Selecting Coverage For Your Cannabis Cultivation Insurance Program

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Legal Cannabis & Hemp Cultivation whether that be indoors, in a greenhouse, or outdoors presents a variety of dangers and risks depending on the growing environment. With that being said there are many ways to structure insurance coverage as cannabis insurance coverage is purchased ‘a la carte’ and not sold as a ‘package’. 

Before you just purchase insurance it’s important you do your due diligence and have your insurance program designed for your company’s specific needs. But, how do you get started? The answer to that question is fairly simple - consider your answers to the following questions that will aid with the development of your insurance program.
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  1. Do you want to have protection in place in case someone gets injured due to a slip and fall injury on the premises? 
  2. Do you want to have protection in place for the building(s), greenhouse(es), hoop house(es), or the costs of tenants improvements and betterments that were made to the premises you occupy?
  3. Do you want to have protection in place for growing equipment & tools including furniture, fixtures, computers, and other equipment?
  4. Do you want to have protection in place in case someone brings a suit against the business due to bodily injury or property damage that takes place from consumption of cannabis flower?
  5. Do you want to have protection in place for the crop and harvest? 
  6. Do you want to have protection in place for loss of business income in case the cultivation site is closed down due to a covered loss?
  7. If you offer delivery do you need coverage for vehicles that you own and operate or need protection for stock that’s transported in your vehicle(s)? 
  8. Do you have employees? If so you will need Workers Compensation coverage that will provide them protection in case they are injured on the job.

Cannabis Cultivation Insurance Underwriting

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Insurance underwriting is important for insurance companies. The role of underwriting is for an insurance company to understand and determine the associated hazards and risks of your cannabis business, how you manage those hazards and risks, and determine the risk of a potential loss. Because stuff happens insurance companies use a series of questions to determine how you're managing your hazards. If an insurance company feels comfortable with the responses to those questions they will offer insurance to cover the exposures that you’ve requested.
The following are specific questions that are asked about cannabis cultivation operations to help underwriters get a good understanding of your business. An underwriter will then assess your answers and decide whether or not to offer an insurance policy for your operations.

Electrical Load & Lighting

The type of electrical load and lighting you use in your cultivation facility is a fire hazard and will be a source of ignition. Insurance underwriters are going to want answers to the following questions with regards to your electrical load & lighting:
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  1. Was a load analysis performed prior to occupancy to ensure electrical service is of capacity for the current operation and any anticipated future additions?
  2. Have the electrical systems been inspected and tested by a qualified electrician experienced with industrial systems, and are they compliant with the most recent NFPA 70 code?
  3. Has all temporary wiring been replaced with permanent wiring fully compliant with NFPA 70?
  4. Have all plug-in grow lights been replaced with permanently installed fixture wiring?
  5. Are grow light bulbs replaced based on the manufacturer’s recommendations prior to failure?
  6. Are bulbs matched to the fixtures to avoid fire and explosion from damaged bulbs?
  7. Are all grow lights hung from chains?
  8. Do you use plastic sheeting to enclose or partition off sections of the building and/or grow rooms? If so any use of plastic to enclose rooms or walls and/or ceilings must be installed in accordance with building and fire code requirements.
  9. Is there a backup system for the electrical supply?

Compressed Gases

Carbon dioxide (CO2) is commonly used in cannabis grow operations as enriching the air with CO2 can support plant growth and development. Do you use carbon dioxide enriched systems in your growing process? If so you would need to answer the following underwriting questions:
  1. Is there a CO detector interlocked to an exhaust fan that operates when high levels of CO are detected as required by the International Mechanical Code?
  2. What is the minimum distance to combustibles?
  3. Is bottle fill limits at ⅔ volume capacity?
  4. Is bottle storage outside in a locked cage?
  5. Are interior total volume (including in the process) limits set and observed?
  6. Are bottles (including empty bottles) chained in the upright position?
  7. Is the storage area clearly marked as a no-smoking area?
  8. Is bottle storage in a segregated, secured location?
  9. Are protective caps in place at all times when the bottle is not in use?
  10. Is there a hard-piped gas distribution system from an exterior storage location?​

Pesticides & Fertilizers

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Your cannabis operations will likely contain fertilizers and pesticides in the cultivation process. You need to make certain that you are compliant with the storage and usage of these materials. The following are best practice storage of pesticides and fertilizers:
  1. Store all bags and boxes of pesticides and fertilizers off the ground on pallets or shelves.
  2. Store all liquid pesticides and fertilizers on shelves capable of containing spills or provide appropriate secondary containment.
  3. Routinely check for leaks and spills.

