Marijuana Business Magazine - January 2017

Most insurers, he added, will provide a better property rate or discounts if the business has a sprinkler system in place, but they are not mandated. Insure Plants From Seed to Sale Cannabis Insurance Solutions, for its part, insures marijuana and hemp plants grown indoors during six different growth phases: • Seed • Seedling (clones) • Vegetative • Flowering (buds) • Harvested, curing and drying • Finished stock that’s bagged, tagged and ready for sale The insurer has policies for growers, dispensaries, extractors and manufactur- ers, as well as policies for plant-touching ancillary companies such as testing labs. Because cannabis plants are tracked from seed to sale, it’s easy to determine the amount of a loss. “It’s a set amount we work with the grower on,” Jones said. “The further up the stage you go, the more valuable the plant becomes.The percentages are based on the wholesale value of the plant. “That’s important from an insurance perspective because it’s tracked, so you know how much it's worth,” Jones added. “The valuation of those plants grows the closer you get to it being harvested.” Pick Your Policy Carefully Jones said he is troubled by the many insurance agents who sell products that cannabis businesses think will cover their crops. But, in reality, they won’t. Traditional insurance companies, he said, will sell a cannabis business a policy without knowing what industry it’s in – and the document will specifi- cally exclude cannabis. Though crop insurance is what it boils down to, Cannasure’s McMana- mon said the term is a misnomer, largely because nobody insures cannabis that’s grown outdoors. “When you see the term crop insur- ance, it’s really just property cover- age for plants if there’s a fire, theft or vandalism,” said McManamon, whose company has about 1,000 customers, with Colorado companies making up 30%-40% of its business. More than half of Cannasure’s customers grow marijuana indoors. Cannasure assigns a value to the plants based on information its custom- ers provide when filling out their appli- cations. It generally costs $1 to $1.50 per $100 of insurable value to cover cannabis plants. “We’ve covered theft and vandalism at cultivation facilities where they’ve destroyed the door and stolen the fin- ished stock,”McManamon said. “If they own the building, we insure the building just like any business.” That includes coverage for plants that were grown outside but moved indoors after being harvested. It also includes greenhouse structures. “If a fire reached that location, it would be covered,”McManamon said. “But if the crop is outdoors, there’s no coverage. Winds, rain and fire can destroy it, and it’s such a new industry that there’s not any coverage there.” McManamon said it likely will be years before there’s an insurance product that will cover outdoor crops. That will come as little comfort to outdoor growers, particularly those dev- astated by fire in Northern California. “A lot of people have spent the last year preparing for legalization and were relying on the harvest season to replenish their cash,” said California grower Kyle Kushman. “Now they’re destitute.” ◆ OTHER OPTIONS I f crop insurance isn’t an option, there are other avenues a grower can pursue. Skepticismoverwhether an insurance companywould actually pay for the loss of a crop led TimCullen, chief execu- tive of Denver-based Colorado Harvest Company, to buy business interruption insurance instead of crop coverage. If a crop is lost or the building is damaged, business inter- ruption coverage provides a six-month Band-Aid that would enable Cullen tomake payroll and keep his employeeswhile the company isn’t in production. “Business interruption insurance lets me know that we’d still be able to get through that rough patch,” he said. “Our products are somuchmore expensive than a tradi- tional agricultural model. Are they going to be excited about paying $2,000 a pound for the crop we lost? Probably not,” Cullen noted. “There are a number of companies that still treat us like we’re an illegal business. There’s a long list of companies that won’t work with marijuana companies.” Chris Driessen, president of Organa Brands – the parent of OpenVape, Bakked, Magic Buzz and District Edibles – said his company grows crops in nine states where it does busi- ness, but not in Colorado or California. The company grows the crops indoors, but it does not insure them against loss, which Driessen said can be prevented in most cases by good growing practices. “Our experience has been that (insurance is) cost pro- hibitive,” Driessen said. “And you shouldn’t be losing indoor crops. It’s almost always operator error.” — Margaret Jackson 44 • Marijuana Business Magazine • January 2018