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.
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