Outdoor Cannabis and CBD Crop Insurance Becomes Available

Insurance Company Offering Protection for Outdoor Plants

In the history of cannabis insurance there has never been a insurance company willing to offer coverage for cannabis plants growing outside.  Think about it, the chances of something going wrong due to weather or criminals seeking an easy target had scared off most insurance companies.  Indoor crop insurance has been available from approximately two companies knowing those plants are protected by four walls, video, alarms, and gated windows. 

However, the thought of offering outdoor crop insurance was unheard of until now. 

The insurance industry is conservative my nature.  The availability of outdoor crop insurance is considered a giant leap forward for both the cannabis and insurance industry.  There are many variables analyzed by actuaries attempting to quantify if a program of this nature will be viable long term.   Those variables include understanding the numerous hail storms that occur in Colorado.  That California is subjected to many wild fires.  Washington State can experience flooding and wind damage.  Knowing an insurance company analyzed these types of risk was the last frontier in cannabis insurance to be conquered. 

SecurityOf course, there are coverage limitations meaning how much the insurance carrier is willing to cover along with underwriting requirements particularly focused on the security of those living plants, water availability to combat a fire, and brush clearance surrounding the property.   These are reasonable expectations every outdoor cannabis farmer should be incorporating even if insurance wasn’t involved.

The coverage limits offered by the insurance company are more generous on cannabis (THC) as opposed to Hemp (CBD).  The reason seems to point toward the lack of regulations within CBD industry.  The types of covered losses such as fire, theft, and hail should be carefully reviewed along with specific exclusions with a licensed insurance broker specializing in the industry.  

How will the insurance carrier determine the value of my outdoor plants?

The application has a designated area to determine values based on the stage of the plant.  These stages such as seedlings, vegetative, flowering, and harvested can be insured in “layers” of coverage amounts. 

For example,  the number of flowering plants multiplied by the wholesale value will equal total plant value.  If a cannabis grower had 1,000 flowering plants valued at wholesale at $500 per plant, then the insurance coverage amount would be $500,000.  The value of seedlings is less than the value of harvested plant material. 

Knowing the wholesale value of those plants will fluctuate, it will be important for the cannabis grower to be certain their limits will sufficiently protect them from a loss. 

Need a quote for your outdoor crop insurance?

Outdoor crop insurance is now available! For more information, please complete this online inquiry if you have interest in obtaining further information. 

Disclaimer:  We are not licensed in all states.  Please visit our terms of use page. The images do not represent a covered cause of loss. 

Cannabinoid Hyperemesis Syndrome Illness Leaves Industry Wondering about Insurance Protection

Cannabis Customers Experience Abdominal Pain and Vomitting

We investigate the world of insurance to determine if product liability insurance would protect cannabis stores, growers, and manufacturers from Cannabinoid Hyperemesis Syndrome (“CHS”).   In case you’re unfamiliar with CHS, it apparently affects certain cannabis users causing nausea, repeated vomiting, abdominal pain, decreased appetite, and fluid loss. 

The people effected by this illness can end up in the hospital emergency room due to the vomiting. Does not sound like a fun illness to have especially if the person ends up with medical bills, out of work, and in rare cases seizures have apparently been reported.

Cannabis companies question if they have a potential liability 

We don’t have access to every insurance company offering product liability protection to the cannabis industry.  That is our disclaimer.  Therefore, we limit our review to insurance carriers typically represented by our office for these types of transactions. 

If you’re a cannabis licensee, the first task is to look at your current insurance policies to determine if you even have product liability. 

Why is this important? 

The insurance companies rely heavily on the policies they’ve produced when determining if a claim is covered. The adjusters in the majority of cannabis insurance claims will review the wording in the policy language to determine if coverage is available or not.

Most cannabis business insurance policies will exclude or remove coverage for “Products and Completed Operations.”  If you see this term excluded, then it means you have no coverage on that policy.   It might be prudent to determine if other policies exists because it may have been purchased separately.

 

Product Liability Exclusions on a PolicyThe insuring agreement is standard in every insurance policy. Its the insurance carrier’s acknowledgement of their agreement with an insured.  In this example, the insurance carriers are using standardized industry forms or policy language:

 

 

1. Insuring Agreement
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” included within the “products-completed operations hazard” to which this insurance applies.

The insured is the cannabis store, grower, or manufacturing company. 

The bodily injury in quotes means it has been defined or a specific definition exists within the policy.  For example:

2. “Bodily injury” means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.

It would be difficult for an insurance carrier to argue CHS is not a sickness.

