Risk & Business Magazine Jones DesLauriers Insurance Magazine Summer 2018 | Page 29

CANNABIS Q&A Cannabis Q&A BY: ZURICH CANADA W HAT ARE THE RISKS ASSOCIATED WITH INSURING PROPERTIES FOR CANNABIS? First, when determining the risks of insuring a property, you’re also determining the risk of operating the business that occupies the location(s) in question. I always like to remind our customers that while insurance companies are here to pay claims, it’s important to also utilise us as a resource to help prevent losses before they happen.  When specifically focusing on the property line of business, the underwriting process will be heavily dependent upon what the cannabis company’s actual exposure is. For instance, a grow operation will need to be looked at much differently than a cannabis distribution centre or retail sales operation. Ultimately, the core principles of Construction Occupancy Protection Exposure (COPE) will help an underwriter assess and price the risk properly as well as educate the customer on how to better protect themselves. DO INSURANCE COMPANIES COVER MARIJUANA-GROWING OPERATIONS? Yes and no. The industry is still a bit sporadic in terms of how it’s approaching not only grow operations but, more broadly, the entire cannabis industry. Some firms are jumping right into things while others are playing it a bit more conservatively. Given the heavy use of data in the insurance industries, companies who have historically been markets for agricultural business have a unique advantage.  In terms of Zurich, we’re very much a market for medicinal/medical marijuana as we treat it just like any other pharmaceutical exposure we’re presented with. When looking at recreational marijuana, we’re currently waiting to see what plays out from a regulatory standpoint, but we’re taking a proactive approach in preparing for the potential legislative change set to take place this summer.   company falls in the supply chain, various lines of coverage should be considered. Certainly property and general liability will be of the utmost importance, but financial lines such as D&O, E&O, and cyber liability should not be overlooked. Additionally, the various lines of what can broadly be considered “marine insurance” should also be at the forefront of the customer’s insurance program.  SHOULD LICENCED PRODUCERS CONSIDER PRODUCT LIABILITY INSURANCE IF THEY MAKE RELATED PRODUCTS SUCH AS CANNABIS OILS OR CONSUMABLES SUCH AS EDIBLES? BECAUSE INSURANCE POLICIES TYPICALLY INCLUDE A CRIMINAL ACTIVITY EXCLUSION, IF A LANDLORD HAS A DISPENSARY AS A TENANT, COULD A LANDLORD’S POLICY BE AT RISK IF THE TENANCY WAS UNDISCLOSED TO THE INSURER? Yes, product liability is something that should absolutely be considered. What’s more, the consideration of product liability insurance should be extended to any firm that finds themselves somewhere along the medical or recreational cannabis supply chain. Focusing just on cannabis oils or edibles would be a bit shortsighted. If a company is selling a cannabis product that can be consumed in any manner, or sells a product that is used as a mechanism of consumption, undoubtedly it has a need for product liability coverage.   WHAT TYPE OF INSURANCE COVERAGE SHOULD MARIJUANA DISPENSARIES INCLUDE IN THEIR INSURANCE POLICY? Whether the economic buyer is a true risk manager or someone in the finance department that wears the “insurance hat,” the coverage needs of the company in question will be heavily dependent upon their exposure to the cannabis industry. That said, and regardless of where the This is a very interesting topic and something of particular concern for the commercial real estate companies where the industrial asset class forms a part of their portfolio. Many of the cannabis grow operations and distribution centres have a high likelihood of conducting their business in facilities they do not own. Legislative change may alleviate some of this concern, but it will not eliminate it entirely. It will take some time to see how all of this plays out in Canada, but we need to remain cognizant of the fact that while Bill C45 may be passed, there are many additional factors to consider.  + Zurich is part of the Zurich Insurance Group, a leading multi-line insurer with more than 53,000 employees worldwide serving customers in global and local markets. Zurich Canada is a leading insurance provider serving mid-sized and large companies, including multinational corporations. 29