For all its faults, 2020 still proved to be a seminar year in the cannabis insurance industry, as it shed considerable light on what kinds of claims are prominent and which are not. And in fact, claims in one category came from both the legal and illegal sides of the fence.
That’s vaping — particularly the many incidents of poorly-manufactured vape pens being recalled due to explosions, and the vaping cartridges that often contained dangerous additives that made users sick. Predictably, underwriters have been paying particularly close attention to product supply chains for retail dispensaries and other businesses making paraphernalia sales to consumers.
Of course, this is just one subset of product liability claims that the cannabis business must be constantly aware of. Every state has its own compliance standards, and companies throughout the supply chain can do themselves a favor by not just meeting but exceeding those standards whenever practical. Growers should ensure their nutrients, pesticides and soil additives are all safe for plants and people. Manufacturers should ensure their ingredient supplies are all meeting standards, and that they test, test and test again their finished products. And retailers should vet their suppliers, including making certain that edibles, vaping concentrates and other potentially troublesome products have all been tested and have the proper paperwork.
Property damage claims were on the rise in 2020, and not just due to the midyear spate of breaking-and-entering incidents during street riots. There were major losses reported due to fires; primarily from issues in growing facilities sparked by malfunctioning lightbulbs. Windstorm losses was an additional category where the number of claims surged.
The number of Directors and Officers liability claims during 2020 reminded the industry of the perils of making too many decisions too quickly. Favorable changes in cannabis law pumped a lot of money into the system, and this caused investors to make time-crucial decisions based on limited information. Many of these decisions turned out to be bad investments, so it became a field day for D&O claims from shareholders and investors. This continues to drive rates and deductibles higher for cannabis businesses, who already pay well above what non‑cannabis companies pay for D&O policies.
One area with negligible activity, however, has been auto claims. While this is certainly not implying acceptance, the current numbers show that drinking and driving is more of an issue than cannabis and driving.