The cannabis industry is enjoying rapid growth. Cannabis companies are also facing significant threats. Here are five cannabis coverages that can help these businesses manage their risks.
Understanding the Cannabis Market
According to ResearchandMarkets.com, the North American legal cannabis market was valued at $15.2 billion in 2021, and it’s expected to reach $38.2 billion by 2028.
Many different types of businesses make up the market. For example, some businesses are involved in the cultivation of marijuana and hemp plants, while others are involved in the manufacturing of cannabis products. Dispensaries that sell cannabis products to consumers are also a big business.
Since states began legalizing cannabis for recreational and medical use, these and other cannabis companies have flourished. According to the Thrillist, more than 500 cannabis dispensaries have opened up in Washington alone since the state legalized marijuana in 2012.
This impressive growth brings risks. Because cannabis companies face multiple types of risk, they can also benefit from multiple types of insurance.
Directors and Officers Insurance
According to a report on securities class action filings from Cornerstone Research, there were 13 core federal filing involving cannabis in 2019. It should be noted that this total was significantly higher than normal. In 2020 and 2018, there were six core federal filings, and in 2021, there were four. Nevertheless, securities actions are a continued threat for the industry.
In addition to securities litigation, both private and public cannabis companies can face claims of harassment, discrimination, unfair labor practices, breach of contract and other acts of negligence or wrongdoing. Directors and officers (D&O) insurance provides protection for the companies and board members who may be held personally liable.
Product Liability Insurance
Cannabis-infused products have become a big business. The National Association of Insurance Commissioners warns that the popularity of edibles and other cannabis products increases the risk of product liability and safety recalls.
Problems may occur if a product is mislabeled or if mistakes in the manufacturing process result in a higher-than-expected potency. In one example, the Oregon Liquor and Cannabis Commission ordered a recall for a CBD product that contained undisclosed levels of THC that could result in consumers becoming unexpectedly impaired.
For cannabis companies involved in the manufacturing and selling of cannabis-infused products, product liability and product recall insurance can offer important protection.
General Liability Insurance
Cannabis dispensaries face many of the same risks as other retailers. For example, a customer may slip and fall while in the store and sue the company for injuries. General liability insurance is an important coverage type for many businesses, including cannabis businesses, and it may be required as a condition of a lease.
Recent wildfires have threatened cannabis crops. MJBizDaily says that wildfires in Northern California have threatened several marijuana farms. Sweet Creek Farms, a family-run cannabis company in Sonoma County, lost about four-fifths of its crop to a fire. Luckily, firefighters managed to save part of the compound. Unfortunately, the crop wasn’t insured.
Crop insurance can protect grow operations from losses related to fires, cold weather damage, diseases and other natural disasters.
Many states have legalized marijuana, but the cannabis industry is still a target for crime. This is largely due to the fact that most cannabis companies operated as cash-only businesses because banks refuse to work with them.
In Washington, the number of robberies targeting cannabis dispensaries has skyrocketed. The Washington State Liquor and Cannabis Board says that there have been more than 50 robberies at cannabis businesses in just the first three months of 2022, more than the total number in all of 2021.
Increased security may help, and cannabis insurance coverage for criminal acts can provide another layer of protection. Commercial crime insurance can provide burglary and robbery coverage, along with coverage against certain other types of crime.
Insuring Cannabis Companies and Cannabis Premium Financing
It’s true that cannabis companies currently have a hard time securing insurance and financing due to federal regulations. The insurance carriers that are willing to work with cannabis companies often charge high premiums. Likewise, many federally-regulated financial institutions are unwilling to offer loans to cannabis companies.
ClassicPlan Premium Finance is state-regulated and able to provide cannabis premium financing. This allows cannabis companies to finance their insurance premiums so they don’t have to pay everything upfront, making coverage more affordable and accessible.
Interested in becoming a ClassicPlan producer so you can make this kind of premium financing available to clients in all industries, including cannabis? Get appointed with ClassicPlan today.