On April 20, PropertyCasualty360 and Insurance Coverage Law Center hosted the Twitter Chat, “High Roads: Commercial Auto Risks and Coverage for Cannabis Businesses.” With several states in the nation having some form of legalization and the Secure and Fair Enforcement (SAFE) Banking Act being passed by the U.S. House of Representatives, marijuana seems to be on its way to becoming “respectable.” However, public perception is still quite the hurdle to clear, especially regarding the cannabis commercial auto insurance market. So said the panel of experts participating in the Twitter chat, “High Roads: Commercial Auto Risks and Coverage for Cannabis Businesses” — a discussion that occurred, appropriately enough, on 4/20.
“Public perception is negatively impacting Insurance Rates/Premiums and the assumption of potentially more losses due to DUI-MJ,” said Jim McErlean of Cannasure Insurance Services during the chat. ”I’ve heard the assumptions (or even snickering) that all drivers employed by the Cannabis industry are driving high.”
“Public perception has limited the carriers willing to engage,” agreed Danny Bozzuto of Cannabis Connect Insurance. ”The long history of anti-cannabis sentiment is time-consuming and difficult to overcome. As the industry continues to develop and the existing stigmas fade, more carriers are willing to engage.”
Ian Stewart of Wilson Elser pointed to the passage of the SAFE Banking Act and the “domino effect of legalization in the states” as evidence that the tide of public perception may be turning. “Public support for legalized marijuana continues to steadily climb across age groups and political affiliations, hovering at about 68% – higher than almost any other political issue,” he said.
Related: Cultivating change: Cannabis business insurance basics
Jim Lynch of Insurance Information Institute added another wrinkle. “In some ways, public perceptions matter less than federal laws, which make it difficult to do financial transactions — including buying insurance and settling claims — because cannabis is a Schedule 1 drug.”
The Twitter chat ranged widely from third-party considerations and litigation trends to legal issues surrounding delivery and distribution, as well as carriers’ concerns in this still-new market.
“The lack of case law in this space is the definition of risk, and no insurers want to be the first to test the waters,” said Jonathan Bench of Harris Bricken.
Participants in the chat also included Dykema’s Rasul Raheem and Insurance Coverage Law Center Editor Hannah Smith.
See highlights from the conversation below. You can also get a full recap here and continue the conversation on Twitter by using the hashtag #420InsuranceTweets.
Q1: How does public perception of marijuana and its use impact this market? #420InsuranceTweets pic.twitter.com/L6r4Cci5pB
— PropertyCasualty360 (@PC_360) April 20, 2021
1/2 As more states are legalizing marijuana use at varying levels, more physicians are prescribing marijuana for medicinal purposes, and CBD oil is used by increasing numbers of people for anything from hair growth to dog anxiety, public perception seems to be changing.
— ICLC (@ICLCenter) April 20, 2021
2/2 to be more favorable to its use. This change will put more pressure on legislators to legalize it at increasing levels in more states, and eventually at a federal level.
— ICLC (@ICLCenter) April 20, 2021
#420insurancetweets Reputations risk, market risk and credit all impact large insurance companies and banks.
— Rasul Raheem (@RasulRaheem) April 20, 2021
Many #cannabis companies struggle with getting accurate information about #insurance coverage, including #autoinsurance. There is a perception that it will not be affordable.
— Jonathan Bench (@jonathan_bench) April 20, 2021
Q2: What are carriers’ appetites for commercial auto for cannabis businesses like today and what are their top concerns? #420InsuranceTweets pic.twitter.com/780uHwEQZP
— PropertyCasualty360 (@PC_360) April 20, 2021
#420InsuranceTweetCarriers’ appetites are VERY limited, with less than 5 carriers predominately trying to support Cannabis Auto. Top concerns, Inexperience in operations, Including Fleet safety, vehicle maintenance & logistics, Inexperienced Mgmt, hiring practiced, monito MVR’s
— Cannasure (@Cannasure) April 20, 2021
#420insurancetweets: It’s a tough market all around. The rise in multimillion-dollar megaverdicts means all commercial auto business is getting more expensive and harder to place – not just cannabis-related risks.
— Insurance Information Institute (@iiiorg) April 20, 2021
The market is improving for the cannabis sector, more carriers are writing coverage and standalone hired/non-owned auto is easier to secure than it was 3-5 years ago. Carriers want to see strong driver safety controls and experienced fleet managers. #420InsuranceTweets
— Danny Bozzuto (@DannyBozzuto) April 20, 2021
Transporting across state lines is a big no no. And opens up a lot of problems for the company and product.
— Rasul Raheem (@RasulRaheem) April 20, 2021
Q3: How do the commercial auto coverages of cannabis manufacturers and retailers differ from traditional policies? #420InsuranceTweets pic.twitter.com/qqBAH6Fy3O
— PropertyCasualty360 (@PC_360) April 20, 2021
Traditional insurance policies do not provide coverage for illegally transporting a product from one state to the next. Companies will have to have advanced knowledge of the state cannabis laws, and those of the surrounding states. #420insurancetweets @FCS_Coverage
— ICLC (@ICLCenter) April 20, 2021
Don’t forget the complications of companies who are trying to legally transport #hemp across state lines. #420insurancetweets
— Jonathan Bench (@jonathan_bench) April 20, 2021
Q4: What questions should brokers ask cannabis clients when securing commercial auto coverage? #420InsuranceTweets pic.twitter.com/T9nsvmiz77
— PropertyCasualty360 (@PC_360) April 20, 2021
Need to ask detailed questions to ensure compliance with regs, e.g, properly permitted, vehicles owned/leased, cannabis goods transport limits, security cages, alarm/GPS, policy re: no deviation from route, etc. #420insurancetweets
— Ian Stewart (@IanStew61864414) April 20, 2021
Will safety measures be taken to protect the product from theft or other losses?
