Cannabis insurance

Many businesses don’t think about insuring cargo

A cannabis shipment is on the way to your facility. Whose responsibility is it to insure the goods — the distributor, grower or manufacturer?

Under standard property policies, your goods are insured while at your place of business. But what about goods that are being transported between two locations or to/from your vendors? What if a shipment is damaged or stolen while traveling? Your goods are insured, right? Not so fast.

Make sure you read the contracts you’ve entered into with your distributors. Most standard policies have exclusions that limit liability when materials are “in transit,” a classification that can include, among other things, the time during which your shipment is traveling in a truck or sitting on a loading dock. These concerns are particularly salient when it comes to sensitive goods that may be subject to a higher risk of theft, such as cannabis. While nearly all cannabis businesses recognize the necessity of safeguarding product at their place of business — and have put sophisticated security measures in place as a bulwark against larceny and misappropriation — most do not appreciate the need to implement a similar level of protection for the goods while they are in transit.

Fortunately, insurance carriers have devised a solution for companies in this predicament: inland marine insurance (also known as “goods-in-transit” insurance), a limited insurance policy that provides financial remuneration in the event that cargo is damaged or stolen while “on the move” (underwriting varies on coverage).

However, obtaining the proper inland marine policy is crucial, as wide variation exists between policies, depending upon the type of goods being transported, the distance the goods are traveling and the mode of transportation.

First, inland marine policies vary based on the type of cargo being transported. Equipment, machinery and other materials require relatively straightforward policies, much like those granted to non-cannabis businesses. On the other hand, because fragile products — such as seeds, plants, edibles and oils — often require specialized refrigeration or risk spoilage, they are typically assessed higher premiums.

Second, though cannabis is legal for medicinal and/or recreational use in 30 states, it remains illegal at the federal level, rendering it illegal to move such products across state or international boundaries. Additionally, because certain types of equipment may be considered “paraphernalia,” they may require adherence to additional guidelines. Any inland marine policy will stipulate compliance with all local, state and federal laws, so be sure your insurance broker is apprised of exactly what is being transported prior to searching for your policy.

Finally, your policy will differ based on the type of good being transported. Furniture, machinery and other equipment may only require that they be properly packaged and can be moved using standard company vehicles. However, when it comes to more sensitive goods, such as product or money, additional security measures may be imposed in order to ensure the safety of your goods.

 

Corey Tobin is the assistant vice president at Bolton & Company. He has almost a decade of industry experience and is knowledgeable about property, casualty, life and health insurance. He specializes in working with manufacturers, distributors, health care and construction. Additionally, he is focused on the unique needs and challenges facing cannabis-related business, including retailers, cultivators, extractors, developers, labs and more. He can be reached at ctobin@boltonco.com.

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