To Protect your company
You will want to get insurance in place to protect your cannabis or CBD company, standard policy forms will not cover or extend to this activity! Ex: you can’t call any Agent to get this in place, the standard markets and captive agents will not have forms that offer a true coverage and will be little to no help! So you want to make sure you getting cannabis or hemp friendly policy forms in place that acknowledge this activity! This will be found in the E&S markets (Excess Surplus markets) of which most carriers and programs are non-admitted at this time. Do not allow an Agent to loop you in general activity terms, it must be stated on the policy the activity at hand and openly / directly disclosed.
You need this insurance in place primarily if your entity or product caused a loss to anyone or anything.
Your company; to be seen as compliant will need first to be licensed and then insured! All companies must be licensed and insured. (Unless vendor and selling other peoples products and labels unchanged, and in this case can be added “additionally insured” as vendor. But! As soon as you white label or change even the brand or label, then liability is picked up and new insurance in applicable. Everyone down the chain of custody must be insured.
To Protect the Consumer
You will want to have this insurance in place to protect consumers for ingesting or inhaling. If ANYTHING happens to a consumer off the use of your product you will want this insurance to come in and save the day, and the longevity of the company. This will also cover the consumer losses. Keep in mind that you want to AVOID buying a policy with a health hazard exclusion. So always ask if that exclusion is present or not. You DO NOT want to buy a policy with the dreadful Health Hazard exclusion – which is a way for carriers to weasel out of paying health claims and medical basis if a consumer were to suffer a loss! Consumer safety is the #1 goal and duty of any company. Same reason or purpose for the insurance policy! To protect the consumer and the company!
To protect the chain of custody
The manufacturers hold most of the liability, but this does not mean they insure everyone down the line.
It is important to understand that each party in possession or in sales channel must have their own GL + Products Ins. policy OR be additionally insured as a vendor. Where in this case if the product line, brand logo and ingredients are the same/unchanged, we can extend coverage to vendors. Where this is not applicable is when white label, brand or logo changes, custom formulation etc. Then the new party is applicable to get their own insurance. It is important that all parties are insured down line to consumer end use so policies can work together and there is ample coverage to take care of potential losses. If you don’t have insurance coverage in place, you will be liable for losses out of pocket!
To engage in sales
Most companies will not sell a product or product line if there is no insurance on it. Plain and simple. Shop owners and retailers do not want to sell uninsured products where they can be responsible for consumer losses. Majority of the time to engage in sales the retailer will validate the certificate of insurance (COI) where they need to be added AI (Additionally insured) as vendor to sell your products unchanged. If you don’t have products liability insurance in place it makes it very risky for a company to sell your products 3rd party as the liability will fall on their shoulders. It is also retailers responsibility to make sure they are selling insured products. They can do this by validating insurance certificates for the companies and brands that they wish to sell, where they will be added “additionally insured”
To protect the Property & Many states will begin to require
Landlords and lessors’ risk this is for you! If you have CBD or cannabis related business or tenant, even if they are selling a few CBD products – you MUST have a cannabis or hemp friendly policy form. I can’t tell you how many landlords and lessors are improperly insured on their standard policy’s unknowingly because they think they have coverage but didn’t disclose the tenant activity and voids the lessors risk or landlords building policy. It is so important that landlords get a specified policy if they have a cannabis or CBD related tenants, even if just selling one product or minimal. The reason being it leaves the carrier room to deny a claim by stating “they didn’t know” you had a cannabis related tenants and losses resulting from are excluded!! So don’t waste money thinking your protected, these carriers in standard markets will still loop and take the money without payback it is your job to make sure you have an appropriate policy. Most Agents will overlook or loop this as they are not experts in writing cannabis or hemp / CBD related policy forms or risks.
These are the (5) general reasons you need a Cannabis Friendly Insurance Policy or CBD Business Insurance in Place!