Lastly we reviewed if the insurance policy excludes or removes coverage for CHS.  The word exclusion is a commonly used insurance industry term.  Many insurance claims are denied because of exclusions meaning no coverage.  Insurance companies will commonly specify their intention to exclude by creating a separate page from the main body of the insurance policy to indicate the level of importance.

Can I Expect Insurance Companies to Pay for CHS Claims?

Depending on the circumstances such as the claim and type of policy, CHS is likely to be covered on most product liability insurance policies.  The reason for our opinion is based on the insuring agreement, definition of bodily injury, and lack of any exclusions in the policies we reviewed. 

 

How Risky is Using a Rice Cooker to Infuse THC?

Cannabis Insurance Requirements when using a rice cooker

Cannabis Insurance requirements when using a rice cooker

Buying Cannabis Insurance is like Entering into a Black Hole

This article was prompted by a client who uses a rice cooker to infuse THC.  I began to sweat imagining what list of conditions and requirements would the insurance carrier force upon us just to buy insurance.  Think about it…its a rice cooker using low heat that can be plugged into your basic electrical outlet.  Rice cookers have been around a long time.  Their chances of it blowing up or causing a fire are pretty low and can even be used to make rice.   But, you combine cannabis and rice cooker with insurance it gets complicated.

As the cannabis insurance industry continues to mature, I’m witnessing a perverse need by the insurance industry to load up customers with many mind numbing requirements in order to obtain insurance.  The list can be exhaustive, burdensome, and nauseating for the agent and customer to meet every demand.

Some of it makes sense and some of it doesn’t, but we’re talking conditions, subjectivities, and warranties to use insurance industry jargon.  Basically, these terms mean if you’re untruthful or fail to comply, the insurance carrier will seek a position to deny a claim based on the facts. 

Essentially, you’re stepping into the insurance black hole that could cost you. 

Now, Greenpoint is not adverse to risk management.  We recognize certain requirements are good for the customer in preventing damage when it makes sense and its reasonable.  We are just trying to find the right balance between meeting the needs of the insurance industry and not overwhelming the cannabis client.

Can you say warranties, conditions, and subjectivities three times?

Here’s a small list of requirements or warranties being mandated by some of our insurance providers:

  1. Active Central Station Alarm
  2. Motion room detectors
  3. Electrical warranty confirming the electrical was performed by a licensed electrical contractor and insured.
  4. Electrical warranty confirming in the next 30 days the electrical will be inspected by a licensed electrician. 
  5. No incandescent lighting
  6. Confirm adequate electrical circuits and plugs for intended use
  7. No smoking of anything at the facility
  8. No open loop extractions
  9. Proper storage of chemicals
  10. Proper storage of fertilizers
  11. Updated roof
  12. Updated electrical
  13. Updated plumbing
  14. Updated hvac
  15. No hanging plastic dividers
  16. Subject to confirmation all employees using the extraction equipment are trained
  17. Subject to equipment being regularly maintained
  18. Proper ventilation/gas detection systems are in place
  19. Subject to providing Standard Operating Procedures and Maintenance Program Log
  20. Non-owned automobile coverage is available if drivers are not on a regular schedule
  21. Confirm your cannabis is not being sold to minors
  22. Confirm you cannabis product is not crossing state lines.
  23. Confirm your cannabis is being testing for heavy metals
  24. Confirm your safe meets a particular TL rating
  25. Confirm your vault meets specific build quality and materials.

Open loop extracting is illegal in regulated cannabis markets

Out of the list, the confirmation of not processing cannabis through an open loop extraction system seems bizarre.  To our readers unfamiliar with the term open loop, think of using a solvent such as butane to extract the cannabis oils without proper equipment and ventilation.   Open loop is like making moonshine in the mountains of West Virginia or Kentucky.  Asking a client if they extract using open loop should have been asked 10 years ago prior to regulations.

The title of one YouTube appropriately calls it Back porch BHO blasting. 

This process would be illegal in regulated markets such as Washington and Colorado.  Knowing its illegal, why would the insurance carrier ask the applicant if they are using an open loop system.  Makes no sense.  Time would be better spent on confirming the types of safety incorporated into their closed loop extraction equipment and methods. 

We strongly encourage the cannabis insurance carriers to carefully scrutinize their list.  What makes sense?  What is reasonable?

For cannabis or cbd operations, we strongly encourage you buy insurance from an insurance broker who has knowledge of these types of issues before entering the game of buying of insurance.

