I recently moderated a Bar Association of San Francisco Insurance Section program co-sponsored with the Cannabis Law Section. The program highlighted recent changes to local insurance requirements and market availability of coverage for cannabis businesses.
Local insurance requirements vary greatly by city and county, and it is important to take this into account—especially if you will be doing business throughout California. While certain coverages are still unavailable (i.e., true outdoor crop insurance) or prohibitively expensive (i.e., quality D&O insurance), one point of optimism is that the insurance market is actually adapting quickly and well to the demand for insurance for this industry. As a result, the panel recommended reviewing and updating your insurance portfolio often with the assistance of a broker who is well versed in the cannabis space.
We also discussed best practices and concerns when placing insurance for cannabis businesses. Some of the best practices discussed in the presentation included:
- Have an experienced broker or coverage attorney carefully review the terms and exclusions of the policy, as these policies vary greatly and standardized forms are not well suited to this industry.
- Make absolutely sure that all cannabis-related risks, both plant touching and not, are disclosed to the carriers in the application process.
- Where applicable, ensure that cannabis activities are included in the description of the business on the issued policy.
- In particular, extra care should be taken in entering contracts that require providing indemnity and insurance to a cannabis business, and in verifying the insurance of companies that are required to indemnify and provide insurance for your business.
It is important to note that these take-aways apply equally to “cannabis adjacent” businesses that service or do business with the cannabis industry, even if they don’t touch the product at all.