Risk Management in the CannaBusiness Industry
By: T. Missy Balmir, President, CannaCoverage Insurance & Consulting Services
As the legal cannabis industry continues gaining momentum as one of the fastest-growing markets in the US, medical marijuana, cannabinoids, cannabis products, retail dispensaries, and other canna- businesses face particular challenges with their new position in the marketplace. So are the Mayors of urban cities facing increased public health and safety issues requiring risk mitigation. Whether a Canna-Business owner is in the state application process or looking to obtain insurance coverage, the choice of the professional hired will directly correlate to the best outcome, critical to the success and sustainability of that business and the community in which that business exists.
The Cannabis Regulatory Commission issues licenses for medicinal and recreational CannaBusiness operations in New Jersey. With the anticipation of the State receiving endless applications starting on December 15 for cannabis growers, processors, and testing labs and again, on March 15, 2022, for dispensaries. In just a few years, cannabis trading has moved from an underground market to a booming legal business. Medical marijuana is now legal in 37 states and the District of Columbia, and Adult-use marijuana is legal in 19 states and the District of Columbia. Therefore, cannabis and cannabinoid producers and distributors have quickly grown and need professional financial, legal, and insurance services. Claims and lawsuits against cannabis businesses ranging from inadequate warning labels, the presence of pesticide residues in products to unsafe handling practices during the manufacturing process are cropping up more and more.
The House and the Senate have been slow to catch up with public opinion of cannabis approval, leaving states to craft legalization and regulations with no federal guidance. The insurance industry has been wary of covering cannabis-related industries; despite the growing interest in the sector. Very few have the expertise and relationships in this highly specialized market and stand ready to serve this emerging market. As a result, the CannaBusiness industry is grossly underinsured, creating risks and challenges for business owners, property owners, venture capitalists, and the community in which that business exists.
As the cannabis sector and insurers examine the risks inherent in cannabis production and distribution, questions arise on everything from general liability to product liability, property, crop coverage, to director's and officer's liability insurance. In addition, the rise of cannabis as an alternative pain medication will have significant implications for the workers' compensation sector.
Whether it's a slip & fall claim at medical marijuana or recreational cannabis dispensary, a product liability claims from consumption of cannabinoid and other products produced by a manufacturer and sold at a dispensary, where both organizations are liable; or property damage or loss from fire or theft. Customized lines of insurance coverage will transfer the risk of loss to another entity to help the CannaBusiness recover from any unexpected losses.
“Do I really need insurance to protect my CannaBusiness?”
"Do I really need insurance to protect my CannaBusiness? What are the advantages of having insurance? Is it worth it to pay for insurance?" Clients often ask these questions during a consultation, and we follow up with a question to their question. Suppose something happened to your crop, dispensary, or products such as crop disease, fire, theft. Is your business financially fit to absorb the financial loss or be self -insured without going out of business or financially stressed? The answer is pretty consistent, "No!"
Insurance Coverage & Risk Management Are Not Equal
Insurance coverage transfers risks away from the business owner to the insurance carrier to limit the financial impact to the CannaBusiness. Risk Management is a culture with tools and knowledge of proactive risk prevention measures with the implementation of pro-grams with best practices in some of the following areas to increase the sustainability of the business and the neighborhoods they occupy:
Customized consulting with business solutions designed to protect businesses from failure, increase revenue to the municipality; maintain public safety and health; provide social justice in action; to impact and uplift the community and the environment.
For additional information on Cannabusiness Consulting and Risk Management practices of Cannabusinesses in your community:
The CRC has established the following information and resource guides for municipalities and potential cannabis business owners: