Member Blog: Transportation Woes – The Unique Risks Cannabis Businesses Face and the Need for Specialized Insurance
In recent years, the cannabis industry has continued to grow with the legalization movement gaining momentum across the globe. As the market expands, so do the unique risks that cannabis businesses face, particularly when it comes to transportation. From theft and accidents to regulatory compliance, navigating the road to success in the cannabis industry requires adequate insurance coverage. In this blog post, I will explore the specific risks cannabis businesses encounter during transportation and the increasing importance of insurance products tailored to these challenges.
The Rising Threat of Theft
Protecting your valuable cargo from theft is a constant concern for cannabis businesses, especially during transportation. The high value of cannabis products makes them an attractive target for criminals. With high value products and cash amounts involved, the consequences can be devastating. That’s why it’s crucial for cannabis businesses to invest in insurance policies that specifically address theft risks during transportation. These policies can provide coverage for stolen goods, ensuring that businesses can recover from such losses and continue to thrive.
On the Road
Whether a retail delivery or wholesale distributor, transporting cannabis comes with its own set of challenges, particularly when it comes to employee safety, accidents and liability. Cannabis businesses must comply with strict regulations regarding transportation, including proper labeling, packaging, storing, tracking and secure transport methods. Additionally, accidents involving cannabis delivery vehicles can result in property damage, bodily injury, or even fatalities. Insurance products tailored to cannabis transportation risks can provide coverage for these eventualities, protecting businesses from costly lawsuits and providing peace of mind.
Navigating regulatory compliance with ever-changing regulations is a top priority and can be a challenge for any cannabis business. When it comes to transportation, the rules can be even more complex. Each jurisdiction has its own set of regulations governing cannabis transportation, such as licensing requirements, transport manifest requirements, and restrictions on the quantity of cannabis allowed per shipment. Failure to comply with these regulations can lead to significant penalties or even the suspension or loss of a cannabis license. Insurance products designed for the cannabis industry can help businesses stay compliant by providing coverage for regulatory fines and legal expenses.
Meeting the unique needs of the cannabis industry and recognizing the unique risks faced by cannabis businesses, insurance providers have developed specialized products to address these challenges. Cannabis transport insurance policies offer elements of risk transfer strategies by providing comprehensive coverages, including theft, auto damage, liability and employee injury, while simultaneously meeting regulatory compliance issues. These tailored insurance solutions are essential for cannabis businesses, providing financial protection and ensuring business continuity in the face of inherent risk.
In general, the transportation of cannabis presents unique risks for businesses operating in the industry. From the constant threat of theft to accidents and regulatory compliance challenges, cannabis businesses must be prepared to face these risks head-on. Insurance products tailored to the specific needs of the cannabis industry offer crucial protection, allowing businesses to navigate the road to success with confidence. Investing in this insurance is not just a wise business decision — it is an essential step towards safeguarding the future of your cannabis business.
Committee Blog: Is American Cannabis Still the Wild West?
by NCIA’s Risk Management and Insurance Committee
Matthew Johnson, Quadscore Insurance Services
Cannabis is America’s riskiest business.
Cannabis itself is a highly valuable commodity, but cannabis businesses also deal largely in cash – making them a prime target for thieves across the country. Recent headlines have reported a rash of unsolved robberies in the Bay Area and Washington State, not to mention the seizure of cash from Empyreal’s fleet of armored transport vehicles (fortunately, that cash has now been returned by the police).
This is a national problem, which begs the question… What should cannabis businesses do to stay safe during these trying times?
There are many different means of minimizing the risk faced by your modern cannabis business, but we’re going to focus on the big three today – security, technology, and compliance. Through careful consideration of these three tenets, cannabis businesses can take significant steps to mitigate risk and protect their employees. Appropriate investments can yield tenfold savings in the form of fewer stolen assets, lower insurance premiums, peace of mind, and safer employees.
Let’s start with the topic that gets the most attention during a crime spree – security. In cannabis, security means a number of things… video cameras, man traps, motion sensors, hardened glass, ID checks, and more. When building or retrofitting a facility for cannabis operations, it is crucially important to consult with security experts like Sapphire Risk Advisory Group or Cannabis Compliant Security Solutions.
