Without Insurance That Is!
As the deadline for Michigan Marijuana Facility License grows closer and closer, people are scrambling to put the finishing touches on their business plans, finalize their locations, and assemble all of the documents that need to be turned into the municipality and the state.
It just so happens that one of those required documents is a certificate of insurance covering the business applying for the license.
Our brokerage has received many questions about the insurance requirements put forth by the state of Michigan. While the final licensing rules have not yet been issued, there are two insurance policies that are specifically mentioned at this point.
Requirement #1 – General Liability – $100,000
Enrolled Senate Bill No 433 states that an applicant must “demonstrate the ability to maintain adequate premises liability and casualty insurance” in order to obtain a license.
While it does not specifically say that a general liability policy must be obtained prior to applying for a license, it can be reasonably expected that it will be required at some point.
NOTE: $100,000 in General Liability is typically not enough coverage to protect a business, in any industry. We always recommend $1 million in General Liability coverage to our clients. It is a fairly standard requirement in many vendor / contractor relationships to have at least $1 million in coverage, often $2 million, so our brokerage does not consider $100,000 to be adequate in protecting a business.
General liability insurance is a policy that covers other people in the event that other people are harmed during the course of your business operations. This could be anything from a customer tripping in your dispensary to one of your employees accidentally running over a customer’s bicycle with the pallet jack. Your general liability policy pays a 3rd party on your behalf, whether it is for court costs or a settlement.
Requirement #2 – Product Liability – $100,000
The Bill Analysis of 4209, 4210, and 4827 states the following:
“Before the Board grants or renews a license, the licensee or applicant must file with LARA proof of financial responsibility for liability for bodily injury to a lawful user resulting from the manufacture, distribution, transportation, or sale of adulterated marihuana or adulterated marihuana-infused product, in an amount of at least $100,000. The proof of financial responsibility may be in the form of cash, unencumbered securities, a liability insurance policy, or a constant value bond executed by a surety company authorized to do business in the State. … An insured licensee may not cancel liability insurance unless the licensee 1) gives 30 days prior written notice to LARA, and 2) procures new proof of financial responsibility and delivers that proof to LARA within 30 days after the Department receives the notice.”
Since this portion states – ‘it may be in the form of cash, unencumbered securities, a liability insurance policy, or a constant value bond’ – we don’t know if product liability insurance coverage is going to be specifically required.
However, required or not, it is definitely a good idea to have product liability coverage, especially when working in a medically focused industry. It is reasonably expected that the product you make will meet certain guidelines of purity and consistency, even more so than traditional food products. If a product makes somebody sick or causes harm, or even if somebody blames your product for making them sick, you can get drawn into a lawsuit. Product liability insurance helps to protect you from defense costs and settlements, and some policies will even cover the expenses associated with a recall in the event that you actually were at fault.
How Do I Buy Insurance?
Both of these insurance policies are fairly easy to obtain, if you know where to go. Many people don’t. We have multiple carriers who offer cannabis insurance, and an easy online application to make it simple. Policies are typically able to be issued within 3 – 4 days of the time of your application.