. Expect these ancillary lines to come to the forefront as sophisticated investors push insureds to properly round out their corporate insurance portfolios.

 

 

What Licensed Cannabis Businesses Need to Know About Insurance

By Eric Weisbrot

The cannabis industry has been growing steadily for the last several years, with many states taking the initiative to legalize medical use, recreational use, or a combination of the two. Several legislative bodies are recognizing the potential of the industry, not only as a way to help individuals with chronic health conditions but also as a boost to tax revenues and economic growth. However, legal cannabis businesses have long faced one significant challenge above and beyond public and government perception – their ability to secure crucial insurance to protect themselves from financial loss.

Licensed cannabis businesses are predicted to grow annual sales to an impressive $57 billion throughout the world over the next ten years, with recreational use making up 67% of the market share. While these numbers are promising for business owners and industry experts, the lack of insurance coverage available in the industry puts it all at risk. Here are several points to know about the cannabis insurance market currently, and where it is headed in the years to come.

Available Coverage for Licensed Cannabis Businesses

Even though several states have moved forward in legitimizing cannabis and the companies behind its growth, distribution, and sales, the federal illegality of marijuana leaves many lines blurred. The ability to get affordable insurance is not simply a challenge for cannabis businesses; it is often not available at all. Insurance companies have previously viewed the risk in cannabis as far too high to provide even minimal coverage, but that negative perception is starting to shift.

In a notable decision in California, the state’s Insurance Commissioner worked diligently from 2017 to encourage a variety of insurance providers tooffer a range of policies to licensed cannabis businesses. After this more than year-long push, the state has approved the first business owner policy for cannabis companies, consisting of property and liability insurance for dispensaries, processors, manufacturers, distributors, storage facilities, and other related businesses in the state. The good news is that many other insurance companies are following suit, offering the following coverage based on the type of cannabis business applying for a new policy:

Dispensaries – the risk faced by dispensaries focuses mainly on the threat of theft in the business, but damage to the product or building, or injuries on the job may also take place. The few insurance companies offering coverage to dispensaries do so by way of general and product liability insurance, property and medicine insurance, or business income/overhead expenses insurance.

Growers – cannabis growers are an essential part of the business landscape, but they often are exposed to a higher risk than other companies in the industry. The potential loss of inventory means a grower could be out of business in a hurry, so insurance companies provide coverage for living plant material, harvested plant material, and finished stock. Coverage typically protects against water and fire damage, theft, and explosions.

Hemp and CBD Production – the manufacturing of legal hemp and CBD products for sale to the consuming public also comes with high risks. Insurance companies offering coverage to these businesses do so through product liability policies, and in some cases, general liability.

Surety Bonds to Fill the Gap

Conventional insurance is often the route many small businesses take to cover their inventory, their overhead expenses, and their ability to generate revenue even when a disaster takes place. However, licensed cannabis businesses may not always have access to an affordable insurance policy to cover these significant needs.Surety bonds for licensed cannabis companies are one method to fill in this gap. A surety bond is not pure insurance, but instead, it provides some level of guarantee that the business will operate in-line with state laws and regulations. Securing a surety bond is not a requirement for all cannabis businesses, but it is becoming more common as states firm up legal necessities for licensed companies that grow, distribute, or sell cannabis products.

At the same time California announced its insurance company partnerships, the state also made it mandatory for licensed cannabis businesses to have a surety bond of at least $5,000 in order to keep their license valid. These bonds guarantee payments related to the financial loss of the destruction of goods and materials when a violation of state regulation takes place. Other states have followed this path and made surety bonds a requirement for receiving a cannabis business license, helping protect both consumers and the state from potential loss. Fortunately, when a surety bond is required, cannabis businesses are not on the hook for the entire bond amount but instead pay a small percentage of the total dollar amount of the bond.

The combination of business insurance coverage and surety bonds lays a strong foundation for cannabis-related businesses to thrive as the market continues to grow.


About the Author: Eric Weisbrot is the Chief Marketing Officer of JW Surety Bonds. With years of experience in the surety industry under several different roles within the company, he is also a contributing author to the surety bond blog.

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