This is part of a series of articles from Insurance Journal’s annual Insuring Cannabis Summit on Oct. 14. You can find more articles from the summit at the bottom of this one.
Employee practice liability insurance, exclusions, onsite lounges, testing labs – there are as many pitfalls as there are opportunities for brokers who want to get into the insuring cannabis business.
Insurance Journal found a handful of cannabis brokers to take four minutes on their three hottest topics in the business as part of a panel called “Broker Quick Hits” during Insurance Journal’s annual Insuring Cannabis Summit on Oct. 14.
“The challenge that we’re having with our contracts is they’re limiting coverages, increasing deductibles and not offering even the coverages the industry needs,” said Jesse Parenti, director of programs for PCF Insurance Services, program director of Nine Point Strategies and program director for PizzaSurance. “For us, we need to challenge industry to get better contracts and be able to provide better coverages for our clients.”
Exclusions were another point he hit upon. According to Parenti, there are numerous exclusions in policies being sold to cannabis operators that could end up excluding the lion’s share of their coverage.
“You need to be aware of exclusions more than any other industry that I’ve ever worked in,” he said. “One of the biggest ones to be aware of is obviously health hazard exclusions. The one to be aware of is a vape or hardware exclusion. This has to do with hardware that’s being made over in China versus being made in the United States and carriers can exclude coverage and they will. So, look at your exclusions.”
TJ Frost, president of Symphony Grow, which works with the cannabis, hemp, and CBD industries, touched on what he feels is a big opportunity for those who insure cannabis businesses: onsite lounges.
“As more states are coming legal and allowing consumption lounges, it’s important to understand what is out there in the marketplace for insurance coverage,” Frost said. “If they have prior or current policies in place that don’t actually allow consumption on site, a lot of multi-state operators are currently buying these licenses or having these additions to their portfolio of dispensaries or whatnot and a lot of times you’ll find that their current policy doesn’t allow onsite consumption or allow for a lounge.”
Danielle Hernandez, director of the cannabis practice at Gilbert Insurance Group, hit upon another potential opportunity for those in insuring cannabis.
Hernandez believes not only does product testing offer opportunities, but those who don’t know the business could easily get in over their heads, he suggested.
“Testing is such an important topic for those of us in this space,” she said. “It’s discussed frequently in policy language and in carrier applications that ultimately become part of the policy and keep in mind that policy language follows state rules and regulations. This is where the understanding of testing requirements is imperative to make sure that your clients are covered in the event of the claim.”
Nathan Bosza, national program manager for cannabis with ALKEME Insurance Services, emphasized the importance of working direct with cannabis program underwriters or specialty cannabis wholesalers to help overcome obstacles.
“This space is changing every day,” Bosza said. “Federal level, we have new laws in the state, county, and city level. We have new licensing insurance requirements that we have to comply with. So, it’s really important to work with those underwriters so that we can overcome those new requirements that we have.”
Cyber liability is one of the most important considerations in the business, according to Danny Bozzuto, co-founder of Cannabis Connect Insurance and a partner at Bozzuto & Associates.
He urged brokers to talk their clients about risk management protocols, such as two factor authentication or security checks and password management, which he said will save them from filing a lot of claims.
“And if you really can find a good IT partner, you’re going to be golden with helping your clients out,” he said. “And I’ve seen claims here range from $3,000 to as much as $600,000 for small to medium businesses. And from there, I talk a lot about vendor management. And when we first got in this space, this was one of my primary focuses because most of my clients, most of my prospects were using verbal contracts, verbal agreements.”
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