By Stephanie Bozzuto, Jason Horst, Eric Rahn, and Ian Stewart
NCIA’s Risk Management And Insurance Committee

As the country continues to grapple with the murder of George Floyd and its aftermath, we have seen reports that numerous cannabis dispensaries in California, Illinois, Oregon, and elsewhere have been the victims of theft and property damage. A number of shops have been hit multiple times in successive days, with many reports indicating that businesses are being targeted by organized groups not involved in protests.

The owners of these dispensaries, like many of the other business owners around them, are likely asking themselves: Is my insurance going to cover this? The good news is that, for many of them, it is likely that they will have coverage for at least some of the losses that they have suffered. What losses are ultimately reimbursed can depend on a number of factors, including what an impacted business owner does in the immediate aftermath of an incident. Thus, we provide below an outline of the steps that businesses should follow in the unfortunate event that your shop has been damaged:

• File a police report.
• Immediately report the loss to the relevant cannabis regulatory authority (check both state and local regulations to ensure full compliance).
• Get in contact with your insurance provider and file a claim immediately. Once filed, you will receive a claim number and an assigned claims adjuster who you will work with from the very beginning to the end of the claim.
• Ensure your place of business is well protected (even after the loss). Do your very best to continue to protect what you can after a loss.
• Document everything. Take photos, save and review your video surveillance. Your insurance company will ask for this when you file a claim
• Begin taking inventory of everything that has been damaged, destroyed, and stolen. Your insurance company will need this as well.
• Review your insurance policy again and speak with your insurance professional.
• Does your insurance policy cover civil unrest, theft, or vandalism coverage? Is it excluded? Is it not listed at all? Many cannabis businesses operate under property insurance policies that will cover losses for property damage and theft that occurs during a public disturbance.
• Some insurance policies, however, contain “protective safeguard” endorsements creating certain requirements that the cannabis business owner must follow or a claim can be denied. Many of the requirements include a central burglar alarm, cameras, an approved vault or safe room, and other similar risk mitigation measures. Pay special attention to these protective safeguard requirements, and ensure that all are met. This can be particularly important for businesses that have already been the victims of crime. If the safety systems in question have been damaged or are otherwise inoperable as a result, make sure to put your insurer on notice of this fact and, ideally, get them to approve a temporary accommodation relieving your business of the relevant protective safeguard.
• Policies may also be “sublimited” for certain types of property coverage, meaning that limits for particular types of loss are lower than the overall policy limits. Impacted businesses should look for a page entitled “Property Optional Extension Endorsement.” The types of coverage that might be sublimited include:
  • Employee Dishonesty;
  • Money and Securities;
  • Outdoor Property (Fences, Radio/TV Antennas/Satellite Dishes and Signs Outdoor Property (Trees, Shrubs or Plants);
  • Personal Effects and Property of Others (relevant if a dispensary has not taken title to product): and
  • Valuable Papers and Records (Other Than Electronic Data).

In addition to taking these actions, dispensary owners in cities where civil unrest is ongoing should give consideration to reducing their store hours or even closing entirely until conditions change in order to keep their staff safe. For those concerned about leaving product in their stores and having it stolen, some states, including California, allow for licensed cannabis dispensaries to remove product from a licensed facility in the face of a public disturbance or emergency. Nonetheless, businesses should always consult their state and local regulations and/or consult with an attorney before removing cannabis products from their facilities in any way that would normally be impermissible under applicable laws.

In sum, while cannabis dispensaries unfortunately appear to be attractive targets for opportunistic criminals, there are a number of steps these businesses can and should take right now to help them begin to pick up the pieces.