A treatment center is ready to open a new dispensary in a Tampa shopping center. The lease is negotiated, the build-out is finished and the state inspection is scheduled. Then the landlord’s property manager sends back the certificate of insurance: the general liability limit is too low, the landlord is not listed as an additional insured on a primary and non-contributory basis, there is no waiver of subrogation and the property coverage does not include the tenant improvements the lease makes the tenant responsible for. The opening slips two weeks while the program is rewritten. Most cannabis insurance requirements do not come from one statute. They come from the contracts that let the business operate.
What the Law Requires
Florida law requires workers’ compensation for most businesses with four or more employees, and that applies to cannabis businesses the same way it applies to any other employer. Vehicles need the coverage Florida requires for registration, and businesses that deliver to patients need commercial auto coverage written for that use. Treatment centers operate under detailed state rules for security, inventory tracking, transportation and product safety, and while those rules are not insurance requirements in themselves, how well a business follows them affects which carriers will write it and what a claim looks like.
What Landlords Require
Leases are usually the most detailed source of insurance requirements. A typical lease requires the tenant to carry general liability at a stated limit, name the landlord and its property manager as additional insureds, make that coverage primary and non-contributory and waive subrogation against the landlord. It will also require property coverage on the tenant’s improvements and equipment, and often business income coverage so rent continues after a loss. Some landlords add requirements for product liability, umbrella limits and workers’ compensation. The lease language should be reviewed before it is signed, because changing it later is harder than buying the right policy at the start.
What Lenders and Investors Require
When a building or equipment is financed, the lender requires property coverage at replacement cost with the lender named as mortgagee or loss payee. Equipment lenders often require equipment breakdown coverage as well, since grow room lighting and climate control systems are a large part of the collateral. Investors frequently require directors and officers coverage so the company’s leadership is protected, and sometimes they set minimum limits for the rest of the program.
What Clients and Vendors Require
Security companies, contractors, transporters, testing labs and other vendors that work with treatment centers are usually required to carry their own coverage and name the treatment center as an additional insured. Treatment centers, in turn, are often asked for proof of coverage by the businesses they work with. Every one of these requests depends on endorsements, not just the certificate. A certificate shows that a policy exists; the additional insured, primary and non-contributory and waiver of subrogation endorsements are what actually extend the coverage.
Why Requirements Are Harder to Meet in Cannabis
Because most cannabis programs are written by specialty and surplus lines carriers, the forms and endorsements vary more than they do on standard policies. A contract that asks for a specific endorsement form number may not match what a specialty carrier issues, and a carrier may limit the additional insured coverage it will provide. Sending the contract requirements to your agent before the policy is bound avoids most of these problems. Our article on what cannabis insurance does not cover explains the exclusions that most often collide with contract requirements.
Worth Confirming Before You Sign
- What limits, endorsements and coverages does your lease require, and does your current program meet them?
- Does your general liability name the landlord as additional insured on a primary and non-contributory basis?
- Is property coverage written on your improvements and equipment at replacement cost?
- Do lenders and equipment financers appear as mortgagee or loss payee?
- Do your vendors carry their own coverage and name you as an additional insured?
- Is workers’ compensation in place for every location?
Talk to Prestige Insurance Group
Send us the lease, the loan documents and any vendor contracts before you bind coverage, and we will match the program to what each one requires. Learn more on our cannabis insurance page. Call the office nearest you. Se habla español.
Miami: 305-969-8776
Orlando: 407-993-2331
This article is general information and not legal advice. Florida law and contract terms vary; consult qualified counsel about the requirements that apply to your business.
