Imagine that you own and operate a dispensary, and for the past three years, things couldn’t have run any smoother. You have a steady stream of clients, you haven’t suffered any losses, and you’re beginning to build a solid reputation around the area. Things could not be going better. Next thing that you know, you get a call from your insurance agent saying that you’ve just been canceled and have to get new insurance.
You’re shocked. You think to yourself “How can this be? I haven’t submitted a claim, what reason do they have for canceling me?” To your credit, this is logical thinking. Why would you be canceled when you haven’t had any losses or even submitted a claim to your insurance carrier to merit the possibility of being canceled?
The scenario above is a true story and one that happened to my client Michael Thomas, owner of High Tides Dispensary in Gualala, California, who was canceled by his insurance carrier back in June of this year. Why was he canceled after being with them for 3+ years with no losses or claims? The reason is that his former agent placed him with Farmers Insurance, who does not work with the cannabis industry.
Now you’re probably thinking “If Farmers doesn’t work with the Cannabis Industry, then how is it possible that they insured him?” Again, this is very logical thinking. The reason that he was insured with Farmers was that his agent at the time classified his business as a “Gift Shop” not as a “Dispensary” in order to have Farmer’s quote and insure the business.
However, once Farmers found out what he was really doing, they canceled him right on the spot, leaving him with no coverage and having to scramble to find and implement the proper insurance.
What’s worse is that this was all unknown to Michael, who assumed that his agent classified him correctly and didn’t misrepresent what he actually did because he knew that his agent was aware he was a dispensary. And that is the correct assumption that Michael should have made.
How would he know or think that his agent would misrepresent what he does and put him in this position? Now you’re probably thinking “Why did his former agent do this?” so I’ll tell you a couple of possible reasons:
- They don’t understand the Cannabis Industry
- They can’t access the specific Cannabis markets which have an appetite for this industry
- They thought that they’d get away with it and reap the additional benefits of placing him with a standard market
In this scenario, it just happened to be that the former agent didn’t have a complete understanding of this industry and the operations of High Tides and did not do it maliciously or for their own gain. However, this along with the three reasons above does not excuse the agent for putting Michael and High Tides in this position.
The agent should have been upfront and said that they either didn’t truly understand the Industry/his business or that they couldn’t access the markets that were needed. Instead, they put Michael in a vulnerable position of not having insurance in place during the time that it took us to implement the correct coverages properly.
What happened to Michael wasn’t the first time that this has happened to a business and it won’t be the last as there are agents out there who are more concerned with writing business than making sure that what they are insuring is correct. Compound this issue with the fact that there are only a handful of specialty insurance markets who entertain the cannabis industry, what happened to Michael is even more likely to occur to other cannabis businesses.
This only stresses the importance of working with someone who acts as more than just your insurance agent, who you hear from maybe once a year and then around renewal time. You want someone who acts as an advisor that can work with you to ensure that your business, employees, equipment, inventory, etc. are all adequately insured so that you, as the business owner, can rest easy at night knowing that your business is protected.
After hearing about what happened to Michael and High Tides, how confident are you that your business is insured correctly? Feel free to reach out as I’m more than happy to review your current insurance program to see if it is indeed set up correctly to protect your business or if you should be expecting a call from your insurance carrier soon.
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