Marijuana Business Insurance: Addressing the Risk of Theft

One of the largest risk exposures that marijuana businesses face is theft. A theft in your marijuana business can happen from either internal or external forces. A National Retail Federation statistic from 2010 states hits home on where you need to focus as it states “60% of inventory losses are caused by employees.”

The best way to address this risk is to start with your processes and systematically expose how a theft could affect your business. Internal controls is the best way to handle theft. Here are some ideas with how to curb employee theft:

1. Conduct regular check-ins with your employees, ask them about their job satisfaction. An employee who feels as if they are being heard and that someone cares about them may be less likely to feel justified in stealing.
2. Carefully screen employees upon hiring. During the screening process make certain you check references to make certain an employee has not falsified their work experience.
3. Is your security system picking up all areas or, are there blind spots? If there are blind spots adjust the camera or add other camera to ensure you are getting full coverage of your space.

The other way is to address employee theft is to make certain your marijuana business insurance policy in includes protection for “Employee Dishonesty” & “Money and Securities.” Standard insurance policy language would read as follows:

EMPLOYEE DISHONESTY

A. We will pay for direct loss of or damage to Business Personal Property and “money” and “securities” resulting from dishonest acts committed by any of your “employees” acting alone or in collusion with other persons (except you or your partner) with manifest intent to:
(1) Cause you to sustain loss or damage: and also
(2) Obtain financial benefit (other than salaries, commissions, fees, bonuses, promotions, awards, profit sharing, pensions or other employee benefits earned in the normal course of employment) for:
     (a) Any ‘employee’, or
     (b) Any other person or organization

A policy will contain the following provision:

B. We will not pay for loss or damage:
(1) Resulting from any dishonest or criminal act that you, any of your partners, or any of your “members” commit whether acting alone or in collusion with other persons.
(2) The only proof of which as to its existence or amount is:
     (a) An inventory computation; or
     (b) A profit and loss computation.

However, where you establish wholly apart from such computations that you have sustained a loss, then you may offer your inventory records and actual physical count of inventory in support of loss claimed.
(3) Resulting from an “employee” of your or predecessor in interest of yours, for whom similar prior insurance has been cancelled and not reinstated since the last such cancellation.
(4) Resulting from trading, whether in your name or in a genuine or fictitious account.
(5) Resulting from fraudulent or dishonest signing, issuing, cancelling or failing to cancel, a warehouse receipt or any papers connected to it.

MONEY & SECURITIES

(a) We will pay for loss of “money” and “securities: used in your business while at a bank or savings institution, at the described premises or in transit between any of these places, resulting directly from: Theft, Disappearance; or Destruction.
(b) In addition to the Limitations and Exclusions applicable to property coverage, we will not pay for loss:
     (1) Resulting from accounting or arithmetical errors or omissions;
     (2) Due to the giving or surrendering of property in any exchange or purchase; or
     (3) Of property contained in any money-operated device unless the amount of “money” deposited in it is recorded by a continuous recording instrument in the device.
(c) All loss or damage:
     (1) Caused by one or more persons; or
     (2) Involving a single act or series of related acts; is considered one occurrence.
(d) The most we will pay under this Money and Securities Optional Coverage for loss or damage regardless of the number of claims or occurrences is $25,000.
(e) You must keep records of all “money” and “securities” so we can verify the amount of any loss or damage.

When working with clients I always encourage them to make safeguards are in place to deal with theft. Protection for ‘Employee Dishonesty’ and ‘Money & Securities’ is not automatic within a marijuana business insurance policy, this protection has to be purchased for an additional premium. When business owners ask me whether or not they should incorporate this into their insurance program I always advise the following.

1. Don't risk more than you can afford to lose. This is a measure of severity. If the maximum possible loss could not be paid out of your existing finances without necessitating borrowing or if such a loss might lead to bankruptcy then insurance must be considered.
2. Consider the odds. What is the probability that a loss will occur?
3. Don't risk a lot for a little. After weighing the cost of insurance compared to the potential out-of-pocket expense. Don't self-insure a loss that could be transferred to the insurance carrier for a known, relatively small amount of premium.

​
Every business owner has their own threshold for risk. My goal is to help you connect the dots with the risks you face and how insurance can be a part of your overall risk management program.

I specialize in marijuana business insurance, this article is meant to provide you a general understanding of how insurance would work. For coverage specifics you would need to refer to an actual policy contract for complete wording of the policy terms, conditions, limits, and exclusions.

If you’re interested in discussing marijuana business insurance or would like to receive a quote please call me at (503)-922-4847 or select “Request a Quote” below.

---

Request a Quote

---