By: Guest Writer Aaron Cohen, Risk Management Consultant at Insurance Office of America

It is safe to say that 2020 has been a taxing year, and the insurance sector has found it no different. Currently, the insurance market is in turmoil largely due to reduced interest rates impacting carriers’ bond-heavy investment portfolios, and dwindling underwriting profits paying out fire, wind, hail, and looting claims.  

All of which boils down to increased insurance premiums and limited carrier bandwidth, which you, the policyholder, have to foot the bill.  Looking at the cannabis industry, we have seen:

  • Governor Newsom implementing SB-1159 that created the rebuttable presumption that COVID-19 cases are work-related, entitling non-WFH (work-from-home) employees to Workers Compensation benefits; 
  • Carriers issue renewal notices to policyholders notifying them of anticipated premium increases of upwards of 25% or more; 
  • California cannabis cultivators and operators without financially viable insurance solutions for their lost crops and facilities. 

Looking at the insurance market, there is a lot to discuss, so here is what we are seeing in the management liability sector.

Directors & Officers Liability

  • What We Are Seeing: Increased litigation from shareholders against company management and board of directors, especially within the public sector, resulting in insurance carriers paying attorneys’ fees to defend these insureds, and large demands to shareholders.  Though you may have a clean loss history, your carrier having to pay out claims for other operators can ultimately have an impact on your renewal.
  • Result: Increased premium rates and retentions from Directors & Officers liability insurance carriers, with COVID-related exclusions in addition to others (insolvency, regulatory, etc.). Carriers are getting more selective with their underwriting criteria for new and existing business, further limiting the marketplace.

 Employment Practices Liability

  • What We Are Seeing: With many cannabis companies experiencing mass layoffs, financial constraints and not having proper HR procedures, this is resulting in an increase in employment related lawsuits against employers. Wage & hour, discrimination, harassment, among other lawsuits continue to arise within the legal cannabis market.  Not to mention, attorney rates are increasing ultimately having an impact on how much claims are costing insurance carriers.
  • Result: Again, with this increased frequency and financial severity of claims comes increasing premium rates with coverage carve outs.  Carriers are excluding COVID-related claims, while some are excluding coverage for Wage & Hour and sub-limiting third-party related claims.

Here are some suggestions for what can you do to reduce or at least maintain your current insurance costs:

  • Get out to market earlier to give the underwriters more time to ask questions, get comfortable with your business and offer competitive terms;
  • Discuss what policies and procedures you can implement to mitigate potential insurance claims;
  • Ensure your submissions are thorough, giving the underwriter a good understanding of your operations and what you are currently doing to mitigate losses;
  • Evaluate the coverage terms and pricing with your broker. Understand the coverage you are purchasing and what is and is not covered by your policy

Aaron Cohen is a risk management consultant and part of the cannabis industry specialists team at Insurance Office of America. Aaron brings a multifaceted approach to risk management and insurance, specializing in the cannabis and hemp industry, while also engaging in other sectors including commercial property, consumer packaged goods, gaming, and restaurant. 

Cannabis business operators may contact Aaron regarding insurance coverage by email at or by phone at (323) 951-4216. Please visit Insurance Office of America’s website for further information:

This information is provided as a public educational service and is not intended as legal advice. For specific questions related to cannabis business licensing and regulatory compliance, please contact an attorney at Katchko, Vitiello & Karikomi, PC.

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