Now that cannabis is legal for recreational use in Canada, that has completely changed the insurance landscape around this much-hyped drug.
People and businesses using and selling the drug want to mitigate some of the risks associated with cannabis, and insurance companies are tentatively stepping into the market, not 100% sure what the ultimate costs will be, but ready to play the role that they always play, spreading risk and offering a certain amount of peace of mind.
This is truly a brand-new insurance market, because by definition criminal activity is not insurable. So even though none of the actual risks surrounding cannabis are new, almost all of the insurance implications were born into existence on October 17, 2018. Before that, illegal pot shops could not be insured, and neither could you buy host liability insurance to cover you if your party guests got high at your house and killed someone with their car.
Cannabis and insurance are just getting to know each other, and there are more unknowns than knowns. That said, here’s what we know about insuring cannabis risks, both if you’re selling legal cannabis, or using it recreationally:
In Ontario, private retail cannabis stores will be legal sometime in the Spring of 2019, though the requirements for getting a license have not yet been defined. Aspiring pot shop owners can line up their insurance needs now, and a number of insurers in Ontario will be willing quote on a policy. Insurance is always bought and sold based on insuring against very specific risks, but these are some of the risks that will make your cannabis-related policy different than other business policies.
This is not a contradiction of what is written above. You cannot get insurance for an illegal activity YOU are undertaking, but you can get insurance for crimes committed against you. Most retail stores will have coverage for theft of their product. The difference with cannabis is that there is at the very least a perception that it will be a bigger target for thieves than, say, carrots from a grocery store. The actual risk of theft remains to be seen, but most insurers will price this risk assuming it will be higher than that of other retail goods.
Crime coverage is insurance that covers your business in the event that your employees choose to dip into the product themselves without paying, give discounts or freebies to their friends or steal product to sell on the side. Again, this exists for other businesses, but the perceived risk right now is higher for cannabis products.
Much like a farm or a grocery store, not all of the product that comes into a pot shop will be sold to customers. Because cannabis is a plant, it’s subject to drying out, getting moldy, or just going stale if it sits too long on a shelf. This is a significant part of the insurance policy, and one of the bigger risks of selling legal weed. Pot growers probably don’t have as much risk as a typical farm because in Canada weed is mostly grown indoors, but with any crop, there is always the risk that the crop will spoil for any one of a dozen reasons. Humidity, temperature, contaminants etc.
Whenever you sell a product to the public, you could become liable for how people behave after consuming that product. Bars and restaurants carry liability insurance in the event that a patron gets drunk and then ends up hurting someone with their car. Pot shops will want similar protection. It’s generally accepted that the number and cost of car accidents will go up due to legal pot, and the manufacturers and sellers of the product will be on the hook for much of the added cost.
You may think that you are not in the cannabis business, but if you rent out commercial space, you may be in the pot business without knowing it. If you rent to a business that grows, stores or sells cannabis products, the risks to your property related to fire, theft, liability and other factors may be affected. Talk to your insurance professional to be sure.
One of the issues that businesses all over Canada have been looking at is what happens if employees come to work high. Depending on the kind of work the employee does, it could affect their performance in a number of ways, but if they are working with heavy machinery or driving, it could lead to serious injuries and/or major damage. Employers could be liable for at least some of these costs, and may have to put policies in place to protect against them. Businesses can already have employer liability coverage, and some businesses may want to review their coverage with their insurance professional to make sure they have enough to cover the new cannabis risk.
Because the law in Canada only allows you to have 30 grams of cannabis at one time for personal use, it’s unlikely you’ll need to insure your personal pot stash, but if you decide to grow your own marijuana plants, those have higher value, and some insurers are allowing homeowner to list these plants under their contents insurance.
Your home insurance policy may already include host liability coverage that protects you if someone gets drunk at your house and hurts someone. You should review your policy with your broker to see if your coverage is sufficient given the added risk created if people are now smoking weed at your party instead of just having a drink.
Right now, insurance companies don’t have any claims experience upon which to base their pricing of cannabis-related risks, but quite a few are willing to offer coverage anyway. Once claims start to roll in in the next few years, insurers will have a better idea of how much all of this will cost. Until then, pricing may be a little all over the place, but you can get coverage for these risks, and should probably consider it.
Want to add to this story? Let us know in comments below! Mitchell & Whale is a fast-growing insurance brokerage in Ontario, striving to make insurance _not suck_ one customer at a time. Give us a call today to discuss any of your insurance needs at 1.800.731.2228.