1. Why does a cultivator need business insurance?

A cultivator needs insurance for a variety of reasons, including legal compliance; asset and investment protection from direct physical loss such as fire, wind and theft; and protection from unforeseen liability claims caused by hazards around the premises, as well as general business activities or by the products grown, sold and ultimately consumed. A cultivator can also choose to buy coverage for income lost during the restoration period after a property loss.

2. What types of coverages are typically required, and what coverages are available beyond most regulatory requirements?

Required coverages vary by state. However, all states require Workers Compensation insurance for their employees. Most states will require General Liability and Product Liability Coverage at the very least, but there are no state requirements for Property Coverage. The basic package of coverages includes Property, General Liability, Product Liability and Workers Compensation. Higher limits, generally up to $5 million, are available for Liability with an excess policy. Other coverages include Equipment Breakdown Coverage, various Crime Coverages, Employment Practices Liability, and Director and Officers Coverage.

3. When it comes to crop insurance, specifically, how can this differ in the cannabis industry versus the traditional agriculture industry?

Given the involvement of the federal government in traditional multi-peril crop insurance, that is not an option for the cannabis industry currently. What is available primarily for indoor cultivation is a Property Coverage form specifically written to address losses to plants in all growing phases. These forms also extend to cover the harvested plants, goods in process and completed stock.

4. Why is the insurance application so important to the policy contract as claims are settled?

A signed application will be used as the basis for coverage. It allows the applicant to confirm the submitted information, consent to review by the underwriters and agree to fraud statements and warranties if applicable. In the event of a claim, the signed application can be used should there be coverage questions.

5. When expanding an operation, what types of questions should a cultivator be asking his or her insurance agent?

While a policyholder should be in contact with his or her agent as the business grows and questions arise, it is crucial to consult with the agent when making the choice to expand operations. Questions include:

  • Will my current insurance company be able to provide the coverage needed in terms of Property Limits and Product Liability coverage for expanded product lines, etc., for the new expansion?
  • Are there loss control services available for what we are planning?
  • What kind of premium costs are indicated for the coverage I’ll need?
  • I am hiring a contractor as a part of this expansion—what do I need to know about risk transfer and additional insured status?
  • What are some ways to reduce my total cost of risk?