June 17, 2024 • 24 mins
In this enlightening episode of Up2Speed, host Samantha reconnects with her old friend, Valerie Taylor, who has transitioned from property insurance to becoming a cannabis insurance expert. Valerie shares her unique journey, starting from her unexpected introduction to cannabis insurance to becoming a key figure in the industry.
Valerie dives into the complexities of insuring cannabis businesses, explaining the various verticals such as cultivation, manufacturing, distribution, and retail. She also discusses the challenges posed by federal illegality and the intricacies of navigating state-specific regulations.
Listeners will learn about the different types of insurance required for cannabis businesses, including property, liability, theft, and crop insurance. Valerie provides insights into the unique risks faced by cannabis operations, such as cash-heavy transactions and product liability.
Additionally, Valerie shares her advocacy efforts in Washington, D.C., discussing the potential rescheduling of cannabis and its implications for the industry. She emphasizes the importance of staying informed about legislative changes and their impact on cannabis businesses.
Whether you're an insurance professional or simply curious about the burgeoning world of cannabis coverage, this episode is packed with valuable information and expert insights from one of the industry's leading voices.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Ooh, do we have a good one for you today? This is Samantha here with Up to Speed,
and I am joined with a very old dear friend of mine, Ms. Valerie Taylor. How are you?
I'm well on this Friday. How are you? So good. So good. So you and I have such an interesting past.
We have kind of grown up together in insurance, but we also used to work together,
it feels like a thousand years ago, in our property insurance world.
(00:23):
Then you decided to just kind of take a little bit of a turn.
And now you are somewhat of a cannabis insurance guru.
And so that is really why I wanted to have you on today, because it's a whole
world that I know nothing about.
And I'm sure most of our listeners are kind of in the same boat.
So tell me, even like, how did you go from, hey, I'm still on property insurance.
And now like, I'm going to become an expert in cannabis coverage.
(00:45):
Yeah, it's weird. I didn't plan this. I don't think anyone in the industry really
plans to be in the industry, but specifically cannabis. Yeah.
So yes, I was heavily into the property side.
And then when adult use passed in California, I was getting phone calls from
social equity applicants at Oakland who,
(01:07):
I don't know how they found me, but they were like, I need insurance to get
my license and start a cannabis company. And I was like, whoa, whoa, whoa, whoa, whoa.
How can I do this? I'm going to figure this out.
And at the time, Golden Bear was the only carrier that would even talk about
cannabis, let alone write it.
(01:28):
So that was a while back.
And they were really the only carrier speaking about it. So they had a CE course.
I went to that in the city.
And let's see, this was about eight years ago.
So I just did a deep dive, a lot of just nerding out on like reading a lot of
(01:49):
information and about six,
seven months into me becoming interested in how I could position myself to be an expert.
I was like the light bulb went off and I was like, holy crap.
I grew up in the cultivation like world, like my, in the legacy space.
(02:11):
You know, my mom, everywhere we lived, she was growing and harvesting and selling cannabis.
And her friends were all doing the same thing.
And I didn't know, you know, at the time as a kid, it was like this big secret. I knew it was a secret.
The war on drugs was full blown, you know, their program.
(02:32):
So I was, I was in, I grew up really terrified actually.
So it took me years in writing
insurance for me to actually start
to tell clients like hey you know the reason i talk the way i do and the way
i get what you're doing is because i actually grew up in the space and then
they're like what yep so i started realizing like it's legal i don't have to
(02:56):
hide the and the fear was really that my mom would get incarcerated so i am super passionate Yeah.
(03:18):
So that's why I'm super passionate about that. And I help, you know,
wherever I can with social equity applicants and just advising them.
So I'm super passionate on that front.
But yeah, I had a full circle moment. I realized, you know, my mom would be
like, are you kidding me?
Like, you can talk about this, let alone you're insuring it.
(03:40):
Like, this is so bizarre. And so I think it's just fueled me into,
you know, it's a cannabis is it's still a small community of,
you know, whatever vertical anyone's in.
So I you have to be passionate on some level to be doing this.
