The often overlooked consequences of hiring a security guard for your cannabis business
I often ask business owners: Would you want your security guard to kill or injure an intruder in order to prevent them from taking your cannabis product or cash? The answer should be “no” because the use of force to protect property is not allowed by security officers and would put you and your business in a precarious position from a liability perspective, not to mention causing a potential reputational issue. If the answer is “no,” then I ask: “Have you had that discussion with your security company and/or the guards that work in your business?” The use of physical force is a serious responsibility, especially if it is done at your request by one of your employees or contractors, and it should not be taken lightly.
Even more serious is the use of a firearm by security guards. This can bring on a series of additional liabilities and concerns. How would you feel personally if one of your security guards killed or injured someone while trying to protect a small amount of product? How would you feel if an innocent bystander was killed during the incident? If you tell your guard not to draw their weapon in case of an attack, then you are defeating the purpose of having an armed guard and may be creating other liabilities with these instructions.
The Last Measure
Are you aware that a security guard is the last measure you should put in place and only after you have secured the site with robust physical barriers, employee procedures and security technology?
You should be suspect of security companies whose first line of defense is always a security guard. Most shrinkage or loss in the cannabis industry is due to factors that can be controlled by measures other than hiring a security guard. Every cannabis business will suffer some loss of product or cash on a monthly basis and most of the time there is some inside employee, contractor or partner involvement.
Some examples of measures that can prevent insider theft include restricting employee bags to lockers and enforcing a dress code that does not allow baggie clothing, establishing policies and procedures that require two employees to be present when accessing large amounts of cash and/or product, installing alarm devices and access control systems that restrict employee access to certain areas, and requiring all transactions to take place on camera.
Insurance Exclusions
Are you 100% sure that if one of your security guards injured or killed someone that your insurance would cover you? How about if they just touch someone and that person claims assault?
All insurance policies have exclusions, and many have an “assault and battery” or other exclusions that stop the insurance company from paying a claim if your security guard used physical force (any bodily contact) on a person, even in the course of their duties. Even if you contract with a licensed security company, their policy may have these same exclusions that place you, and them, at risk of not being properly covered. This exclusion may be as subtle as no coverage for providing security for a business that is involved in illegal activity such as working with a Schedule I narcotic (including cannabis).
These are steps you can take to protect yourself and your business. First, if you hire guards directly, your insurance company must know that you are doing this in order for you to be covered in the case of an incident. Second, if you contract with a security provider, you should ask this security company to list you as a co-insured on their insurance policy. Third, have your attorney review both your policy and the security company’s policy to make sure that cannabis businesses are not excluded and ensure that there are no other exclusions, such as “assault and battery,” that put you at risk.
Vetting Security Guards
Are you 100% sure that your security guards are fully licensed and compliant to perform their duties under local and state laws that regulate security companies, as well as cannabis companies?
All security companies are heavily regulated due to the need for trust and accountability as they are entrusted with our most valuable assets and sometimes with our lives. Cannabis security companies and guards are even more heavily regulated and scrutinized than other security companies. State and local cannabis regulations require that security companies and/or guards that are used by cannabis companies must be properly licensed and insured.
Things you should do to vet a security provider:
Have your attorney review the contract with the security company and make sure that it meets the state and/or local requirements.
Visit, or call, the state and/or city agency that licenses security guard companies to make sure they are licensed.
When performing a compliance check make sure that you have the following documents on hand: a copy of the security company’s license, the security guard’s personal guard card or license, your contract with the security company, the insurance binder from the insurance company that lists you as a co-insured as well as any other security-related documents required by law or regulation.
HR Oversight
Were you aware that in most states you cannot hire security guards directly (even if they have guard cards) without your business being licensed as a Proprietary Private Security Employer?
Many cannabis businesses that hire their guards directly have no idea that this is required. The supervision of security guards cannot be performed by someone who is not an expert in security. Any company that hires security guards must have a license to do so and must have a manager on staff who has proven experience in security management and has completed a written test and background check. Your insurance company will also want to look at the manager’s qualifications in order to ensure they are experienced and don’t present a risk to the policy.
This is only a partial list and there are many other things that you should consider when hiring security personnel at your cannabis site and you should do everything you can to be informed and to protect you and your business.
There are many misconceptions regarding security in the cannabis industry regarding what is required under state and local laws and even some security companies that don’t fully understand these requirements. The only way for you to protect your company is to be proactive, to work closely with your attorney and to use a reputable security company.