We had the opportunity to interview with Galen Hayes, Owner of Hayes Insurance Brokers. To better understand how business insurance can help you and your customers.
TWB: Why would a medical or recreational business need insurance?
Galen Hayes: Every business in any sector involves some sort of risk, and sometimes that risk can exceed the benefits of the business. Insurance is a way of managing risk. You pay a little money and in the event of a claim you get deeper pockets to foot the bill for legal fees and claim payouts.
Every business needs insurance. Landlord and lenders require insurance coverage. So do vendors. And if your business deals with the public, like every medical or recreational marijuana business does, you leave yourself open to claims and lawsuits for a variety of things from slip and fall to product liability. Insurance is a must if you plan on staying in business for very long.
TWB: From an insurance standpoint, what are 2-3 important things that cannabis companies need to know as they get started?
GH: The important thing when starting a business is to realize you can’t know everything. It’s important to have help, and we’ve discussed on our blog the Top 5 Advisors Every Owner Needs. Of course, we believe an insurance broker is an important piece of the puzzle.
As you start your business it is important to meet with a qualified insurance broker to perform a risk management analysis. You and your broker will talk about all the different aspects of your business and what insurance you may need to cover those. We’ll talk about vendors, delivery drivers, employees, customers, the products you are selling and the decisions you may need to make as your business gets going. We’ll also help you decide what insurance you need to make sure your business is protected.
TWB: What are some misconceptions that you commonly see about cannabis industry liability?
GH: Cannabis liability insurance isn’t really all that different from liability insurance in other industries. The important things to know are:
- Liability insurance isn’t unlimited coverage. Your broker will help you select liability limits and you can pay for higher limits if you so desire. If you have a big claim, once the policy limit is exhausted, the insurance company is out. That’s where umbrella policies come in.
- A liability insurance policy will cover slips and falls or property damage but not financial obligations like monetary contractual obligations. There are bonds for that type of coverage.
- Liability insurance policies don’t cover everything. You see words like “comprehensive commercial general liability” or just “general liability” and you think that’s all you need. Unfortunately, if you are doing something with your business that your insurance company doesn’t know about then there probably isn’t going to be coverage for it. Talk to your insurance broker about everything you’re doing and we’ll help you get coverage.
TWB: On your website you wrote about Lloyd’s of London ending insurance for the cannabis industry. How is that impacting companies today and how might it impact them in the future?
GH: Lloyds pulling out of the market has definitely shaken things up, but luckily there is still coverage available. We expect as more policies are nonrenewed that insurance premiums will go up. The other insurance companies still writing cannabis coverage are facing less competition and they have less capacity for these policies, so the bottom line will increase. That also means underwriters are going to become more stringent as they quote new policies, so marijuana businesses will need to understand the underwriting requirements to keep their coverage at a reasonable cost. New insurance companies are going to enter the marketplace looking for business, so we have to keep an eye out for companies coming in with rock bottom rates. They can price themselves out of the business if they aren’t careful and make it harder for everyone else. Ultimately we think that cannabis will eventually become legalized at the national level because of Lloyd’s pulling out of the marketplace and other factors at the grassroots level.
TWB: Anything else we should know?
GH: This may seem contradictory, but as the cannabis industry has matured rating the insurance policies has become more predictable. Unfortunately, predictability doesn’t always equal lower cost. Litigation is becoming more prevalent which means an increase in claims and lawsuits. This translates to higher premiums.
We’ve noticed a large number of marijuana product recalls in Colorado lately and we’re keeping a close eye on that. Products liability insurance doesn’t include coverage for recalls so we’re looking into that coverage for our clients. Hayes Brokers has been in the marijuana insurance industry since before states started legalizing it, and we plan to be around to serve this industry for decades to come. More information is available on on our cannabis industry insurance web page.
Galen Hayes is president of Hayes Insurance, a full-service commercial insurance brokerage and risk management firm, serving clients across the country by providing access to over 200 insurance carriers. Mr. Hayes wrote the first insurance underwriting guidelines for the cannabis industry in the mid 1990’s. Hayes Insurance specializes in hard to place risks including cannabis industry insurance.