“In many areas, it’s not a question of ‘if’ a cannabis business will be robbed – it’s ‘when,’” cautions Chris Eggers, CEO of Cannabis Compliant Security Solutions. With 13 years of experience as a law enforcement officer in the Bay Area – including several years working as an undercover narcotics officer – Chris is uniquely qualified to address the ongoing issues in Oakland and other areas along the West Coast. “There’s a question of how you navigate and survive an incident, but beyond that, how you ensure that your business will survive too.”
There’s an important distinction between security consultants like CCSS, security integrators, and vendors. To achieve best results, cannabis businesses should work with a security consultant who can identify ways to protect the business – without being tied to commission-based sales contracts or a specific ‘brand’ of security solutions.
Physical security aside, there are a number of high-tech security tools that can help cannabis business owners protect their operations. For example, let’s take a look at the biggest security company you’ve never heard of – an organization called 3SI Security.
3SI Security began their journey over 50 years ago as the original producer of dye and smoke packs intended to deter bank robbers in the 1970s. Technology has evolved over the years, and so has 3SI’s product offering – now, their GPS tracking tech is ubiquitous throughout banking, pharmaceuticals, luxury retail, and telecommunications.
As VP of Business Development for 3SI, Carlos Casas works to connect cannabis businesses with this tech to protect their assets and employees. “According to a Forbes report from July 2020, an estimated 70% of cannabis businesses are cash-based. This is a staggering statistic which shows the real risk to the industry is on an upward climb.” With the SAFE Banking Act still in the works, savvy business owners have to explore alternative solutions like 3SI’s technology to ensure their business stays safe.
Apart from 3SI, there are a number of technology companies that provide technology to make the cannabis industry a safer place. ADT Security has recently launched a cannabis-focused divison of ADT Commercial to provide critical security technology to cannabis businesses around the country. After spending three years keeping HERBL’s fleet secure on the west coast, Andy Fleet now leads ADT’s efforts to provide security solutions to the cannabis industry.
According to Andy, “Security planning is critical for any cannabis organization. Take the time to evaluate all the risks within your establishment and build a robust plan that ensures all areas of physical safety and security are considered and protected.” Underscoring the points above, Andy continues, “Working with a licensed, experienced consultant will ensure adherence with all relevant regulations and help keep your employees safe while having technology do the heavy lifting for you.”
COMPLIANCE & COVERAGE
Next up, everyone’s favorite topic: compliance. In this sense, we’re not talking about adhering to the myriad regulations imposed on cannabis businesses wherever they operate – but rather, making sure that your operation complies with the protective safeguard requirements in your insurance policy. Non-compliance with or material misrepresentation of your active protective safeguards could result in an uncovered or denied claim – and could even cause problems with your investors. If you’re buying insurance, you want to make sure that your policy will pay out when stuff hits the fan!
Theft Sublimit – Most cannabis insurance policies will only cover theft losses up to a certain ‘sublimit’ depending on the quantity of cash/cannabis being stored, the physical location of the cannabis business, and any relevant losses that the insured business may have sustained due to theft. Make sure that you are comfortable with the sublimit provided and, if you aren’t satisfied, work with your insurance broker to see if you can secure higher limits.
Protective Safeguards – Virtually all cannabis insurance policies carry some warranties around protective safeguards that can impact your coverage in the event of a claim. Make sure to read the Protective Safeguards endorsement and check that all of your security systems are functioning in compliance with these requirements.
Motor Truck Cargo – Similar to the protective safeguards warranty, make sure that you study your policy to ensure that any requisite safeguards are in place. For transportation operations, these safeguards are likely to include vehicular telematics, buddy systems for drivers, GPS tracking, and possibly even an escort vehicle to accompany the transport unit.
Security guards – When hiring security guards, it is recommended to employ a third-party guard service that carries appropriate limits of insurance. Make sure that your business is listed as an additional insured on their insurance policy to ensure coverage in the event of an altercation at your business!
Financing – Lenders and VC firms will often stipulate that the companies accepting their funds will need to adhere to certain requirements, like securing Directors & Officers insurance for the officers and executive board. Beyond insurance, it’s important to make sure you are actually doing what you promised to do in terms of safeguarding the property and not just so that you may be eligible for coverage, but also so that you are not held liable for losses suffered by third parties, such as lenders and investors.
Joseph Cioffi, chair of the Insolvency+Finance practice at the Davis+Gilbert law firm in New York advises, “Operators typically make certain representations to investors, lenders, and other capital providers, and undertake certain activities intended to preserve asset and collateral values. The operator is looking at default if it’s in breach of contract, but worse, the operator and its principals could be sued for misrepresentations made in obtaining funding – and be held liable for losses that flow from those misrepresentations.”
