The Marijuana Regulation and Taxation Act it has achieved one of its goals – attracting entrepreneurs to enter the new large-scale marijuana industry and thereby creating more jobs for both New Yorkers and Albany’s tax dollars.
But according to one CNY insurance agency, many of the new cannabis entrepreneurs seem to be unaware of the importance of obtaining commercial insurance for their ventures.
Kent Doctor is a risk manager at Reagan’s companies in Marcellus. He told New York Cannabis Insider that new businesses he meets are often “blindsided” when it comes to realizing they need insurance.
“They’re new to the business and don’t know much about it,” Doctor said. “A lot of them hope that if they have a policy for their hemp farm, it will just carry over to their cannabis business. But that’s not the case.”
The doctor said that since there is “no mandatory insurance” listed in state licensing agreements, many prospective licensees do not realize they need coverage.
“If it had been stated in the terms of the license agreement, then they would have understood that they needed to look at insurance as soon as possible,” he said.
Josh Amidon, a risk manager at Reagan, encourages businesses to be proactive, meet with an agent they trust early on, and find out how to mitigate risk before building or renovating their store, warehouse or expansion.
“Discuss what you want and how to set up your space,” Amidon said. “You don’t want to finish building your warehouse and realize you should have put in these security cameras or these types of fences.”
Installing such safety equipment in construction is not only easier and cheaper than retrofitting, it also helps your maintenance costs, he added.
To learn more about risk reduction, check out our Q&A with Michael Sampson.
Emily Leander is a Florida-based founding partner GreenWrap Insurance Solutions, which works with cannabis companies in 24 states, including New York. He says Albany’s lack of insurance in the cannabis sector is “not unusual.”
“Overall, states are not involved in regulating insurance,” Leander told NY Cannabis Insider. He suggests that, in the future, Albany will develop its own insurance policy for cannabis along with tobacco and alcohol.
States “should treat this like any other legitimate business,” he said. “If you’re going to issue permits, you’ve got to issue standards.”
Aaron Ghitelman, spokesman for Office of Cannabis Managementtold NY Cannabis Insider that guidance is coming, but did not give a timeline.
The OCM “monitors the security requirements of the cannabis industry, and will develop guidance that will include the security measures required of licensees,” Ghitelman said, adding that the organization has been working to identify measures that can help businesses.
Ghitelman said that obtaining insurance is not necessary if a business submits its first Conditional Adult-Use Retail Dispensary (CAURD) application; instead, it is required after a temporary permit.
Government Department of Financial Services declined to comment on the report.
Place of insurance
The doctor explained that the major insurance companies that are often seen in TV commercials are not cannabis players due to the fact that the products are still illegal in the state.
“All these big players want nothing to do with this,” he said. “So we’re dealing with ‘excess line’ carriers. They have a license to do business in New York but it’s what we call ‘unauthorized.'” This means DFS has not accepted their wishes, he added.
So if you look at two policies of the same business from, for example, Farmers and Allstate, “you can expect it to be very similar because the government has passed and approved how to write your policy,” said the Doctor. “It’s a common species.”
But the spread of more lines “is where things start to get crazy in cannabis insurance,” said the doctor, because these insurers “are not forced to provide certain services. They can pass [a policy] and removing parts of the cover through deduction, they can add all kinds of things through acceptance. These are not old policies.”
Yet another reason for business owners to thoroughly research any insurance policy they are considering purchasing.
Attorney Michael Sampson, chairman of the Cannabis Industry Group at Leech Tishman in Pittsburgh, insists that cannabis businesses in New York should have no problem getting help.
Sampson said that while “the cannabis industry insurance market in New York is still smaller” than other industries, “it’s getting there.”
“It takes a little bit of work, but the coverage is there and any cannabis business that wants to get coverage — which should be any cannabis business — should get it,” Sampson said.
First cannabis seizure?
One organization may have the answer to the insurance needs of its members. The New York Cannabis Growers and Processors Association are “in the final stages of implementing an insurance program built for our members – membership benefits.” Said Managing Director Dan Livingston.
“I am a CBD grower and processor,” said Allan Gandelman, NYCGPA President. “I sell to Wegmans and they require financial insurance. But I found it difficult to get the company’s CBD insurance.”
With the legalization of adult marijuana users, Gandelman was initially concerned that “there are no carriers that will insure us,” but he was encouraged by the Farm Bureau’s workers’ compensation insurance where he was previously involved.
“We want to create parallels on the cannabis side,” Gandelman said. “Let’s make a plan for our members.”
Derek Davis, Cortland-based marketing executive McNeil & Co…
Reciprocal is an insurance vehicle combining policy and risk spreading. This one will offer nine types of insurance, including all credit and sales, compensation, property, etc., Livingston said.
“Our goal is that by September, people will start selling this year’s crops,” said Gandelman.
A captive can help its participants by offering lower costs and better cost control, while sharing the profits and dilution from successful markets. Downgrades include higher initial payouts and higher payouts if other members don’t perform well.
The doctor, a salesman, said that his organization will be the agent of the captive, adding “from what we have seen, this ‘captive’ sounds like a purchase agreement. If it is written according to the traditional procedure, then some price problems and instability can be reduced, but it can lead to groups some who are doing well should donate money to help others.
But it’s not a magic bullet, the Doctor said.
“It’s a well-thought-out and purpose-built insurance vehicle for high-net-worth groups, who have the ability to control losses, who have a deep understanding of their current program, and who place a high value on managing their risk,” he said. children establishing a hostage is when the group had information that experts could evaluate, after five years give or take.”
Sampson, an insurance attorney, said he knows of “few, if any” programs that already exist in the cannabis arena.
“There’s a problem with establishing slavery in the cannabis industry, especially if it’s established by a trade association or other group,” Sampson said. “Marijuana businesses come in many different shapes and sizes, making it difficult to assess risk.
“Before any business becomes involved in public, captive, or risk sharing, it needs to make sure that it knows the participants and that the other companies are serious, responsible and responsive businesses,” he said.
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