Covid-19 Cannabis Insurance: Latest News and Updates
Questions on Coronavirus: Contact Us Here
March 16, 2020 11:49 a.m. MST
Understanding Policy Coverages
The most frequent question we receive is whether business insurance – specifically Business Income and Extra Expense (“BI/EE”) – will provide coverage during business closure (or reduced hours) due to Coronavirus or COVID-19. The closure or reduced hours may be voluntary or enforced by a government action. For example, the ski resorts in Colorado are being closed by Executive Order from Governor Polis. This is an example of a Civil Authority enforcing a law.
As of today, we know that insurance companies are having their legal teams evaluate the language within the insurance policies, to determine if coverage would be offered for a claim of this nature.
All of our carriers are consulting with their legal counsel at the moment.
Source: Insurance Underwriter (CO)
As such, it is important for cannabis licensees to review their policies and coverages with their Agent, to determine if Business Income and Extra Expense was purchased. This form of income and extra expense coverage is typically triggered by a property loss (such as fire or theft to covered personal property), and may extend during the period of business interruption.
To learn more, here is an article written by attorneys on this topic, and available online: Will Business Interruption Insurance Provide Coverage for Coronavirus Losses?
Below are relevant sections from a proposal and standard insurance policy used in the cannabis industry.
Cannabis Insurance Declaration Page: Do you have Business Personal Property and Business Income and Extra Expense?
Review the declaration page from your policy to determine if you have Business Income and Extra Expense with Business Personal Property as indicated in the sample below:
Specified Causes of Losses: Is the Coronavirus considered an “Act of God”?
Sometimes known in the insurance industry as “triggering events,” below are events that some could consider “Acts of God”: fire, windstorm, hail, etc. The question is whether the Coronavirus qualifies as an “Act of God”, or if it’s specifically excluded.
We searched various insurance policies for key words such as “Act of God”, “virus”, and “pandemic” and certain policies seemed to be silent on these terms. The fact that these terms are silent might be an opportunity for interpretation by the insurance carriers and their lawyers.
However, other policies included a specific policy form entitled “Exclusion of Loss Due to Virus or Bacteria” (ISO form CP 01 40), which specifies “We will not pay for loss or damage caused by or resulting from any virus, bacterium or other micro-organism that induces or is capable of inducing physical distress, illness or disease.” This exclusion would seem to be problematic and potentially block coverage.
Business Income and Extra Expense (BI/EE): What does it mean?
Below are two different examples of Business Income from insurance policies. In plain language, BI/EE typically provides Net Income or Loss before taxes, and normal operating expenses including payroll. Determining whether manufacturing risks are addressed, or if executive payroll must be subtracted, will require a thorough review of your insurance policy.
Example A: The coverages do not limit payroll.
Example B: The coverages limit payroll by removing compensation for executives, department managers:
March 16, 2020 2:24 p.m. MST
Cost of BI/EE and Buying Coverage
“Should I buy or increase my business income and extra expense coverage before I close my doors due to Coronavirus?“
Buying the BI/EE does not guarantee coverage for this event. There unfortunately is no certainty if the BI/EE will be covered until a claim is filed and reviewed.
“How much does business income and extra expense cost?”
This depends on the insurance carrier and other factors. One example: $500,000 of BI/EE may cost $2,500/year or .50 per $100 of coverage.
You can estimate your premium for BI/EE below:
March 16, 2020 2:49 p.m. MST – Medical Cannabis Deliveries: Non-Owned Auto Liability
The State of Michigan will apparently allow delivery of medical cannabis to patients due to the Coronavirus. Cannabis licensees can review their insurance policy for non-owned auto liability insurance coverage. If the employee is using their own vehicle, this insurance might provide excess liability over the employee’s personal auto policy, and could protect the cannabis licensee with additional coverage limits. Coverage will depend on each carrier’s specific Underwriting Guidelines.
March 16, 2020 6:31 p.m. MST –
Premium Finance Payment Relief for Victims
If you are paying insurance premiums to a premium finance company, you may be entitled to payment relief. ClassicPlan, the premium finance company we use at Greenpoint Insurance Advisors, LLC, is offering payment options for customers. You may call them directly at (800) 347-6482 from 8:30am – 5pm PST to discuss your loan, or email them at email@example.com. Please reference your Company/LLC name or your Loan number, if available.
March 17, 2020 11:58 a.m. MST –
Pinnacol Assurance Workers Compensation
Important information for customers and their employees seeking testing for coronavirus exposure
In light of the unprecedented nature of the coronavirus (COVID-19) pandemic, we want to ensure all our mutual customers and their employees can get tested quickly if they suspect they’ve been exposed or infected with COVID-19 as a result of their work.
If a customer or their employees need to get tested, please advise them to go to the medical provider of their choice, and Pinnacol will pay for the COVID-19 testing. They don’t need to go to one of their designated workers’ comp providers for the test.If a customer or their employee believes there is a work-related exposure to COVID-19, we recommend they file a claim. Should the test results be positive, current state law regarding workplace exposure will apply in order for Pinnacol to pay for further COVID-19-related treatment and benefits.
We realize this is an uncertain time for customers and their employees. If you have questions about COVID-19 testing or claims, please contact your Pinnacol claims representative. Also, we encourage you and our customers to visit Pinnacol.com for additional information on preparing their business for COVID-19.
We’re updating our site regularly with Frequently Asked Questions and other essential resources. If anything occurs in the coming days to change this guidance, we will update you as soon as possible.
Further Information: Coronavirus Questions and Answers for Colorado Businesses, Letter from Pinnacol CEO
March 17, 2020 12:15 p.m. MST –
**UPDATE** Regarding Business Income & Extra Expense
After discussion with Underwriting today, it appears that the carriers are taking a position that Business Income & Extra Expense would need to be triggered by a direct physical loss of, or damage to, property at the business premises, that occurs as a result of a covered cause of loss defined within the policy. Since that situation does not seem to exist in the case of the Coronavirus business closures, it could present challenges in collecting on a claim. Unique circumstances such as these would require submitting a claim to see how it unfolds, with decisions based on policy language interpretation and case law.
Policy Language: We will pay for the actual loss of Business Income
you sustain due to the necessary “suspension”
of your “operations” during the “period
of restoration”. The “suspension” must be
caused by direct physical loss of or damage to
property at premises which are described in
the Declarations and for which a Business Income
Limit of Insurance is shown in the Declarations.
The loss or damage must be caused
by or result from a Covered Cause of Loss.
March 18, 2020 11:33 a.m. MST Washington DOI Coverage Position on Coronavirus Covered or Not
The Washington State Department of Insurance has a link for insurance producers and consumers regarding the Coronavirus. For business customers, they have issued the following statement on Business Income and Extra Expense:
Coronavirus: Insurance information for businesses