insurance underwriters for marijuana businesses

Securing Insurance Coverage With Marijuana As A Risk Factor

November 1, 2018

Vermont was the 9th state to pass some form of legalization of marijuana use and we expect more states to follow suit. States where THC & CBD are legal for medical and recreational use are Vermont Massachusetts, Maine, California, Nevada, Colorado, Oregon, Washington, Alaska and Washington DC.

Some confusion exists between Hemp and Marijuana. They are two different plants, but they are both part of the Cannabis family. Tetrahydrocannabinol, also called THC, is the chemical responsible marijuana’s psychological effects. An average batch of marijuana contains anywhere from 5-20% THC content. Some premium marijuana can have up to 25-30% THC. Hemp, on the other hand, is regulated to only contain a max THC level of 0.3%, essentially making it impossible to feel any psychoactive effect or get a “high”. Rather, hemp contains high cannabidiol (CBD) content that acts as THC’s antagonist, essentially making the minimal amount of THC useless. When President Nixon signed into law the Controlled Substances Act of 1970, Hemp was grouped with all types of cannabis and was made illegal to grow in the US. So this law outlawed Hemp, which was one of the world’s oldest domesticated crops. This also led to increased misconception of the plant. In summary, the products derived from the Hemp plant and Marijuana plant that you can buy on store shelves, from dispensaries or online are all classified as a Schedule 1 controlled substances (like heroin or LSD), and are illegal at the federal level, even if legalized at the State level.

When trying to secure coverage for certain risks insurers face different legal issues by State because laws vary from State to State. There are limited markets available that can craft a policy to meet the insureds needs. S&H is seeing a steady stream of Cannabis, CBD and Hemp related submissions. Whether it’s a Cultivator, Manufacturer, Laboratory, Retail Shop or a Lessors Risk we can consider them all. We are appointed Cannabis specific markets and another that will provide coverage for the lessors risk exposures for landlords including habitational.

Key questions to ask to determine which applications/coverage you will need are as follows:

  1. Do they want Premises Liability only or Products Liability as well?
  2. If the insured is offering consulting services will they require Professional Liability?
  3. Do they need Cyber Liability if they are transacting online?
  4. Non-owned /Automobile coverage?
  5. Is the insured selling on line/across state lines?
  6. Do they need Workers Compensation?

From a property perspective you’ll need to drill down to the insured’s processes. If they are a cultivator for instance the following needs to be considered:

  1. Do they need coverage on seedlings?
  2. Do they need coverage on harvested stock as well as the finished stock?
  3. Is the stock located in an approved building or in a greenhouse?
  4. The finished products will be susceptible to theft. Does insured have a Central Station Burglar Alarm (CSBA) or approved vault or safe to store the product?

Bottom line is___ S&H Underwriters can help guide you through the process of properly insuring your Cannabis risk. Feel free to give us a call and we will be glad to lend a hand.

Contact us to learn more.