Cannabis Insurance Q&A with Michael Sampson

Michael Sampson is a friend Leech Tishman and chairs the Cannabis Industry Group. Based in Pittsburgh, Sampson represents clients in a variety of civil, commercial and other cases throughout the country. He recently spoke with Tom Wanamaker of the New York Cannabis Insider about the cannabis insurance market. This interview has been lightly edited for clarity.

What is your advice to a new cannabis entrepreneur looking for commercial insurance for their business?

Any business in the cannabis industry, like any other business, needs to make sure it has the right brands and the right insurance.

If you are building or repairing a product, you may need general liability insurance. If you own property, you may need property insurance. If your business relies on computers and the Internet to store personal information, you may need to consider cyber risk insurance.

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For almost any cannabis-related business there are, often times, cover-ups that one may want to obtain. It is not surprising that these covers are not very different from any business. As with any business, you want to make sure that you calculate all the possible risks, and make sure that you have the insurance and the insurance that will respond in the event of one of the obvious ones.

It’s important to understand what your policy covers and what it doesn’t cover because we still see many policies that have some issues. I understand that insurance isn’t fancy or fun – but it’s important, especially in this industry – business owners and employees need to take the time to make sure they understand their needs and make sure they’re covered. it fits those needs.

What if the business owner develops a new business?

Make sure you are covered for what you are doing. The best example is the delivery service. If you suddenly find yourself in a state that allows shipping that didn’t exist before, or you’ve moved into a business that didn’t, you can’t just assume that the insurance was already there. You were in a place that will continue to work. Now you are in your car and you are driving marijuana to different places as well [there may be] regulations applicable to delivery vehicles requiring in-vehicle GPS, other in-vehicle storage requirements, etc.

That’s why you need to know the security requirements, and what insurance can and can’t cover, when you’re moving into new business models or new jobs.

Does the cannabis industry really need to protect itself from theft?

Criminal law is important for cannabis-related businesses to cover theft in particular. Criminal law often includes factors such as immunity of some kind, amount or scope, or other restrictions.

Additional security measures may be necessary to have a criminal record; Failure to maintain this protection may result in a denial of coverage to the insurance company.

To be clear, insurance is only one part of how a business can reduce risk. And especially when it comes to safety you don’t want to rely on insurance alone. You want to make sure that you have ingress and egress control, you want to make sure that you have good lighting, you want to make sure that you have video surveillance, you want to make sure that you have separate storage rooms and other types of locks, doors, and/or glass. You want to make sure you have solid policies and procedures in place and that you train your employees on them and what to do in the event of an emergency. In many countries these types of protection are required by state law.

What are some ways cannabis business owners can reduce risk?

Risk mitigation takes all shapes, forms and sizes. Obviously, insurance [coverage] is a key component in risk management and risk reduction. Physical security is a major part of risk management. Along with physical security and safety, I would add privacy and security, and cyber security.

In 2022 cyber security is absolutely essential when it comes to any risk mitigation strategy, whether in the cannabis industry or not.

Related: Cannabis businesses can’t afford to ignore cybersecurity – Guest group

There are other ways that a business can reduce risk, in particular, transfer the risk of the contract. Whenever a cannabis-related business enters into an agreement with another entity, there is an opportunity to transfer or reduce risk. There are different parts of the contract to do this, including the provision of interest, waivers, releases, insurances.

“What we often want when representing a business is to include requirements in the contract that the company has a certain insurance and name the business as an insured or loss on the company’s insurance, so that the business now has access to the other’s insurance and does not have to rely on its own in the event of a loss or claim.

There are many different things, including representations and warranties, that can be used in a commercial contract – a sales contract, a service contract, a lease – that reduce or reduce or reduce the risk. All of these factors – contractual risk transfer, insurance, asset protection, cyber security and more – should go into any cannabis-related business or risk mitigation strategy.

What is D&O insurance? Is it necessary?

Directors and Officers Insurance is a standard insurance policy that companies of all sizes and types, in all industries, have. It will often provide different assessments for directors and officers and the company itself, whether it is required to indemnify its directors and officers or if it has public information.

For large operators who want to attract famous people to their teams, these people hope that these companies have D&O insurance because if the company is sued or the people are sued for what they did as directors and officers, they want to make sure that it is covered.

The D&O market in the cannabis industry is dangerous. It is probably one of the most difficult markets to navigate because there are few insurers willing to write D&O in the cannabis market and even fewer write the right stories for the cannabis industry. But it’s one that can be important when you’re trying to attract talent.


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