Like an onion, there are many layers to a risk management program for cannabis businesses. Through careful implementation of security measures and protective technology, many businesses will be able to prevent damage to their business with proper planning. In case all security measures fail, a comprehensive insurance policy should be able to help make a business whole again after a claim. Make sure to work with the proper insurance, security, and legal experts when building or restructuring a cannabis operation!
Equity Member Spotlight: YS Cannabis Delivery Services
NCIA’s editorial department continues the Member Spotlight series by highlighting our Social Equity Scholarship Recipients as part of our Diversity, Equity, and Inclusion Program. Participants are gaining first-hand access to regulators in key markets to get insight on the industry, tips for raising capital, and advice on how to access and utilize data to ensure success in their businesses, along with all the other benefits available to NCIA members.
Tell us a bit about you, your background, and why you launched your company.
Originally from Ecuador, Yadira Elizabeth Silva Leon, I came to the United States when I was only 16 years of age. I graduated with honors from Sheridan High School and Arapahoe Community College in Colorado. Then I graduated from the American Intercontinental University online, with a BA in Business Administration. I own my construction clean-up company, officially named YS Construction Clean Up Services.
As a single mother of two and minority business owner, I started to become more involved in the world of cannabis after two separate accidents, leaving me with a damaged spine. Doctors prescribed medications and pills that began to damage my nervous system and I started to lose sensation in my legs, inhibiting me from taking care of my children. It was around this time that Colorado legalized cannabis, and after becoming legally accessible, I decided to take advantage of the medicinal benefits of cannabis to calm my pain. Cannabis inspired me to begin a new career in the cannabis industry. Serving people who are in pain by bringing their medicine in the comfort of their home in a timely fashion became an interest and passion of mine.
What unique value does your company offer to the cannabis industry?
The health and safety of our patients, customers, and employees is our top priority. We see the future where our company impacts the wellbeing of our drivers and the life of our planet. That is why YS Cannabis Delivery Services was created.
We specialize in transporting cannabis products business to business and business to customer. We also collect empty containers from customers to recycle properly, and return clean, disinfect, and sterile containers for businesses.
What is your goal for the greater good of cannabis?
Securing the life of carriers, and our environment. We are working on a new security system where we use AI (Artificial Intelligence) and VR (Virtual Reality) to deliver cannabis from business to business with efficiency and security. While we are expanding security to protect cannabis shippers and vehicles against prohibited intrusions, we are also making sure plastic containers get to the right place and be recycled properly.
What kind of challenges does the industry face, and what solutions would you like to see?
COVID-19 created many challenges for most industries, but the cannabis industry faced more threatening challenges such as violence and robbery. What we would like to see is the safety of cannabis employees become a priority. That is why we are looking into virtual reality as a security measure.
Why did you join NCIA? What’s the best or most important part about being a member through the Social Equity Scholarship Program?
I joined the National Cannabis Industry Association to collaborate in the development of my company at a national and international level. Because of NCIA, I was able to receive access to the resources my business needed to grow and thrive. I was able to speak with leaders, consultants, and other like-minded professionals.
Committee Blog: Successful Retail Outcomes of SAFE Banking
By NCIA’s Retail Committee
Have you ever wondered where or how a cannabis retail business banks? You should know that it’s complicated because of federal prohibition. So what do you do? Some are finding workarounds and loopholes, others are able to obtain services with smaller financial institutions for exorbitant costs, while many others struggle to maintain an expensive, risky, and dangerous cash-only ecosystem.
The 2020 elections set the creation of four new regulated state cannabis markets in motion, and four more state legislatures followed suit in the first half of 2021, making the last year arguably one of the most consequential and momentous periods for the cannabis industry and policy reform.
However, cannabis is still illegal at the federal level, classified as a Schedule I substance under the Controlled Substances Act, despite state-level regulated cannabis markets in more than half the country. This prevents banks from doing business with cannabis companies because of fear of prosecution or reputational risk, as these businesses aren’t viewed as legal under outdated federal laws.
