Cannabis Business Insurance
Directors & Officers (D&O) Liability
Directors & Officers (D&O) insurance protects the executive management team and balance sheet of a public, private, or non-profit company from claims relating to their management decisions and business operations.
Contrary to popular belief, all organizations have risks a D&O policy would respond to. For example, a private company D&O policy can cover claims relating to unfair business practices, conflict of interests, violations of non-compete agreements, a bankruptcy filing, creditor actions, and merger & acquisition related issues. Regulatory investigations and fines or penalties as a result of a regulatory action would be addressed.
The 3 basic parts to a D&O policy are:
Provides protection for the Directors and Officers from personal liability
Provides protection for company indemnification of Directors & Officers
Provides protection for the corporate entity itself
Why Do Cannabis Businesses Need D&O Insurance?
Directors and officers can be held personally liable for the actions and decisions made in the interest of the company or organization. Defending these decisions can be costly.
The cost of defending a D&O claim can often exceed any financial means or resources available to a company.
Directors and Officers insurance offers critical financial protection and legal resources to address claims against a company’s leadership. It safeguards the company’s financial health from the unforeseen costs associated with these claims.
Get the D&O Guide
D&O insurance is not just for publicly traded companies to cover suits from shareholders. It’s a valuable tool for all companies and is an important item to consider when attracting credible investors, lenders, vendors and board members.
Claim Scenarios
Credit Fraud
A creditor filed a complaint against an existing cannabis company’s individual directors and officers. The claim alleged its CEO, CFO, and COO conspired to use the plaintiff’s services to furnish, install and repair the company’s equipment knowing it was insolvent and was planning to file for bankruptcy protection. Causes of action included: (1) fraud, misrepresentation, and non -disclosure; (2) deceptive trade practices; and (3) civil conspiracy. Total settlement and defense of the individually named defendants exceeded $400,000.
Stolen Corporate Secrets
The Vice President of a cannabis manufacturer determined diversification into a different product line presented tremendous sales potential for his company. Instead of presenting the opportunity to his employer, the VP shared it with his brother who formed a new company to produce that product. On behalf of the company, a shareholder sued the VP alleging he wrongfully took advantage of an opportunity belonging to the corporation. The suit eventually settled for $2.5M.
Recruiting Sales Executives
A rapidly expanding cannabis company recruited a top sales executive who had an employment contract with a competitor company. The competitor sued the company for damages suffered because of losing its top sales producer on the grounds the company interfered with the competitor’s contractual relationship with its employee. Defense expenses were in excess of $250,000 and the competitor was awarded damages of $600,000.
Due to the federal illegality of marijuana, you need to be aware of certain policy provisions within a D&O cannabis policy.
We can help you design a strong policy for your client’s cannabis related business by considering and negotiating the following conditions and exclusions:
Exclusions to Note
Creditor and Debt Holder Exclusions
Antitrust/Unfair Business Practices Exclusions
Bodily Injury/Property Damage Exclusions
Pollution Exclusions
Regulatory Restrictions
Enhancements to Note
Non-Rescindable Individuals Coverage
Innocent Insureds for Fraudulent Acts
Defense Allocation
Additional side A (personal limits)
Executive Knowledge Carvebacks
Let’s talk about your insurance needs.
To learn more about how we provide comprehensive solutions for companies across all industries or to discuss your insured’s needs, speak with one of our insurance specialists today.
DOWNLOAD APPLICATIONS
FILE A CLAIM
CLAIM SCENARIOS
FAQs
INDUSTRY TOOLS
FREE CYBER HOTLINE
GET APPOINTED
TITLE AGENTS &
MORTGAGE BROKERS
REAL ESTATE
LEGAL
MEDIA
ARCHITECTS & ENGINEERS
FINANCIAL INST.
CONSULTING
MISC. SERVICES
HEALTHCARE
MEDICAL
INSURANCE
TECHNOLOGY
SPACs
PRODUCTS OVERVIEW
Errors & Omissions
EPLI
Directors & Officers
Fiduciary Liability
Commercial Crime
Cybersecurity
MERGERS & ACQUISITIONS OVERVIEW
Reps
and Warranties