Cannabis Retailers Want Manufacturers to Cover them from Liability through Insurance

Cannabis stores may not realize most carriers are saying no coverage for vape pen batteries

The latest insurance trend in the cannabis industry has to do with cannabis stores requiring their manufacturers to include them as additional insureds for product liability.  Additional insured means the store is listed on the policy for liability protection.  Even more interesting for insurance geeks are stores are asking the batteries for vape pens must be covered.

A typical scenario is the manufacturer of the vape pen and battery sells these products to a variety of retail cannabis stores.  A store requests their business must be covered on the manufacturers insurance policy for product liability.  The evidence comes in the form of a Certificate of Insurance without any real verification the batteries are indeed covered on the manufacturers policy.

Why are cannabis retailers requesting this type of coverage for batteries?

 

Cannabis Insurance Company making certain requirements

 

We don’t see any evidence of retailers or manufacturers considering this type of obligation in their relationships or contracts.  It may be the cannabis insurance companies forcing their store clients to request the coverage from the manufacturer as a condition of their insurance.  This is a method we strongly are against for a variety of reasons, if its true.

For example, a cannabis store is buying product liability insurance from an agent.  The agents tells the cannabis store they must be added as additional insured on the manufacturers policy or else they may not be able to buy insurance according to the carrier’s underwriter.

The other scenario could be some cannabis store became concerned with exploding batteries and decided to request coverage from their manufacturers in case something went wrong. 

The truth is cannabis insurance companies are not covering most batteries

 

No insurance coverage for vape pens

 

Based on current market conditions certain product liability insurance policies are covering the vape pens.  However, they seem to be running away from batteries.

We reviewed several product liability insurance policies to determine if batteries are being covered. 

Here’s what we discovered:

No Coverage of Batteries on Insurance Policies

Cannabis Insurance Carrier ACannabis Insurance Carrier BCannabis Insurance Carrier C
EXCLUSIONS BATTERIES

This insurance does not apply to "bodily injury", "property damage", or "personal and advertising" arising out of batteries. This exclusion applies regardless of whether:

A. Said batteries were manufactured, sold, handled, distributed or disposed of by your or others trading under your name or on your behalf; or
b. "Your work" or
VAPORIZING EQUIPMENT AND COMPONENTS EXCLUSION

In consideration of the premium charged for the policy, it is hereby understood and agreed that coverage under this policy does not apply to any claim arising out of the use, handling or ownership of vaporizing equipment, or any part of the accessories attached or used with the vaporizing equipment including pens, cartridges, mouth pieces, batteries, chargers, coils and any miscellaneous products used with, or attached to, vaporizing equipment.
DESIGNATED PRODUCTS EXCLUSION--PRODUCT RELATED TO ELECTRONIC CIGARETTES, VAPORIZERS AND SIMILAR DEVICES.

Batteries manufactured, distributed or sold by, or disposed of by, or in any way used or handled by, or sold under the label of :

a. ShenZhen Fest Technology, Co., Ltd
b. ShenZhen E-Young Technology Co., Ltd
c. EFEST
d. ShenZhen Mxjo Technology Co., Ltd
e. MXJO
f. MXJO Tech

In our table, Carrier B is excluding batteries and vape pens from coverage.  Carrier C has a list of batteries they believe are the most dangerous. 

If you’re a store requesting this coverage from your infused product manufacturer it would be prudent to be certain its even offered.  More importantly, cannabis retailers through their agents may want to question the insurance company if this is indeed a requirement of buying and maintaining insurance. 

Number of Insurance Carriers Decrease by Product Type

Cannabis Insurance Carrier Graph by Product Type

Limited Number of Cannabis Insurance Companies

If you’re wondering if there’s a lot of insurance companies serving the cannabis industry this graph may help give you a different perspective. 

The number of insurance carriers providing the primary coverages such as general liability and business property are more readily available throughout the United States.  The reason is the risks appear more predictable to the insurance industry.  As you move on the graph from left to right, the number of carriers offering a particular type of cannabis insurance will decrease dramatically. 

Less options means inability to comparison shop your insurance

Cannabis Insurance Proposal Banner

For example, the Directors & Officers, Commercial Auto, and Workers Compensation may be 2 or 3 companies serving each product segment.  The less number of carriers offering coverage is indicator the risks are not as predictable.  The limited supply of insurance companies doesn’t mean the pricing will be inflated.  It will mean the insurance buyer will not have the ability to comparison shop.

If you’re a cannabis or hemp/cbd licensee it will be important as your shop for insurance to keep this in mind as you’re contemplating your insurance needs.