Cannabis is an exciting emerging sector that poses unique challenges and risks. The industry is projected to grow to $146.4 billion by 2025. As the industry grows and becomes more regulated, so does the risk exposure.

The uncertainty surrounding the legality of marijuana has lead to many major insurance carriers being reluctant to offer insurance to the industry and presents obstacles finding the right insurance policy. Many cannabis companies struggle to get quotes, and can be left with substandard insurance policies with significant gaps in coverage.

This is why its so important to work with an insurance broker that access to the top industry carriers, has proven track record of placing insurance and managing claims for Cannabis companies. At Founder Shield, we partner with the leading international insurance carriers that design policies specifically for cannabis companies. We work with some of the top public cannabis companies in the US and Canada and craft tailored risk management programs that allow them to focus on the things that matter, growing their business.

Some of the biggest risks Cannabis companies face

Legal & Regulatory

The legal status of cannabis remains hotly debated in the U.S. The 2018 Farm Bill legalized hemp and hemp-based cannabidiol. Additionally, many states have legalized recreational and/or medical marijuana. However, marijuana is still illegal on the federal level, resulting in a highly complicated legal and financial environment for marijuana companies operating under state laws.

Financial Risk

Federally regulated banks avoid accepting proceeds from a licensed cannabis business or risk losing their federal charters. With traditional banking services limited or unavailable, cannabis firms can be forced to transact business, including paying employees and taxes, in cash. Recently, a Denver, Colorado credit union received approval to receive cannabis proceeds but availability still varies significantly by state.

Product Liability

Proper product labeling is crucial. Even so, bodily injury and property damage could result from the use of the psychoactive drug, and contamination with pathogenic molds, fungus or pesticides could also result in major recalls and liability. According to Denver’s Department of Public Health & Environment, there were numerous marijuana recalls recorded over contamination issues between 2015 and 2017.

Why is Insurance for Cannabis Companies Important?

Insurance is a vital way of managing risk for all industries, and Cannabis is no exception. In particular, Directors & Officers insurance is important to protect executives and board members. However, as an emerging industry built around a federally illegal (and, in many places, currently illegal) substance, the cannabis industry is especially risky. Companies must navigate new, evolving and uneven regulations. The legal climate sometimes seems to be changing daily, making it hard for companies to keep up. Multiple recent lawsuits have highlighted the importance and a solid D&O policy for cannabis companies:

  • Cronos Group Inc. has faced securities litigation.
  • MedMen, a cannabis retailer, and its executives have been sued.
  • Aphria Inc. has been hit with a securities lawsuit.
  • CV Sciences, which manufactures and sells CBD products, has been sued for securities violations.

There are also several additional policies that Cannabis companies should also consider which we’ve outlined below:

What Insurance do Cannabis Companies Need?

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What Types of Cannabis Companies Need Insurance?

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Cultivation

Greenhouses & Hydroponics

Infused products

Testing & Extraction

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Dispensaries

Distribution

Delivery & On-Demand

Ecommerce

Technology

Software as a Service

Data & Analytics

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Media & Content

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