Colorado is on the cutting edge of the insurance world as we continue to push the boundaries in the medical marijuana arena.
The advent of recreational marijuana has changed the insurance landscape dramatically. Small medical dispensaries are being replaced by larger operations that require more complex insurance needs.
What was once a simple insurance policy for liability and some property (contents) has now become a hybrid policy, including diverse items such as crop insurance, liability insurance, products, cultivation, cyber and comprehensive property insurance.
Insurance companies are dusting off their old farm insurance manuals to handle the onset of these large growing operations that are supporting the booming recreational marketplace.
Dispensaries and grow operations face two major insurance requirements.
The first, and simplest, is the insurance for the building from which they operate. Many carriers refuse to write policies on buildings where marijuana grow operations take place, and so specialty companies have surfaced to handle the landlord’s interest. Prices are steeper than a traditional landlord policy but coverage can be obtained.
The second, and bigger issue, is the insurance for the marijuana operation. While liability and property insurance policies are clearly understood by business owners, the medical marijuana world includes several additional types of insurance.
Loss of air conditioning on a hot summer day can destroy thousands of plants and cost millions of dollars.
[/pullquote]The first is crop insurance (either indoor or outdoor) for the plants. Values are determined per plant through each phase of a marijuana plant’s life (from seed to harvested plant). The total value is insured against theft, fire or other perils.
Another type of insurance is the booming industry of ancillary products such as candies, lotions, cookies, etc. This requires a hybrid of a standard insurance policy (say, bakery) and a modified product liability policy to handle the nature of the added marijuana. This hybrid policy type expands the regular insurance policy to handle claims arising from the quality of the marijuana.
Insurance companies are now having to tailor policies to handle business interruption and lost income from issues with power and water. Seemingly innocuous problems like utility interruption become a major factor with indoor grow operations. Loss of air conditioning on a hot summer day can destroy thousands of plants and cost millions of dollars.
Finally, these operations need crime policies: Many operations are unable to take credit cards due to federal laws and so they are forced to handle vast sums of cash.
Seldom do we get to see the growth of a completely new industry. From the insurance side, we are forced to learn new products and custom design policies to handle this booming growth industry.
It makes for an interesting dinner party conversation!
Martin Burlingame is CEO at Commercial Insurance Group LLC and president of Martin Burlingame Insurance Agency in Colorado Springs.