Cannabis Business Insurance
According to the International Risk Management Institute,
Commercial Property Insurance is “an insurance policy for businesses and other organizations insuring against damage to their buildings and contents due to a covered cause of loss, such as a fire. The policy may also cover loss of income or increase in expenses resulting from the property damage. Commercial property policies may be written on standard or nonstandard forms. A commercial property policy covers loss to buildings, business personal property, equipment, inventory, betterments and improvements.
A Peril is a cause of loss.
Typically, people think of wind, hail, and fire as being covered causes of loss. The types of perils a business is insured for will be listed on the declarations page and will be determined by the type of loss form purchased by the Insured business.
Basic Causes Loss Forms
Are the most narrowly written form within the available property insurance policies. This type of property policy covers causes of loss for the following named perils: fire, lightning, explosion, smoke, windstorm, hail, riot, civil commotion, aircraft, vehicles, vandalism, sprinkler leakage, sinkhole collapse and volcanic action. If the peril is not named as covered by the policy, then an Insured business will not have coverage for losses caused by that peril.
Broad Causes Loss Forms
Provide coverage only for losses caused by the perils specifically outlined and listed in the insurance policy. The broad form expands the basic property form to include specified risks as may be required by a specific type of cannabis business. This coverage may include damage from broken windows (think greenhouse) and water damage (think burst pipe at a grow). Theft may or may not be included in a broad cause of loss form.
Special Causes Loss Forms
Provides what is referred to as all-risks coverage. That is, coverage for loss from any cause except those specifically excluded. The special causes of loss form is undoubtably broader than the Basic or Broad Forms.
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What Exclusions are Likely Included in a Property Policy?
Exclusions depend on the policy form. Special cause of loss is the broadest policy form whereas Basic is the narrowest form of coverage. Typical exclusions include but are not limited to:
Viral and Bacterial Losses
What is Business Income (Interruption) Insurance, and is it Included in my Property Policy?
Business income interruption (BI) is triggered by a covered property loss resulting in property damage. If a covered building is damaged or equipment breaks down, the BI clause is triggered. This allows a business owner to file a claim giving them the BI loss reimbursement required to pay debt obligations, payroll expenses, rent and other expenses needed while repairing property or finding a new location in which to operate. When reviewing your BI terms, it’s important to understand how the payout occurs and for how many months BI can be paid under your policy. BI is typically included within a property policy; however, it is imperative when reviewing your cannabis commercial property policy you review the inclusion of BI and the limits of BI being offered by the carrier. Due to COVID, some cannabis insurance companies have reduced the BI limits available under their policy or removed BI entirely.
Crucial Property Definitions
Cannabis Finished Stock
Means finished marijuana stock and products containing marijuana and/ or its derivatives. “Finished stock” does not include harvested cannabis material being dried or product not yet incorporated into a final product for retail sale nor does it mean Living Plant Material.
Living Plant Material
Includes marijuana seeds, immature marijuana seedlings, marijuana plants in the vegetative growth stage, and mature flowing plants rooted in growing medium.
Harvested Cannabis Material
Means mature marijuana plant material no longer in the growing medium. This material is likely in the process of being dried or includes any raw materials or products not yet finished stock.
Perishable Cannabis Inventory
Means cannabis finished stock required to be refrigerated or otherwise maintained under controlled conditions for its preservation. This stock is susceptible to loss or damage if the controlled conditions change, such as refrigeration failing.