And so that's that's how I got into it. Which is great because I think you could
(04:02):
relate, you know, versus being some just insurance person that's like trying
to like, you know what it's like to be on the other side of the table.
So in preparing for this, I was doing a little bit of research,
which I found incredibly fascinating.
So as of 2023, only three states, which are Idaho, Nebraska and Kansas,
have not adopted some form of cannabis, you know, acceptance or,
(04:25):
you know, medical, personal, different types of usage, you know.
So when you think about everybody but three is doing some version of it,
like how in the heck does anybody keep up with these laws, the legislation?
I mean, it's there's not an even playing field when it comes to cannabis at
all, and especially when it comes to insurance. So how does how does one even navigate that?
Yeah. So because it's federally illegal, each state can determine right on their
(04:49):
own how their stance on this.
So so over the years, you know, we say states open up.
That's sort of how how I talk about it. So the majority of states are now open.
So the needle isn't going to go backward. Right.
And California and Colorado, Colorado being the first in California and Colorado,
(05:11):
sort of the old school states that have been doing this the longest.
Unfortunately, there's not, you know, there's not like a boilerplate regulations
that every single state just gets the template and they know how to do it.
So every state has their own specific challenges. Every state has their own
specific guidelines and their own headaches and hurdles and politics.
(05:37):
I mean, a lot of this is navigating how to do it right.
And behind the intention are a lot of different types of players.
So a lot of states, for example, think, oh, this is a great tax revenue,
tax really crazy high percentages. And we're going to have all this money and
(05:58):
it's going to be amazing.
And that's what California thought. This is a cash cow, like everyone's going to be rich.
And the reality is that in California, because of the way that the federal and
state is currently set up is that businesses are taxed at 70% as we sit here today.
Day. So you tell me if you and your family spent five years saving all your
(06:20):
money, writing up an ideal business plan that was like your dream little,
let's say you want to make cupcakes.
And you're going to have a storefront. It's going to be so cute.
And you saved up all this money to do all this research. When you went to school,
you figured out how to write business plans.
You open up shop, 70% taxed. Who would be in business?
(06:41):
No one. No one wants to be in business. But with respect to the insurance part
of the equation, like a carrier, let's just say Lloyd's, for instance,
we're going to throw them into the hopper here.
I mean, it isn't a one size fits all situation because each state is going to
be treated differently?
Or do the insurance companies just not care? They're either going to write it
(07:01):
or they're not. How does that get broken out?
Yeah, the states, I mean, the carriers are either cannabis carriers or they're not. That's it.
Either we're in or we're out. Excellent.
So here's something when I was deep diving into these different types of policies and coverages.
I mean, we're going to talk about, you know, there's the flower,
the concentrate, and then the infused products, which a lot of things are infused,
(07:24):
which then qualify into this cannabis area.
All of these get treated differently with respect to insurance and coverage.
And so, I mean, how do you even break that out? What are some of the things
that if somebody were to come to you, you would need to know as an agent?
Yeah. So there's verticals. There's the cultivators.
(07:45):
There's the manufacturers. So the cultivators grow cannabis.
The manufacturers manufacturers and processors, they take the product that's
already grown and they make it into something.
Either they're making an oil that then they wholesale out and someone else makes
a cookie with it or whatever. The manufacturing is a piece of it.
(08:06):
And then you have the distributors. So the distributors are taking whatever
that product is from A to B.
And then you have manufacturing, retail, wholesale, distro, and then there's delivery as well.
Oh, yeah. There's so many different parts.
So based on that, you have different types of insurance, but really it's...
(08:31):
It's all the same with some exceptions that are very nuanced to cannabis.
So you can get insurance for anything just like any other business,
but there's different exposures that are not typical in any other type of business.
So because it's a cash intensive business, because of the way that banking is set up.
(08:53):
Let's just unpack because maybe everybody understands. the cannabis clientele
cannot necessarily get access to banking like the normal traditional businesses.
Right. So because it's federal, banks are FDIC insured and there's a federal,
right, there's federal parameters around that.
