A question regarding cyber risks had already been planned in PC360′s "Emerging Risks in Cannabis" Twitter chat, but participants got to the subject before it was posted.
Addressing the topic of types of policies most in demand in the cannabis space, Ian Stewart of Wilson Elser said, "Be on the lookout for new cyber offerings soon." Hannah Smith, editor of Insurance Coverage Law Center, jumped on that: "Yes! I was going to say, cyberthreats are increasingly affecting more and more aspects of our lives and the cannabis industry will be no exception."
The Twitter chat panelists echoed a growing concern in the industry that cannabis businesses are blinking at cyberthreats because they view themselves as low-value targets for hackers.
"A primary concern is breach of facility and ransom — many of the more sophisticated facilities live and die by their interconnectivity," said Quintin Meek of Sterling Insurance Group. "A breach of this system could be compared to a total fire loss."
The "Emerging Risks" chat covered a wide variety of potential pain points for the cannabis industry, from product liability and recalls to federal prohibition.
"Federal illegality is the number 1 reason keeping most large admitted mainstream insurers out of the market for cannabis insurance," said Jodi Green, founder of Legal Limits.
"As long as the industry remains at odds with both federal prohibition and law enforcement, insurance product development will be negatively impacted," agreed Meek.
"When Federal Entities take cash it is usually due to illegal business practices or noncompliance. The way to shield your business is to check all the boxes," advised Cimone Casson of Cannas Capital.
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.
Product Liability will always be a concern especially for any product that is consumed. Issues such as product recalls, consumer complaints,and labeling will always be risk. Carriers are doing their best to require SOP"s and other measurements to mitigate risk
— C Cimone Casson (@CCimoneCasson) April 20, 2022
#420insurancetweets while we've seen increased activity related to product liability claims, I wouldn't say there has been a consistent theme driving increased or decreased cause for concern surrounding product liability.
— Quintin Meek (@quintin_meek) April 20, 2022
When talking about "product liability" should distinguish between injury claims and contamination/label claims that do not involve injury. Significant insurance issues between them
— Ian Stewart (@IanStew61864414) April 20, 2022
Q2. What is the situation with product recalls? #420InsuranceTweets pic.twitter.com/s1QG5snBtx
— PropertyCasualty360 (@PC_360) April 20, 2022
Magic 8 ball says – outlook is hazy. We need to push front end compliance and testing.
— Legal Limits (@legalimits) April 20, 2022
Have been a big problem depending on the state. Getting better in California. Lab accreditation, proficiency testing, attention to validation methods, newer equipment and uniform standards will help reduce future recalls in all states.
— Ian Stewart (@IanStew61864414) April 20, 2022
From what I've seen, some of the recalls start at the crop point, with a certain pesticide or something, which affects every single product made from that one crop. Millions and millions of potential dollar losses!
— Hannah Smith (@HannahTalksIns) April 20, 2022
They come in two general flavors, contamination/adulteration and label errors. Both primarily arise from lab error.
— Ian Stewart (@IanStew61864414) April 20, 2022
Since the same base cannabis is used in producing many products, recalls due to pesticides or mold introduced at the growth stages can affect a wide variety of finished cannabis products and can cost the industry much more.
— Hannah Smith (@HannahTalksIns) April 20, 2022
I don't see this as significant issue. It doesn't happen often and reported seizures have either been justified due to other violation of law, or local authorities are misinformed on law re transporting cash (some seizures have involved armored car service across state lines).
— Ian Stewart (@IanStew61864414) April 20, 2022
I don't see this as significant issue. It doesn't happen often and reported seizures have either been justified due to other violation of law, or local authorities are misinformed on law re transporting cash (some seizures have involved armored car service across state lines).
— Ian Stewart (@IanStew61864414) April 20, 2022
Federal illegality is the problem keeping insurers out so legislation like MORE would likely move more insurers in. But there's a lot of problems with all of the pending bills, the worst of which is the cannabis industry itself cannot agree on what it wants.
— Legal Limits (@legalimits) April 20, 2022
#420insurancetweets CLAIMS act — it outlines the clearest path forward for insurance carriers. However, it doesn't solve for the decriminalization of marijuana, which may ultimately make the CLAIMs act less impactful
— Quintin Meek (@quintin_meek) April 20, 2022
I think the better question is to ask which of the proposed bills contain an actual regulatory plan and on how the federal government will oversee and interact with state regulations, and the answer is none of them do.
— Ian Stewart (@IanStew61864414) April 20, 2022
CLAIM act. Less impact to federal cannabis policy. It would simply provide safe harbor for those insurance companies interested in providing coverage to cannabis businesses. The MORE act would definitively shift federal prohibition by decriminalizing and reclassifying marijuana.
— Quintin Meek (@quintin_meek) April 20, 2022
I don't see CLAIM act having much chance. It is mooted by SAFE which would incorporate insurance protections since insurance companies are financial institutions under BSA
— Ian Stewart (@IanStew61864414) April 20, 2022
At this point I feel like it is too close to the election for huge moves like passing either Act into law. That being said, I think the CLAIM Act will pass first and then the MORE Act will pass.
— Hannah Smith (@HannahTalksIns) April 20, 2022
Where to start with this one … the difficulty of measuring intoxication and educating consumers on the differing effects of products will be a huge challenge; legal issues like Dram/Gram Shop liability; mixing alcohol or not (often prohibited); smoke impacting neighboring areas
— Legal Limits (@legalimits) April 20, 2022
…creates or furthers exposures like: Over serving/consumption, driving while intoxicated, onsite altercations (resulting or related to intoxication), faulty/contaminated onsite product, server intoxication
— Quintin Meek (@quintin_meek) April 20, 2022
The risk profile depends on the jurisdiction. Although Nevada has recently included the same civil liability protections that shield bars and restaurants in the state's regulations for cannabis consumption lounges, the general trend appears to be going in the other direction.
— Ian Stewart (@IanStew61864414) April 20, 2022
Cannabis companies are becoming more sophisticated insurance buyers.
— Ian Stewart (@IanStew61864414) April 20, 2022
Coverage specifically – we see the need for more sophistication. Cannabis operators are seeking coverages that their peers in related industries, manufacturing, food/beverage, distribution, have easy access to…
— Quintin Meek (@quintin_meek) April 20, 2022
D&O and other management liability, particularly for pubco's
— Ian Stewart (@IanStew61864414) April 20, 2022
Captive/RRG solutioning as well
— Quintin Meek (@quintin_meek) April 20, 2022
Risk management web portals and hotlines offered by carriers can be very useful for cannabis insureds.
— Ian Stewart (@IanStew61864414) April 20, 2022
2/2 increasingly necessary. As always with cannabis and insurance, more of these policies would likely be available if the CLAIM Act were passed into law.
— Hannah Smith (@HannahTalksIns) April 20, 2022
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