Handout 1

Coverage for the Cannabis Industry: Risk
Management Opportunities
Speakers:
• Justin Moriconi, Esq. and Ted Flowers, Esq.
• Regulated Substances Attorneys
Segal McCambridge Singer & Mahoney, Ltd.
• Preferred Vendors for the Pennsylvania Medical Cannabis
Society.
• Handling litigation in general liabilities, products
liabilities, workers compensation, and coverage analysis
for plant-touching and ancillary companies and their
insurers.
• Emerging Cannabis Industry will be worth in
excess of $20 Billion by 2020, with some estimates
up to $35 Billion.
Cannabis Businesses And
Their Coverage Conundrums
Takeaways:
• Types of Business Subject to Insurance Coverage related to the Commercial
Cannabis Industry
• Types of Coverage That Apply to each Business
• The current state of Cannabis Coverage
• Tips for Drafting a Tight Cannabis Insurance Policy
What Is Insurable?
• CSA and Attorney General Memos
• Federal Judge – made your bed, now sleep
in it: Green Earth Wellness Center, LLC vs.
Atain Specialty Insurance Company
(Colorado Federal Court Feb, 17, 2016).
• Plant-touching Cannabis company form
depends on your state
• All Cannabis entities subject to
Gov/Industry standards
The Cannabis Grower
• GL
• Crop, Harvested Product (drying), cured flower
• The structures (own vs. rent)
• Warehouse
• Greenhouse
• Existing Structure (retrofit)
• Premises
• Products – include list of excluded pesticides (No EPA Approved
List)
• Inland Marine
• Moving or moving valuables
• Workers Comp; E&O; Cybersecurity (tracking requirements)
The Cannabis Wholesaler
• New cultivation operation growing
popularity in Colorado
• Wholesaler sector fastest growing in CO
• GL/Products/WC/Inland Marine: Similar
coverage as a Grower, but need to cover
transportation.
• Cargo insurance
• Environmental
The Cannabis Processor/Extractor
• GL
• Use of solvents
• Certificates of Liability from Each
Manufacturer or Supplier
• Products Liability
• Additional insured to each
manufacturers/suppliers product
• Foreign made products
• Testing
• Recall Procedures – heavy metals;
hydrocarbons
• WC - usually too small to apply
• Fire - hydrocarbons
The Cannabis Dispensary
• GL – cash heavy
• Encourage alternate payment methods
• Federal Raid Insurance - Get detail on recordkeeping procedures
• Premises
• Shift to landlord if possible
• WC – many multi-location dispensaries will
qualify
• Theft
The Cannabis Edibles
Manufacturer
• GL, WC
• Product Liability
• Recalls
• Subject to standard inspections for food and
beverage manufacturing as other food products
makers.
• Also subject to strict regulations by, e.g. the
MED (Colorado Marijuana Enforcement
Division)
• Similar certificates of liability and additional
insured requirements as processors
The Cannabis Ancillary
• Cannabis Product Company (e.g. vape pens)
• Testing Facility
• Lighting Company
• Greenhouse Company
• Delivery Service
• Lawyer, doctor, other professional (think about
including exclusions that don’t disclaim coverage
for malpractice simply by virtue of practicing in
commercial Cannabis Industry)
• Professional associations starting to change their
professional conduct rules.
Tips for Drafting the Cannabis Related Insurance Policy
• An acknowledgement of Illegality or Waiver
(waive the illegality defense)
• Choice of Jurisdiction
• Choice of Venue
• Choice of Law – Erie Doctrine
• Subject-matter descriptions
• Severability clause
• Independent considerations
• Binding Arbitration of Coverage Disputes
State of the Cannabis
Insurance Market
• Lloyds Of London Exits market early 2015
and creates a vacuum
• Number of other brokers and underwriters
have entered the space:
• Kaercher Insurance
• Greenpoint
• Cannasure