Will the drivers have experience with transporting similar products with similar vehicles? #420insurancetweets @FCS_Coverage— ICLC (@ICLCenter) April 20, 2021
Q5: As cash businesses dealing with a unique commodity, does the cannabis industry see increased risks for theft? Are there coverages for theft of product during transport? #420InsuranceTweets pic.twitter.com/0QnPdR0JuJ
— PropertyCasualty360 (@PC_360) April 20, 2021
Meaning, the Insurance industry is providing much less coverage for goods in transits and cash on hand. We do see much more ‘armored car’ or secure delivery than we might see with Pizza delivery. It will be interesting to see when we have viable data over a 5 year period whethe
— Cannasure (@Cannasure) April 20, 2021
You can get coverage for cargo, it’s a whole separate conversation from auto given the controls carriers want to see. Theft is a higher risk for distributors carrying large amounts of good/cash and we see many carriers wanting to cap limits at $100-500k/trip. #420InsuranceTweets
— Danny Bozzuto (@DannyBozzuto) April 20, 2021
2/2 Since cannabis coverage is an emerging risk and a unique commodity, agents don’t yet know all of the questions they need to ask to ensure carrier comfort with the associated exposures. #420insurancetweets
— ICLC (@ICLCenter) April 20, 2021
Q6: What are the special issues third parties need to consider when transporting cannabis products? #420InsuranceTweets pic.twitter.com/GNXGDDNxEb
— PropertyCasualty360 (@PC_360) April 20, 2021
They need to make sure their insurance is willing and able to provide coverage for the cargo, cash, and extend coverage to any vendors if required. #420InsuranceTweets
— Danny Bozzuto (@DannyBozzuto) April 20, 2021
#420insurancetweets: This is especially important because in the admitted insurance market, carriers are specifically carving out cannabis coverage till things settle out more. So 3d party might need cannabis-specific policy to transport.
— Insurance Information Institute (@iiiorg) April 20, 2021
Transportation companies that also provide storage services will need to be aware of product storage best practices and potential changing in cannabis going hot (THC content crossing legal threshold). #420insurancetweets
— Jonathan Bench (@jonathan_bench) April 20, 2021
Q7: What litigation trends have emerged that are tied to cannabis businesses’ commercial auto policies? #420InsuranceTweets pic.twitter.com/Moe5eZfgdx
— PropertyCasualty360 (@PC_360) April 20, 2021
None. That is a major part of the problem in insurers being willing to step in. #420insurancetweets
— Jonathan Bench (@jonathan_bench) April 20, 2021
I don’t see much potential for materially increased transportation risks around cannabis different from other industries — with the exception of some increased transport security-related risks, which really hasn’t materialized into claim volume. Yet. #420insurancetweets
— Ian Stewart (@IanStew61864414) April 20, 2021
As far as I have seen, no trends have emerged that are tied to commercial auto policies and the transportation of cannabis. That is not to say there will be no litigation in the future. #420insurancetweets
— ICLC (@ICLCenter) April 20, 2021
The wave is coming, but it’s several years down the road. But the facts of those cases are being established now. #420insurancetweets
— Jonathan Bench (@jonathan_bench) April 20, 2021
Q8: What are some of the legal issues cannabis businesses need to consider for their delivery or distribution services? #420InsuranceTweets pic.twitter.com/91jZ4v4XoN
— PropertyCasualty360 (@PC_360) April 20, 2021
Many #cannabisretail shops are geographically limited. Will their states permit them to expand beyond their current licensed boundaries? Will insurers take geographic limitations into account on premiums? #420insurancetweets
— Jonathan Bench (@jonathan_bench) April 20, 2021
#420insurancetweets Not so much a legal issue, but having proper Insurance limits across all Auto coverages (especially Uninsured Motorist coverage)
— Cannasure (@Cannasure) April 20, 2021
Q9: Is a lack of actuarial data from the cannabis industry making it more difficult to find coverages? #420InsuranceTweets pic.twitter.com/WwFdjInMbW
— PropertyCasualty360 (@PC_360) April 20, 2021
It’s becoming less of an issue. Although carriers don’t always know how new states will play out many of them have 5+ years of data. As the industry ages and more data is available this issue will be less of a hurdle. #420InsuranceTweets
— Danny Bozzuto (@DannyBozzuto) April 20, 2021
#420insurancetweets: Not as much as you might think. I’ve written about actuaries who price the product, and they can take data from similar (ag/retail) industries and make reasonable adjustments to come up with a rate they are comfortable with.
— Insurance Information Institute (@iiiorg) April 20, 2021
Whoever is holding the data trove, turn it into an #NFT and make some money off of it at the same time! #420insurancetweets
— Jonathan Bench (@jonathan_bench) April 20, 2021
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