The exciting launch of Pennsylvania’s medical cannabis program has left a select few businesses racing to operationalize as the first quarter of 2018 quickly approaches. Teams have been finalized, land has been secured, and build outs have begun. An often overlooked aspect of any company’s build out is the insurance program. As groups begin to release capital in the coming weeks and months, it is important to ask the following three key questions:
- Do we own the property? Let’s assume, given the short timeframe to operationalize, that the answer is yes. Is your business covered in the event of an injury that occurs on the land you now own? General Liability coverage is imperative for any business and the cannabis industry is no exception. Be sure to carefully review the policy forms to ensure coverage extends to construction exposures at ALL of your operating locations.
- Have we started construction? If your answer is yes, it is important to evaluate the need for Builder’s Risk coverage. Builder’s Risk insurance is designed to cover the property itself in the course of construction. Review any contracts held between your general contractor and subcontractors to determine where each party’s insurable interest begins and ends.
- Have we hired employees? Businesses in PA with employees on payroll are legally obligated to obtain Workers Compensation insurance. A Workers Compensation claim could arise simply from an employee driving to and from the bank if he or she is acting within the breadth and scope of their duty as an employee. Workers Compensation premium is based on the class of employee and the corresponding payroll dollars associated with that class. Many new ventures experience difficulty projecting their first year payroll in order to receive a rate from the Workers Compensation carrier. For this reason it is important to partner with an insurance company that allows quarterly audits so that your plan accurately reflects projected payroll for the year.
The infant stages of any young business will always have certain risks associated with it. It is important that your business partners with a risk management consultant that understands the cannabis industry and does not advise purchasing coverage not needed at this stage in your operation. A final vital consideration during the build out is your security plan. Securing your facilities properly will ultimately lead to a decrease in the need for insurance claims. Check out our partner, Viridis Security Group, and their blog on “Four Security Considerations for New Cannabis Businesses” for more information.
– The Viridis Team