COVID-19 Will Have Biggest Impact on Cannabis Space, Poll Shows

By | April 20, 2020

COVID-19 will have the biggest impact on cannabis and insurance the rest of this year and into the foreseeable future, according to the majority of participants in Insurance Journal’s April 15 webinar “Insuring Cannabis: From the Mechanics to Seeing Through The Weeds.”

The hour-long session featured three experts taking on a variety of topics in the growing world of cannabis and insurance, as well as several participant polls and a question and answer session.

View the full webinar on Insurance Journal’s Research and Trends webpage.

More than one-third of poll respondents said they believe COVID-19 will have the greatest impact on the space going forward. About one-fourth expect the biggest impact from legislation like the SAFE Banking and the CLAIM Act – both would ease financial or insurance transactions in the cannabis industry.

One-in-five said legalization would have the biggest impact, followed by 13% answering vaporizer bans and related illnesses and 9% who said the big impact would be from CBD products and the U.S. Food and Drug Administration.

The biggest fallout of the COVID-19 crisis will be unanticipated and uncovered business interruption losses, according to 82% of poll respondents. A few chose other fallouts: 13% said new and stricter policy exclusions, and nearly 4% answered an influx of claims.

Business interruption was also a top concern of all three panelists.

Norman Ives, cannabis practice leader for Worldwide Facilities LLC.

“With regard to COVID-19 and business interruption insurance, one thing to be aware of is right now a number of the property carriers, the carriers out that are offering business interruption insurance in the cannabis space, have ceased making those placements for the time being,” said pantelist Norman Ives, broker and cannabis practice leader for Worldwide Facilities LLC. “They’ve just frozen those markets waiting for things to settle out before they move forward trying to see if there was going to some legislation come in trying to force the insurers hand in having to pay on some business interruption as there’s been some talk in some of the states.”

While some companies may have had business interruption options in the past, in the current market many carriers are declining to offer that coverage and waiting for the pandemic and its impacts to play out, Ives added.

Jodi S. Green, partner at Nicolaides Fink Thorpe Michaelides Sullivan LLP.

Fellow panelist Jodi Green, a partner in Nicolaides Fink Thorpe Michaelides Sullivan LLP, is paying close attention to coverage lawsuits that don’t necessarily involve the cannabis industry but that include policy terms that might be applicable to COVID-19 losses.

“And so until those things shake out and we really understand how the courts are going to construe the provisions that might be applicable to this virus, I’m sure carriers are going to be hesitant to be issuing any new policies that might involve virus, pandemic type losses,” Green said.

Despite the economic downturn from the COVID-19 crisis, all three panelists gave largely “thumbs up” answers to a question of whether insurance professional looking to specialize in this business should still do so.

Phillip Skaggs, , assistant counsel of American Association of Insurance Services.

“Yeah, I’d give it a thumbs up definitely,” said Phil Skaggs, assistant counsel for the American Association of Insurance Services. “I think there’s still a huge opportunity here to do it and to do it smartly. To step into markets that are more stable and to evaluate companies that are able to weather this COVID-19 crisis and really provide quality insurance. And insurance that is in high demand right now.”

He believes “special attention” will be paid to business interruption coverage in addition to the already close eyes being cast upon insurance offerings like product liability, and directors and officers – meaning businesses are becoming more aware of the value of insurance policies because of the pandemic, and they may be more interested in engaging with brokers on what insurance products can do for them going forward.

“And so, I think there’s many opportunities here still,” Skaggs added.

Ives fielded a question about what some brokers who specialize in cannabis may be doing wrong.

He noted that brokers may sometimes “get in over their heads before they realize that this is not the standard policy form that’s being employed here.”

“Most of these forms are heavily scripted,” Ives said. “They’re not ISO forms. Most of these operations don’t follow a typical playbook of traditional businesses. A lot of them may have evolved from an illicit market or a highly unregulated market and so their business practices are not as practical or as streamlined as others.”

The webinar also included a poll asking participants what they specialize in within the cannabis and insurance space.

Nearly half (46%) said they specialize in ancillary businesses or services. The rest were: dispensaries (21%); cultivation (17%); distribution (10%); labs and testing facilities (5%).

Editor’s note: This is a summary of Insurance Journal’s latest webinar on insurance and cannabis. The May 18 issue of Insurance Journal will have a larger, more detailed story on the webinar and some takeaways for the business segment.

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