Safety Systems

You will need to address the fire alarm and fire protections systems you have in place for fire protection. You’ll need to confirm that you have a central station fire alarm connected to the building. In addition you will want to make certain that the fire department has easy access to your cultivation facility. This includes that a key box is made available so the fire department can gain access to your facility. The portable fire extinguishers that you have on the premises need to be inspected on an annual basis. The installation requirements for portable fire extinguishers will vary based on the size and layout of your cultivation operation.
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For outdoor and greenhouse cultivation operations the one of the largest areas of risk concern for insurance underwriters will be the peril of liability, theft and the destruction of greenhouses and hoop houses from the natural elements.

Premises Safety & Liability

It’s understood that you will not want to draw a lot of attention to what you're doing and security is paramount for the success of your business. Insurance underwriters will want to have details regarding the premises safety of your outdoor operations. Insurance underwriters are going to want answers to the following questions with regards to your risk management and safety of the premises: 
  1. Does the property have fencing surrounding the cultivation area?
  2. If yes is there any barb wire, razor wire or electrified fencing?
  3. Are there gates at all entrances of the property? If yes are they locked at all times?
  4. Are there any traps that are used for security on the property? A trap is an area where there is a small area with two doors designed to “trap” an individual before they are cleared to enter a location. 
  5. Are there any dogs on the premises?
  6. Are there any firearms on the premises?​

Crime

The potential of a loss due to theft is significant. In order to have protection for your cannabis stock/inventory and cash from the perils of fire and/or theft you will want to make certain you have the following protections and safeguards in place for your cannabis cultivation site:
  1. Video Surveillance System: The video surveillance system must be recording and backing up for 14 days prior to the loss.
  2. Central Station Alarm: The central station alarm system must be active during non-business hours (All doors and windows must be connected to the central station alarm system).
  3. Safe: Safes must be at a minimum 800 lbs. with a 1 hour fire rating. If safes are under 2,000 pounds they must be bolted to the ground.
  4. Vaults: Vault rooms must be fire rated/certified for a minimum of 1 hour. If the room is not fire rated or certified, then the building will need to have 100% fire sprinklers or a fire suppression system for the peril of fire to be covered. Vaults should have the following characteristics:
    1. Concrete, masonry or cinder block walls with steel rebar    
    2. Concrete, masonry or cinder block ceiling with steel rebar
    3. Concrete, masonry or cinder block floor with steel rebar
    4. Concrete, masonry or cinder block walls including the ceiling of the vault room are lined with steel plates.
    5. Vault room doors are made of steel                        
    6. Video surveillance is located in the interior and exterior of the vault room and all video recordings are backed up 14 days
  5. Shipping Containers: Shipping containers must be in a building equipped with a fire suppression system and/or 100% fully sprinklered with a central station burglar alarm in order to be approved for fire coverage. In addition the shipping container must have the following characteristics:
    1. Steel container is 100% enclosed
    2. Container is free of any rust or corrosion
    3. Container doors are made of steel
    4. Container is no more than 15 years old
    5. Container walls are a minimum of 14-gauge steel
    6. Active central station alarm is connected to all doors/openings
    7. Active central station alarm is connected to all motion sensors in the building interior and exterior
    8. Vault room doors will remain locked at all times except while in use by limited personnel (an authorized employee or agent).
    9. No windows are located in the interior of the vault room
  6. Container access is restricted:
    1. By Key Card or similar
    2. By Combination Lock or Code
    3. Combination Lock includes more than 1,000,000 potential combinations​

Greenhouse/Hoop House Safety

If your operations have a greenhouse and/or hoop house on the premises underwriters have the following questions and concerns with regards to protection for the building and/or possible liability situations.
  1. Is the greenhouse/hoop house fully enclosed with locking doors?
  2. Does the greenhouse/hoop house have electricity? If yes, what equipment on the premises uses electricity?
  3. What materials have been used to construct the greenhouse/hoop house walls. i.e. aluminum frame, glass windows, steel frames, canvas, polycarbonate, etc.
  4. What protocols are in place to prevent overwatering and flooding. Are flow meters and water timers used?
  5. What plan is in place for disposal of waste water?

As you can see the risks are many and not all the risks of a cannabis cultivation operation have been addressed above. Your cannabis cultivation insurance program will be designed to protect your property and inventory, liability and loss of income in the event of a loss.

Core Cannabis Cultivation Insurance Protections:

Providing Cannabis Cultivation Insurance for Indoor Facilities, Greenhouses & Outdoor

Reach out to me when you’re considering cannabis cultivation insurance. I will discuss coverage’s with you, how each coverage works and assess how it fits into your risk management needs. I will provide you with comparative cannabis cultivation insurance quotes from multiple insurance carriers so you can get the best possible rate.

As an insurance broker I help cannabis businesses manage risk through insurance.​