Medical Marijuana Business & Insurance Coverage
My name is Ernest Gonzalez owner of Hydro Pharms, LLC and by trade I’m a Licensed Commercial Insurance Agent in the State of Florida. In this article I will explain the complexities of insuring a Medical Marijuana Cultivation Facility and/or Treatment Center in Florida.
I recently spoke with William Richard Wohlsifer, ESQ., who is running for Attorney General of Florida at a Meet the Experts seminar in West Palm Beach. With his background as a Senior Assistant General Counsel for the State of Florida Department of Business and Professional Regulation, he has strong opinions on the future potential of the medical marijuana industry in Florida and what will be necessary to ensure regulatory compliance. Florida has the potential to lead the country as to how this industry should be regulated.
The medical marijuana industry has risks which need to be addressed through insurance.
Keep in mind that the examples explained herein are solely for reference and consideration as no insurance carrier is offering coverage in Florida at the time of writing this article. The examples I use are based on how insurance carriers are offering coverage in other states. Underwriting guidelines, and provisions may affect those wanting to enter the medical cannabis industry in Florida. Insurance carriers in other states have stringent contingencies, and the insurance is costly.
Florida regulatory departments will want to know proper insurance coverage is in place in the event of loss for many reasons like; property damage, bodily injury, etc. It is incredibly important to know that the consumers in Florida are protected from any liability claims arising out of the medical clinic’s operations or products provided.
Types of Insurance Medical Marijuana Treatment Centers Will Require
General Liability Insurance – This type of policy is based on annual gross sales of the business. In other states the average rate is $9.00 per every $1000.00 in sales. As an example, a cultivation facility with expected annual gross sales of 1 Million Dollars will sustain a premium of $9,000.00 annually. In order for coverage to be given you must comply with safe requirements, alarm & security surveillance, etc. And this is just for General Liability Insurance.
Workers Compensation – Workers Compensation is a requirement for any business in the State of Florida.
Property Coverage – The medical marijuana business must be insured against electrical fires, theft, machinery, and windstorm. Catastrophic losses can cripple a business overnight.
Crime Coverage – With cash and drugs in the same place, there is a potential for employees to be dishonest and take money and/or inventory. Background checks on employees will most likely be enforced by the state of Florida as well as the insurance carrier.
Inland Marine – This coverage is necessary to cover account receivables, patient records, valuable papers, employee papers, etc. Regulatory requirements will most likely imposed that you keep track of patient and business records making it wise to purchase this type of coverage.
Commercial Automobile Insurance – Automobile insurance will be required if you are allowed to deliver products to patients. High Liability Limits may be imposed, you will need to consult your insurance agent accordingly.
Business Personal Property – You must protect the business assets and inventory from any type of peril. Fires, theft, and malicious mischief are very common in this industry.
Umbrella Coverage – Excess Liability Insurance must be considered once you have established your business and your assets of the business exceeds your liability exposure.
Business Owners Insurance – This is a type of policy package that includes all of the coverages above except workers compensation. I would suggest you shop for this type of policy. However breaking down your exposures with different policies can be more cost effective.
Other coverages that you may need to consider are: Flood, Cyber Liability, Employment-Related Practices, Money & Securities, Electric Data Processing, etc.
For those looking to get into the Laboratory part of the industry, all the types of insurance above apply, plus some additional other coverages. The environmental impact exposure is significant due to the potential for improperly disposing of waste. Waste disposal may need to be documented to meet all FDA and EPA standards. Before opening any type of scientific laboratory, inquire with the appropriate state and federal agencies.
I decided to write this article to educate those that may want to enter the industry and to inform future medical marijuana dispensaries in Florida that this application process is not going to be a walk in the park. I will not be insuring any businesses that are looking to get into this new industry. Hydro Pharms, LLC wishes everyone the best of luck!
Hydro Pharms, LLC