Why Cannabis Operators Need Suitable Product Liability InsuranceThe cannabis industry has faced many challenges, and the past year was no exception. With a new year ahead, we will see how the past several months have reshaped this space. But first, let’s review what’s happening in the cannabis insurance industry now.
Essential Operations
Amid a horrific pandemic, the cannabis industry experienced a bright beam of light. While COVID-19 restrictions forced other companies to shut their doors temporarily, many governors and state officials deemed cannabis businesses “essential operations.”
Not only was it a move in the right direction for medical marijuana patients, but it was a long-awaited stamp of approval for the cannabis industry as a whole. With expanding legalization in addition to the newly-found social embrace, insurance carriers are happy to give cannabis businesses more consideration.
Federal Decriminalization
Banking has been a massive challenge for the cannabis industry and the passage of the MORE Act in December represented a giant step forward for the industry. If the bill passes through the Senate, cannabis businesses will soon have access to traditional banking and capital resources, which would open up new opportunities for the industry.
New Insurance Products
Like many other markets, cannabis insurance carriers are in the waiting and watching mode. Few carriers are eager to roll out new insurance products, mostly because of the increased uncertainty about the future.
Although this stance is temporary, factors such as the election, ongoing pandemic management, and foreign relations could significantly impact the insurance world. For now, carriers are watching to see how things play out, and then they will respond accordingly. As a result, new insurance products are on the backburner, facing massive delays and postponements.
Product Liability Limitations
Some products have always been notoriously difficult to insure. For example, vaping products fall into this category. The vaping crisis of 2019 and the ongoing COVID-19 pandemic probably won’t bode well for vaping products. Most cannabis insurance carriers will be hesitant to insure these products.
What’s more, COVID-19 is a respiratory illness, which adds a level of complexity for underwriters and companies navigating this exposure. Vaping products are known to exacerbate symptoms of respiratory diseases. As a result, insurance carriers will see increased litigation as a liability checkpoint.
Other Exclusions
Aside from vaping concerns, a growing number of cannabis insurance carriers are adding exclusions to various policies. Consider product liability carriers, for example. They may tighten up product liability coverage to limit their exposures. The following are some of the most widespread current cannabis exclusions.
- Health hazard exclusion
- Cannabis exclusion
- Carcinogens exclusion
- Psychiatric drug exclusion
- Hardware exclusion
In short, carriers won’t shy away from pandemic implications; they’ll undoubtedly address COVID-19 in a way that’s similar to how they addressed asbestos exclusions. Keep in mind, the cannabis industry already faces a plethora of exclusions, as mentioned above. Growing concerns about the pandemic will only encourage more exclusions.
Potential for Increased Insurance Options
Cannabis sales are up in many states, although some experts believe this trend won’t last long. Besides the sales impact, however, the new “essential business” classification for cannabis businesses and the passage of the MORE Act have helped legitimize this industry.
These dynamics are attractive to insurance carriers, potentially serving as incentives for them to enter the space. We can’t forget that the world is navigating a pandemic at the moment, which is pushing back legalization efforts. Nevertheless, experts anticipate more significant revenues and payroll projections for cannabis companies. Lastly, capacity could open up, regardless of any COVID-19 fallout.
It’s safe to say, the regulatory framework governing this industry is still in development. As a result, adopting a risk management plan can seem like a daunting task. Our team at Heffernan Insurance Brokers is here to help you navigate the twists and turns you might face in the cannabis industry. Please contact us to talk with our cannabis insurance experts — we’re on your side.
