One of our insurance carriers increased the price by 15% for a cannabis manufacturing company. The increase in premium will also mean underwriting by insurance companies is about to become even more cumbersome.
Insurance carrier removes coverage for vitamin e acetate
Even more interesting, the insurance carrier has added vitamin e acetate to the list of ingredients now being excluded or not covered if a claim or lawsuit was to be filed. This ingredient has been identified by the New York State Department of Health as being linked to those individuals experiencing illness.
A recent product recall by Medicine Man identified vitamin e acetate as a ingredient they did not want their customers consuming.
Vitamin E Acetate Product Liability Coverage Removal
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?
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
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 A
Cannabis Insurance Carrier B
Cannabis Insurance Carrier C
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
d. ShenZhen Mxjo Technology Co., Ltd
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.
The 7 Worst Exclusions on Cannabis General Liability Insurance Policies
Look Inside your Cannabis Insurance Policy to Avoid Surprises
The following is a list of exclusions we’ve found on a variety of cannabis commercial general liability policies over the years, we had to publish because they can lead to harsh consequences or surprises for business owners.
Typically, exclusions can be embeddedare separated from the main body of the commercial liability and meant to notify the policy holder of circumstances when coverage may not be offered.
Cannabis business owners should look for these exclusions
The Washington Changes to Defense Cost Exclusion: Perhaps the worst and most despicable exclusion we’ve seen on a cannabis general liability policy because it gives the right to the insurance carrier to seek reimbursement for claims that are not covered. The exclusion is in direct conflict with another policy condition that requires insured’s to notify their carrier of potential claims. This exclusion will leave many cannabis companies with either a big dilemma or a bill they weren’t anticipating.
The Products and Completed Operations exclusion: Many cannabis companies were never informed by their agent or broker the policy doesn’t cover your product liability. If someone gets sick off your weed, you need to buy a separate insurance policy to cover the risk of product liability.
The Breach of Contract Exclusion: Cannabis insurance companies want to be certain their insurance policies are not covering broken promises with other parties through written or oral agreements. Don’t plan on using your insurance for claims involving money owed to other parties because it didn’t work out between you.
The total mold, mildew, and other fungi exclusion: Cannabis companies who are being sued by landlords or other parties might not realize no coverage exists for grow sites covered with mold or mildew.
The Protective Safeguard Exclusion: The reason certain cannabis insurance policies add this exclusion is to notify their clients of conditions you must follow for covering the actual cannabis products. One cannabis carrier requires the safe to be bolted to the ground if it weighs between 800 lbs. to 2,000 lbs. Many cannabis business owners will question the need to bolt a 2,000 pound safe. This same carrier requires a 1 hour fire rating for your safe. Don’t bother filing a claim if the safe was suppose to only last 30 minutes in a fire.
The Limitation to Designated Premises or Project Exclusion: This exclusion makes our list because it surprises many cannabis companies when they realize their insurance is specific to the locations listed on the insurance policy. If you need your insurance to cover an offsite event, then this exclusion doesn’t provide the protection you need. Many insurance brokers fail to realize the certificate of insurance they issued for the 420 event holder could be meaningless. Many cannabis event holders are probably sitting on certificates of insurance that could be worthless.
The Skin Tanning Exclusion: This is not the worst, but simply the dumbest exclusion we’ve seen included on a cannabis general liability policy. What does a skin tanning exclusion have to do with a cannabis company remains a mystery to most?