With so many businesses shutting down to help prevent the coronavirus from spreading further, business owners of all types — including those in the cannabis industry — are wondering what provisions they may have in their insurance coverage to protect themselves.
According to Michael H. Sampson, the co-chair of Leech Tishman’s cannabis group and chair of the firm’s insurance coverage group, there are three initial steps all business owners should take.
He says all businesses should first review their current policies to see if they are covered for losses and damage caused by an outbreak. According to Sampson, this will require looking at the specific language in each shop’s or producer’s policy as the coverage will depend on how the policy itself is worded.
“Even the same types of insurance policies are not the same,” he says about specific coverages, including property insurance, interruption insurance and directors and officers policies. But he also adds, “Do not assume you are not covered.”
Second, if your business does have losses due to the virus, Sampson says it is imperative to document those losses in real time and to check your policy’s notice of claim provision (also known as an “awareness provision”) to ensure that you submit a claim to your insurer within the required time frame to be reimbursed.
Finally, Sampson recommends reviewing any current contracts, including supplier agreements, to make sure you understand all of the clauses, such as force majeure or other provisions. While many states are labeling cannabis retailers and providers as “essential services,” many of the businesses they work with may not be considered essential and may have to temporarily shut down or cease providing their services, which can cause ripples throughout the supply chain that can negatively affect cannabis retailers and growers.
Sampson also notes that because of social distancing and stay-at-home orders, some states and municipalities are encouraging or beginning to allow deliveries under certain circumstances. He says while this is a positive for some retailers, as it allows them to continue to operate, there are additional risks that come with home delivery that may require additional insurance policies for the store. Retail store owners and managers need to read through their policies to ensure they are covered off-site, and retail stores moving into delivery should also make sure their theft policy covers product out for delivery.
Looking ahead, Sampson says his advice for cannabis businesses is to wait and see how the government and insurers will respond to this crisis. But in the meantime, business owners should make sure they have a good insurance policy and, as always, closely review any policy before buying it to make sure you are facing any additional risks with “eyes wide open.”