The cannabis industry is optimistic about the future, though, thanks to an increasing interest in cannabis, public safety, and economic development in Congress. Lawmakers in both chambers are actively debating comprehensive legislation to remove cannabis from the schedule of controlled substances and regulate it federally while repairing some of the harms caused by prohibition, but there are also incremental reforms in play that have a track record of success in the House as well as bipartisan support. Chief among them is the Secure and Fair Enforcement (SAFE) Banking Act, which would provide safe harbor for financial institutions that wish to work with state-legal cannabis businesses and allow them to provide services to the industry without fear of prosecution. This legislation originally passed the House in 2019 and was the first piece of standalone cannabis policy reform legislation ever to receive a vote or be approved by a full chamber vote.
Since then, cannabis banking has been approved in the House three more times in various forms, mostly recently when it passed the SAFE Banking Act again – and with record bipartisan support – earlier this year. The bill is now awaiting consideration in the Senate, but has yet to be taken up by the Senate Banking Committee.
So, what does the SAFE Banking Act mean for retail cannabis businesses?
Loans, capital markets, and credit card processing are common interests for cannabis companies. Access to traditional lending is particularly important for small businesses that usually lack connections to angel investors and venture capital. However, some of the benefits of this legislation are of special interest to cannabis retailers. Check out what some of the Retail Committee members are considering to be important aspects of broadened access to banking and financial services:
“As a retail cannabis business operator, safety is of our top priorities as it directly affects our staff, our patrons, and our bottom line,” said Larina Scofield, director of retail operations at Lucy Sky Cannabis Boutique dispensary chain in Colorado and vice-chair of NCIA’s Retail Committee. “We are required to operate as a predominantly cash business in a high-risk industry that can sometimes lead to criminal targeting; this can put not only our business at risk but also the potential individuals on-site if a targeted crime were to take place.
“There is also no doubt that operating a cannabis business is costly, due in part to the fact that we do not receive the same benefits and protections that other businesses have; cannabis companies are also subject to higher fees in order to get similar services, if those services are available at all. Lucy Sky is fortunate enough to have banking and armored services, as well as a cashless ATM service to allow for safer money handling, but this does not come without a price… a high price. Our company pays top dollar every year in order to have banking and secured payment delivery (something that is not seen in traditional businesses), in order to provide safety for our business and to the individuals who frequent our facilities.
“SAFE Banking would mitigate that and allow for retail cannabis companies to operate without having to “constantly look over their shoulders” so to speak. It would provide an enormous sense of security in an already high-risk business, it would allow for small business owners to receive proper funding to allow for safer operations, and it is truly crucial in the progression of the industry as a whole.”
Less Cash on Premise
“Less cash during COVID-19 is always a plus. The goal is to limit contact, and we all know cash is constantly being passed from person to person. There are plenty of studies highlighting how many germs really are on physical cash. Researchers found plenty of questionable microbes on $1 bills in a more recent study. In a world where we are all concerned about our physical health, the time is now to reduce physical cash in cannabis businesses. Or at least, give people the choice to go cashless if they want to. Let’s also not forget the security benefits of carrying less cash on the premises”, said Byron Bogaard, CEO of Highway 33, a cannabis dispensary in Crows Landing, California, and chairperson of NCIA’s Retail Committee.
Contactless Delivery for Retail
“Golden State Greens had a spike in deliveries during the COVID pandemic but were still forced to collect cash and signatures from customers. When online orders can process card transactions we can make a true contactless delivery where both payment and signature are managed from the customer’s device. This will increase the safety of our drivers by maintaining safe distancing practices and allow new types of deliveries to drop boxes or to customers’ homes similar to Amazon,” said Gary Strahle, chief growth officer for California dispensary Golden State Greens.
Beyond these major issues, there are a number of potential outcomes that could impact retailers as well.
Revamping the relationship between cannabis businesses and banks will likely trigger higher competition for banking services, resulting in lower fees. This would clearly benefit small businesses but could also have an impact on the frequency and nature of mergers and acquisitions in the cannabis space.
Regulatory frameworks will certainly change, and outstanding litigations will most definitely become more complex. Chargebacks from credit transactions will be a constant problem, due to the level of surveillance and data collection they will more easily be disputed.
Better access to banking also positions technology companies for success, as there will be a high demand for mobile wallets, online ordering, and automatic recurring memberships. We can’t predict everything, and there might be more hurdles to cross than we realize, but the technologically-agile retailer may benefit most. Studies show that most of the Top Fortune 500 Companies use software platforms such as Salesforce to manage their enterprise, however many of the canna-specific solutions are missing much of the integration and scalability needed to immediately handle broadly increased access to the banking system.
Speak your voice.
