Developing your business plan in anticipation of filing an application with Arizona Department of Health Services ? If so, you’re likely scrambling to find the perfect location(s) for your new Arizona medical marijuana business. Whether you’re seeking a storefront or a warehouse, there are three things about insuring building(s) for dispensaries, grows or other medical marijuana business uses you should know going in:
- “Admitted carriers” such as Progressive or Farmers will not insure medical marijuana businesses – period. They have made a business decision to not serve specialty markets.
- A few other carriers might insure your leased or owned buildings, depending upon the specific circumstances. They are willing to take on more risk, but the medical marijuana industry is not their specialty.
- Comprehensive coverage for your medical marijuana business, written with A-rated carriers, IS available from agents and insurers who have made a commitment to the medical marijuana industry.
Let’s keep these few facts in mind as we discuss the best way to protect yourself and your future business through the uncertainties of the current pre-DHS application period.
Getting Into the Building
Many landlords require proof of property and liability insurance before giving their new tenants access to the building. This is prudent, and generally required under the terms of the building owner’s “lessor’s risk” policy.
Your future landlord needs to know that claims against that policy resulting from MEDICAL MARIJUANA business activities aren’t likely to pay out, however, as suggested in the first bullet point. While it’s their responsibility to discuss any tenant changes with their agent, I always advise my clients to bring the topic up so that everyone is on the same page, helping all parties to avoid any nasty surprises later.
Insuring Appropriately Now While Planning for Later
While waiting to find out if you’ll receive a dispensary license from DHS, you need only insure yourself against liability, any damage to your newly leased property and loss or damage to property you may have in the building. Simply put, basic coverage is sufficient for this stage.
Many carriers will write a policy for empty office or warehouse space, but offer only a one year term – and given that it will be just a few months before you receive your dispensary license (or not) this doesn’t make a whole lot of sense, especially as they will charge you a short-rate penalty for cancelling before the end of the term.
A better approach is to obtain your basic policy now from a carrier that won’t penalize you later, when you’re ready to begin insuring your new MEDICAL MARIJUANA operation with industry-specific coverage. You can either get a basic six-month policy that can be “flipped” to another carrier (under the same parent company) to one that specifically includes coverage for MEDICAL MARIJUANA businesses, or get a pared down policy from a company specializing in MEDICAL MARIJUANA policies and simply add additional coverage as needed. Either approach will help you to avoid unnecessary penalties or fees while ensuring that your new venture is appropriately covered.
Such flexibility in coverage costs a bit more, but provides several significant benefits – no risk of denied claims due to undeclared MEDICAL MARIJUANA operations, eliminating the danger of coverage gaps or lapses, and simplying the whole insurance process – all far outweigh the small additional costs.
The majority of carriers serve the majority of the market. If your business is out of the ordinary, however, your insurance needs likely are as well. Specialty brokers meet those needs.
Doug Banfelder is a Commercial Insurance Specialist. Reach him to insure your Arizona medical marijuana dispensary at 480-315-9051 or www.PremierDispensaryInsurance.com