How to Buy Massachusetts Cannabis Insurance. Part 1

You have spent months, maybe even years wading through the Massachusetts medical & recreational regulations.  You have met all of the requirements.  You have secured your investors.  You have your licenses.  You have found your new location to call home.  Now, you need to buy some security: commercial insurance for your marijuana business!

Whether you have been running businesses for years or this is your first, there is plenty of complexity surrounding Marijuana in Massachusetts.  You need to find a partner who will help you navigate through the uncertainty, work with you to build an insurance program that can grow with your cannabis business, and continue working with you and your team to maintain that insurance in the most cost effective way possible.

Today, let’s focus on the basics of the insurance purchasing process.  You are going to need the following to get started.

Property Insurance:  You need to cover your buildings and your business personal property.  Think about taking the roof off of your business and flipping the building over.  Everything that falls out is your business personal property.  Pretty simple in general, but you have some pitfalls you need to be aware of.  Generally, within property you’ll be thinking about crime.  Are you susceptible to potential employee theft?  Do you want to cover your lost income in the event of a loss?  Business Income coverage will be an important consideration.  Valuation of your inventory will be key.  What is it worth at the time of a loss?  How will the insurance company value your product?  Did you make upgrades to the building you are leasing?  Do you have coverage for tenants’ improvements and betterments? These are some of the issues that need to be addressed as a program is tailored to you and your needs.

General Liability: A liability policy is designed to cover bodily injury or property damage resulting from your operations or your premise.  If a visitor slips and falls in your location your general liability will respond to defend you and pay claims on your behalf.  Where it gets a little sticky, is in the products and completed operations coverages in your policy.  The problem…many policies written for marijuana exclude coverage for your products.  This is a MAJOR issue!  This is most likely where your biggest risk is for a large suit.  Make sure you work with someone who understands the limitations of the insurance forms you are purchasing.  How about product recall?  Do you think you have that coverage in here?  Most likely not.  You’re going to need to secure separate coverage.

Professional Liability: This coverage will be necessary if you have any professional exposure.  What is a professional exposure?  Are you prescribing cannabis as a medicine?  That’s a professional exposure. Are you testing marijuana? That’s a professional exposure.  This policy will be necessary for many businesses who are providing professional opinions and services in the cannabis industry.

Workers Compensation: This is a statutory requirement in the state of Massachusetts providing your employees with medical services and loss of income in the event of a work related injury.  It also provides protection for you, the employer, in the event of an employer’s liability suit or exposure.

Auto Liability:  Do you own vehicles in the business?   You need auto liability insurance.  You don’t own any vehicles in the business?  You still have a hired and non-owned liability exposure.  Think about an employee driving to a meeting on behalf of your company and getting into an at-fault accident along the way.  Your business is exposed and you need to ensure you have the proper coverage.

Umbrella (Excess Liability): Often thought to be a catch all for everything, the umbrella is a misunderstood insurance coverage.  It is designed to provide additional coverage over your general, professional, auto, and employers’ liability policies.  You must ensure that this policy is providing additional coverage for the policies you have.  Don’t let a separate professional liability policy or product liability policy go unnoticed on your umbrella.

These are the basic insurance requirements for any Massachusetts marijuana business.  Check back for Part II of How to Buy Massachusetts Cannabis Insurance for a deeper dive into employment practices liability, directors and officers liability, cyber liability, as well as other potential pitfalls in crafting your unique insurance program.