The SAFE Banking Act is critical to the cannabis industry’s success, and your voice will tip the scales. Reach out to your members of Congress, especially your Senators, and tell them what safe banking means to you as a cannabis retailer. Remember, policy needs to support logic over emotion. Emotions are important, but remind Senators of the logic behind implementing safe banking solutions for cannabis businesses:
- Reducing the risk of robbery & theft with less cash on the premises
- Supporting the demand cannabis businesses receive, which in turn supports the local and national economy and helps minimize the unregulated market
- Reduce pathogen transmission by limiting physical cash transaction
If your senator already supports the SAFE Banking Act, please politely ask them to prioritize this legislation in the current session.
Committee Blog: Practical Tips for Cannabis Businesses Impacted by Theft and Property Damage
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.
Member Blog: Three Security Must-Haves for Marijuana Dispensaries
by Evan Hicks, Senseon Secure Access
The proliferation of both legalized medical and recreational marijuana has, not surprisingly, led to a massive boom in dispensaries — and, with that boom, increased focus on these burgeoning businesses and their increasing security needs. “Inventory will increase, cash holdings will increase, and the number of people accessing legal cannabis for the first time will naturally evolve to a larger customer base,” writes Marijuana Retail Report. To many industry and security experts, this presents a perfect storm — high value products, cash on hand and less scrutiny over who’s coming through the door.
If you’re launching or scaling a marijuana business, it’s essential to unpack several basic security challenges and overarching needs. By safeguarding your business from day one, you’ll be better positioned to protect your inventory, your customers and your business, while maintaining a well-designed, welcoming environment for workers and buyers.
1. Security Guards
Many dispensaries want to avoid a visible security presence — which makes sense. Because of marijuana’s history and, still, the stigma that exists in many communities, seeing a security guard can make customers feel skittish or even avoid coming in entirely.
The solution? Have point-of-entry security that facilitates a positive customer experience. Many businesses, for example, opt for plain-clothes guards or guards with uniforms that mimic the rest of the in-store team. “Since they are the first point of contact,” explains MMR, “ensure that they are helping consumers feel welcome and invited, yet are able to maintain a zero-tolerance stance on any customer activities that could present a perceived threat to your dispensary, staff and other customers.”
2. Secure Transportation
Getting marijuana from growers to dispensaries and shops presents another layer of security concerns. Because the product is so in-demand and so valuable, it’s an appealing target for retail crime, from the minute it’s harvested. If you’re handling transportation yourself, be sure your fleet is equipped with the basics — bullet-resistant finishes, GPS tracking and streaming videos that feeds to your security “home base,” for starters.
For many businesses, though, managing this level of high-stakes transportation is too much to take on, especially in the beginning. For them, there are a variety of transportation-focused companies who specialize in cannabis and medical transport, and can ensure your product arrives safely and securely every time.
3. Internal and In-Store Theft Prevention
The majority of dispensary losses come from employee theft. While there are several steps businesses must take early on — thorough employee screening, background checks and a solid inventory management and POS system — it’s essential to maintain in-store security measures that discourage “heavy-handedness” and full-on theft.
During the onboarding process, supervisors and dispensary owners should be clear that employees cannot sell to themselves. Beyond that, ensure you have a clear-cut “friends and family” discount policy in place and that it’s communicated and adhered to. No discounting allowed? Make sure that’s made crystal clear, too.
Taking things a step further, be sure to integrate physical protections for your product. Senseon Secure Access recently topped IndicaOnline’s list of the top five security services for marijuana dispensaries, with a specific eye on the company’s smart cabinetry systems. With automatic relocking and customizable permissions for staff, it’s easy to safeguard cannabis while, at the same time, maintaining a close eye on who’s accessing what when — if there’s a problem with products, tracking down the culprit is easier than ever. And, with a keyless entry, there’s no risk keys will end up in the wrong hands ever.
As the cannabis landscape grows and expands, security needs will, too. But, for now, focus on these three must-haves to protect your dispensary today and tomorrow.
Evan Hicks is Marketing Coordinator for Senseon Secure Access, a product of Accuride International. As coordinator, he helps manage Senseon’s marketing initiatives covering communications, events, and research & development. With an unquenchable thirst for learning, Evan frequently finds himself deep in the rabbit hole conducting research for Senseon’s multiple markets.
A graduate of California Polytechnic University, Evan has nearly a decade of experience in security and public relations in both the public and private sector.