It is important to note that every business in the chain of custody (cultivation, processing, manufacturing, distributing, wholesalers and retailers alike) are responsible for product tampering and tracking. Below are some forms that may be found on a general liability policy that should be avoided at all costs, in plain terms:
Smoking Exclusion
Smoking exclusions in regards to cannabis and hemp use is a “no brainer” for dispensaries, but since the grower, processors and others in the chain of custody do not always know where the flower or oil will end up, this endorsement would leave everyone in the chain of custody exposed. This form excludes smoking of any “herbal” substance, which is not defined and leaves the business exposed due to the ambiguous nature of the verbiage. To that end, these forms specifically exclude vape equipment and its components entirely.
Conditions That Relate to Cannabis
It is important that this form be read through carefully, as many times there are exclusions/conditions that relate to your business that specifically excluded or coverage is severely reduced/limited regarding cannabis and hemp.
Ingredient Exclusions
Be very careful to read this endorsement thoroughly! ALL CANNABIS/HEMP CARRIERS that offer products coverage will apply this endorsement to their policy, however, not all Ingredient Exclusions are made the same.
Designated Premises Limitation
These policy terms are used on many policies issued for cannabis/hemp policies. They are not necessarily harmful, unless you have operations that extend away from your initial location, such as a special event or delivery services.
Total Cannabis Exclusion
Unfortunately, this endorsement still lives in the cannabis insurance marketplace. By way of this form, the policy charges for coverage, but then removes most claims because it completely excludes any claim relating to cannabis. Simply put, the only kind of claims that may be covered would be slip and fall (in the parking lot, since a dispensary would be a cannabis operation) and all cannabis products coverage that is charged for would be excluded. The coverage would only apply to accessories that are not related to cannabis, such as a t-shirt or hat. For this reason, this is a very dangerous exclusion.
Vaporizing Equipment and Components Exclusion
For manufacturers, distributors, wholesalers and retailers, this form can be a massive risk to your operations. If this is applied to your policy, then there is no coverage for any claim arising out of the use, handling or ownership of vaporizing equipment, or any part of the accessories attached or used with the vaporizing equipment including pens, cartridges, mouth pieces, batteries, chargers, coils and any miscellaneous products used with, or attached to, vaporizing equipment. Considering the wrongful death lawsuits and bodily injury lawsuits emerging recently, it is important to negotiate this form off your policy if possible.
Class Limitation
This endorsement can be very tricky for Cannabiz owners as the classification is limited to operations specifically listed on the application AND agreed to on the hazards portion of the general liability policy (which unless you’re a broker, you may easily look right past this page!). The danger in this form, is that if your in a state that was or is medicinal only, and your state approves regulated adult use, and your business moves in this direction, there will be no coverage for your operations unless you report this to your insurance company, and they agree to add it. In states that have regulated adult use, this is the majority of the sales since medicinal use charges a doctor fee to renew a license once a year, and many patrons would rather just pay the adult use taxes on their products then hassle with a license. Another reason this form can be problematic is because if your insurance broker, underwriting firm or carrier class this policy incorrectly, you could be wrapped up in a time-consuming lawsuit to pay a claim that was applied for due to an administrative error.
Assault and Battery Exclusion
By way of this exclusion, if you, your employees or one of your security guards remove any “unwanted” patrons from your facility, even if to protect others or property, there is absolutely no coverage for bodily injury or property damage, and likewise there is no defense for a lawsuit. This would affect everyone in the cannabis/hemp industry due to needed security measures.
Exclusion – Health Hazards, Tobacco & Cannabis Business
This exclusion excludes vaporizers and its components and contents from bodily injury. It goes on to specify that any contraction, development, aggravation or exacerbation of cancer, pre cancer, heart disease, other diseases of the organ (and it does not specify WHICH ORGAN – SUCH AS LUNGS!!) that are impaired are excluded. This form SPECIFICALLY EXCLUDES CLAIMS FOR DEPRESSION AND MENTAL DISORDERS (which is a good majority of the cannabis/hemp using community!). Class actions are also almost entirely excluded. A very small amount of bodily injuries would actually fall outside of the categories listed. For this reason, this endorsement cuts the protection of product liability severely and leave the insured almost entirely uninsured.
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