The coronavirus pandemic introduced many companies to a halt this spring. Then, in May and June, a rash of robberies and lootings focused marijuana companies. In late summer season, wildfires started destroying cannabis farms throughout the West Coast.
All that exercise has triggered a significant uptick in insurance claims by marijuana companies, however the course of of getting paid by an insurance firm isn’t at all times simple or simple. There are sometimes surprises or fights with insurance carriers who don’t need to pay. And the business’s federally unlawful standing solely makes the state of affairs murkier.
“Most days, as an insurance-coverage lawyer, life is pretty boring. Nobody wants to talk to you. In 2020, I’ve become a lot more popular,” quipped Michael Sampson, a Pittsburgh-based legal professional who makes a speciality of insurance points for each marijuana companies and mainstream companies.
Marijuana Business Magazine queried a number of insurance specialists—together with brokers, brokers and attorneys who’ve fought insurance carriers in courtroom—to find out how cannabis companies can get the most out of their insurance insurance policies when catastrophe strikes.
‘Don’t take no for a solution’
The first rule of thumb when coping with insurance carriers, specialists say, is to do not forget that insurance companies are for-profit companies designed to make money by amassing extra in premiums than they pay out in claims.
That means it’s in insurance companies’ curiosity to look for causes to deny a declare—even when the declare is legitimate.
“You’re working against the backdrop of an industry that’s disincentivized to pay claims,” stated Sampson, who has represented each marijuana companies and mainstream companies towards insurance carriers in courtroom.
Experts say enterprise house owners who discover themselves on this state of affairs ought to push again—with a lawyer, if mandatory.
“Don’t take no for an answer,” stated Robert Finkle, a California-based legal professional who has handled a number of marijuana companies’ insurance claims in courtroom.
Finkle pointed out that pointless delays in getting insurance claims paid can sometimes be the foundation for a bad-faith lawsuit.
He and different specialists additionally famous, nevertheless, that the claims course of could be a prolonged one—wherever from months to a 12 months or longer, relying on the dimension of the declare in query.
Document all the pieces
Two steps ought to take precedence after catastrophe hits a enterprise:
- Document each potential loss.
- Immediately evaluation insurance protection to decide whether or not a declare is supported by the coverage.
An excellent insurance dealer—the one that bought you the coverage, not the firm you might be asking to pay your declare—ought to have the opportunity to help with these steps, stated Stephanie Bozzuto, a co-founder of Cannabis Connect Insurance Services in California.
“Ask your insurance broker for help if you need help,” she stated. “Don’t give up, and don’t quit. I know it’s lengthy. It’s not a quick turnaround time on big theft claims.”
Bozzuto, who chairs the National Cannabis Industry Association’s Risk Management Committee, stated she is aware of the course of might be discouraging, significantly for small-business house owners. However, she famous insurance carriers are more and more paying out on marijuana companies’ insurance insurance policies as the business matures and as protection turns into extra hermetic.
The different fast step is to doc as a lot as potential, which ought to bolster the energy of your declare when it comes time to justify fee.
For occasion, any retailer that was robbed ought to have a log of stock that was readily available. And if a cultivator is submitting a declare that features stock theft, data from the state track-and-trace system can be utilized as documentation, Bozzuto stated.
Photos and different documentation additionally make useful data, stated Patrick McManamon, director at Ohio-based Cannasure Insurance Services.
“When you submit a claim, take pictures. Take short video clips and narrate,” McManamon suggested, including that it’s up to the insured enterprise to show that the insurance service ought to pay the declare. “Understand that the burden is somewhat on you to prove that you had a loss.”
To that finish, he added, precision helps quite a bit.
“All too often” companies alter their claims upward after the reality as a result of they didn’t do a full accounting of their losses earlier than beginning the claims course of, McManamon stated.
Adjusting a declare makes it extra doubtful in the eyes of the insurance firm and may create delays. The documentation and particulars are linked, he stated.
“If you send in a half-hearted narrative, you’re not always going to get the best response,” McManamon stated. “If you send in an organized and professional narrative, you’re going to get a better look, because they’re going to want to work that one through and see what’s going on.”
Be prepared to negotiate
Another great way to be certain that the claims course of goes as easily as potential is to present the insurance service with strong, verifiable details about the worth of the objects misplaced, stated Doug Esposito, a principal with California-based Owen-Dunn Insurance Services.
That consists of correct market costs for misplaced or stolen stock, he stated, as a result of the claims course of can rightly be considered as a enterprise negotiation.
“No one is just going to roll over and cut you a check. They’re going to check the market to say, ‘What are those Gavita lights going for today? What’s a wholesale pound (of outdoor-grown marijuana) going for? What is a vape pen with that amount of concentrate going for?’” Esposito stated. “This is a business transaction, and there’s going to be a negotiation.”
And as a result of it’s a negotiation, companies typically have to be affected person—even when the claims course of can appear mind-numbingly gradual.
“Take a deep breath and realize this is not going to be a fast process,” Esposito stated.
Several insurance specialists stated there’s no common time-frame for how lengthy a declare can take, however Bozzuto and Esposito estimated that pretty simple theft claims in the vary of 5 figures may take just a few months.
If there’s bodily harm concerned in the declare, nevertheless, or if the insured quantity is value six-figures or extra, then the course of can drag out for not less than a 12 months.
“I’ve got a $250,000 claim right now on a basic fire that’s been going on for a year,” Esposito stated.
“It’s been a slugfest just to keep the thing moving.”