If your cannabis insurance policy includes these exclusions or warranties, your business could be at serious risk due to insurance gaps.
Understanding Common Exclusions and Warranties in Cannabis Insurance Policies
The cannabis industry faces unique challenges when it comes to insurance. With strict regulations, high-risk exposures, and an evolving legal landscape, it’s crucial for business owners to understand what’s actually covered in their policies—and, more importantly, what isn’t. Many cannabis operators assume they have full protection, only to find out that exclusions or warranties significantly limit their coverage when they need it most.
Objective
The goal of this blog is to raise awareness to the exclusions, gaps and warranties that likely exist within the fine print of your insurance policies. We want to give you actionable risk management strategies that will lessen your chances for claims to occur in the first place.
Let’s break down the key exclusions and warranties commonly found in cannabis insurance policies, so you can make informed decisions and avoid costly surprises.
Common Exclusions in Cannabis Insurance Policies
1. Total Cannabis Exclusion
Some insurers outright exclude any coverage related to cannabis operations, rendering policies useless for industry operators.
How to Protect Yourself: Work with a specialized broker who understands the nuances of cannabis insurance, has access to the markets and can find policies that provide meaningful coverage.
2. Animal Exclusion
If a cannabis business has security dogs or other animals on-site, injuries or damages caused by them may be excluded from coverage.
How to Protect Yourself: Confirm whether your policy includes liability for animals and consider separate coverage if needed.
3. Absolute Weapons Exclusion
Some policies exclude any claims arising from the presence or use of firearms or weapons on the premises, even if they are legally possessed and used in self-defense.
How to Protect Yourself: Ensure security providers carry their own liability coverage and comply with policy terms. Or find a policy without this exclusion.
4. Assault or Battery Exclusion
Claims related to physical altercations, whether involving employees, customers, or security personnel, may be excluded.
How to Protect Yourself: Implement strict de-escalation training and confirm whether this exclusion applies in your policy.
5. Independent Contractor Exclusion
Losses caused by independent contractors, such as security firms, artisan contractors or delivery drivers, may be excluded unless they are specifically covered under a separate policy.
How to Protect Yourself: Verify contractor insurance coverage and request certificates of insurance before they do any work for you or on premises. Request Additional Insured and Waiver of Subrogation.
6. Vaporizing Equipment and Components Exclusion
Some insurers exclude coverage for claims related to vape pens, cartridges, or associated equipment, citing potential health risks.
How to Protect Yourself: Understand whether this exclusion applies and seek alternative coverage if available.
7. Health Hazard Exclusion
Many policies exclude claims related to health issues allegedly caused by cannabis products, including respiratory issues, allergic reactions, or long-term health effects.
How to Protect Yourself: Work with a broker to explore product liability options that provide protection for potential health-related claims. Understand how this exclusion can impact your business.
Understanding Insurance Warranties
Insurance warranties are conditions you must comply with to keep your coverage valid. Failing to meet these conditions could mean your claim is denied.
1. Security Warranties
Some policies require specific security measures, such as:
- 24/7 video surveillance
- Armed security personnel
- Minimum vault/safe requirements
If you fail to meet these conditions, theft claims may be denied.
2. High Intensity Discharge Bulb Protective Safeguard Warranty
Some policies require cannabis cultivators using High Intensity Discharge (HID) bulbs to implement specific protective safeguards, such as:
- Regular inspections and maintenance logs
- Protective coverings or enclosures for bulbs
- Fire-resistant installation methods
Failure to adhere to these safeguards could result in claim denials for fire-related losses.
How to Stay Protected Against Coverage Gaps
- Review Your Policy Carefully – Understand all exclusions, warranties, and coverage limits before signing.
- Work with a Specialized Broker – Generalist insurers may not understand the complexities of cannabis businesses.
- Request Multiple Options – Compare different policies to find the best coverage for your specific needs.
- Keep Your Information Updated – Changes in operations, inventory, or security should be communicated to your insurer.
- Maintain Documentation – Keep thorough records of training, maintenance, and compliance efforts.
Final Thoughts
Navigating cannabis insurance is complicated, but understanding common exclusions and warranties helps you take control of your coverage. By proactively managing risks and working with an experienced insurance broker, you can ensure that your business is fully protected when it matters most.
We’ve shared some helpful resources including information on buying cannabis insurance:
- Vetting Cannabis Insurance Agents: The Ultimate Checklist
- Finding the Right Insurance Agent for Your Cannabis Business
- The Reality of Cannabis Business Insurance: Why Multiple Agents Aren’t the Answer
- Key Factors to Consider When Choosing Cannabis Insurance
- Cannabis Insurance Cost Estimator
Need help reviewing your cannabis insurance policy? Reach out to Spire Insurance Solutions, where we specialize in helping cannabis businesses secure the right coverage for long-term success.
📞 Need help securing cultivation insurance? Contact us to find the right coverage for your grow operation. Contact us for assistance with buying cannabis cultivation insurance.
Sources:
8 Cannabis Insurance Mistakes Dispensaries Must Avoid
Key Questions for Vaping Businesses | Insurance Thought Leadership
Cannabis Product Liability: How to Protect Your Business from Catastrophe | Cannabis Business Times
