After Hurricane Michael crashed along the Florida panhandle and heaved inland, the burgeoning medical cannabis industry of the American Southeast and Mid-Atlantic took notice. Trulieve, which owns 20 dispensaries in Florida, is collecting supplies for neighbors in need of assistance.
The increasing threat of tropical storms and the quickly expanding cannabis markets in states like Florida and Virginia tee up opportunities to consider business insurance policies. How should a cannabis business prepare for natural disasters?
Mike Sampson, Insurance Recovery Group partner at Reed Smith, addresses the concerns over wildfires in California, hurricanes in Florida and everything in between; he says the key is open communication with your insurance provider.
“For those who have not been in that situation before, there's so much to triage that insurance may be the last thing you're thinking about,” Sampson says. “You really want to make sure you know that you're taking certain steps as far as making sure to document your losses with pictures; keeping your receipts; making sure that you give prompt, timely notice to your insurance companies. There’s a number of steps I think that one wants to be thinking about.”
The steps required to initiate an insurance claim are laid out in individual corporate policies. With that in mind, it’s best to consider your policy in detail—before the unexpected occurs. Much like an emergency exit plan, it’s a good idea to keep an emergency insurance claim plan tucked somewhere into your overall business model.
“I can't stress enough that in the event of a loss is due to a natural disaster or otherwise to give notice to do it as soon as possible,” Sampson says. “Take pictures, keep records, document your loss communicate in writing with insurance company if you can. You want to make sure to cooperate with your insurance company, just like you expect them to cooperate with you.”
“Really, there is little downside to giving notice when you shouldn't give notice,” Sampson says. “If there's any question, give your insurance company notice; it will often tell you in the policy where to send that notice, be it by email or writing. Let them know what's happened. That gives them the opportunity to participate upfront to help to see things for their own eyes. And, you know, oftentimes insurance companies may have preferred providers and they may be able to use their services—or at least that gives you a sense of what … price will be acceptable for certain providers to the insurance company. So, there's a lot of advantages to doing to making sure that notice is provided as soon as possible upfront.”
Sampson has written about this subject elsewhere, too: “Today, cannabis-related businesses – especially those in the medical-marijuana industry – can and do obtain various coverages, including, but not limited to, commercial general liability, property, and workers’ compensation insurance. They may also be able to obtain some coverage for damage to their crops from specialized insurers. While the market for all of these coverages may still be limited, there are insurers that will underwrite various types of policies for cannabis-related businesses.
“Further, although under federal law, it is still illegal ‘to manufacture, distribute, or dispense, or possess with intent to manufacture, distribute, or dispense’ marijuana, anyone experiencing a cannabis-related loss should check their various policies and consult with experienced insurance-coverage counsel. There may be coverage.”
As the cannabis industry expands across the U.S., a new variety of natural disasters joins the more typical threats seen in legacy markets out West (earthquakes, wildfires). Now, a hurricane that spins off the Gulf of Mexico can pose a major problem for cannabis growers—whether through loss of property and plants, loss of electricity (and thus a significant business interruption) and other issues that can affect you and your team’s personal lives in a plethora of ways.
“With hurricanes, what you are generally looking at is a conventional property policy and oftentimes it will include—and should include—a business interruption component,” Sampson says. “That means not only will it cover the physical damage that your property suffers, but if you have interruption to your business as a result of that covered physical damage, you'll have coverage for that as well. [That] can help fill in, for example, if you have a lost income stream if you're not able to grow or manufacturer certain types of products. Growing is a little bit … different because you may need crop insurance.”
Top photo courtesy of Adobe Stock