The banks that are being used are credit unions and those banks charge quite
(09:18):
a lot per month to bank cannabis cash because it has to be traced,
tracked monitored there's fees involved in doing
all that so for example it costs like two thousand
bucks a month wow to have your
bank bank your cash crazy so
your tax is 70 so anyway there's all these why we
(09:41):
call this a whole other episode a whole other episode i'll
stick to insurance okay so so yes
it's cash heavy so what that means for
insurance too though is that there's it's known right
so it's known that on site retail specifically there's
cash so if you don't have the correct protocol
(10:01):
set up where there's a daily truck coming and taking and doing deposits you're
exposed for theft theft is the most common claim that i see it's not if it will
happen it's when and that could be an entirely its own separate episode but
it all stems from the federal.
(10:21):
Banking issues yeah right so cash
intensive draws people to break in that
so then you got some property damage involved and then you've got is it the
landlord's responsibility the tenant's responsibility the lease and this and
that there's you know it's a public safety issue there's like shootouts in the
parking lot between the police force and these rings of people that are growing going around,
(10:46):
a lot of lost revenue.
And it's dangerous. And then you have product liability.
So for all of those products, like you mentioned, that are being created,
the product liability really is through the entire chain.
So everyone in the entire cycle of the supply chain should carry product liability, ideally.
(11:14):
It depends how business want to structure, you know, their, their flow.
So I have different structures that I advise different clients on how to where
to protect themselves that way.
But ultimately, if a product claim hits, and you know, everyone in the supply
chain could get named in a suit.
And so you want to be sure to cover yourself. And always even to if you're private
labeling, you've got, you know, you're buying, you know, a serum,
(11:36):
and then you're slapping your logo on it.
All of a sudden, this now becomes a bigger problem on a product liability stance.
Something that I always thought was interesting was the crop insurance, like the growers.
And could you because in the old days, like I say old days, like five,
six years ago, you couldn't insure crop like if it were to catch on fire,
you know, in our wildfires.
(11:58):
Sorry, you know, that's millions of dollars that's gone. Or if it gets,
you know, weather problems or whatever. Can you do that now?
So the last I recall, because I don't I don't I don't have any,
at this point, any more outdoor cultivators, but when I did have a few...
(12:19):
Is that not a thing anymore?
Everybody grows it in greenhouses? No, there are a lot of farms still operating,
but ensuring the crop, there was only one carrier, and I don't know if they're
still doing this, but it's extremely hard because there's too many Any outdoor elements.
Too much. Pests, mold, fire, mainly fires.
(12:41):
But indoor, yeah. You can insure that. If it's inside, under lock and key, safe, probably.
Sprinkler systems. I'm just, I'm like insurance girl racketing my brain of all
the protective safeguards.
Yeah, all the safeguards it has to have.
The entry points have to be specific to, and this is whatever type of vertical
(13:03):
you're in, you have to have certain things in place in order for theft coverage to kick in.
So if you don't have the right vault, if your safe isn't bolted,
if you don't have keyless entry to certain entry points where there's cultivation,
if there's not sprinklers, all of that stuff, and something happens,
a covered cause of loss, but you don't follow the warranties of your policy,
(13:24):
you're out of luck. Yeah.
Now, how hard is it to find other lines of insurance like comp and EPLI and
those types of other lines for these industries?
Because, you know, the GL, they don't have problems with it.
I mean, it's, yeah, it's so much easier today than when I started.
Like I told you, you couldn't find, there was state fund, there was one work
(13:46):
comp carrier, and there was one package carrier.
And now there's programs put together.
There's you know there's for delivery you
can you can have an entire fleet i mean the auto
coverage so you've got property and transit because you've
got all this cannabis high value product and cash you know
all over driving around do you know you can get cyber everything that's key
(14:12):
man you can get your pli work hump is is i mean it's easy to get but it is one
of the lines where there's not a ton of options.
Yeah. So there's a lot of property liability carriers and programs now.
Workers comp, it's growing, but it's still a handful.
(14:35):
So the normal like, you know, GL policy is going to have the normal limits,
just like you would see your occurrence, your ag, you know, your personal advertising injury,
product liability, we've talked about crop, the theft part, is that something
that you you would almost buy a separate policy for, or is it something that
is included in many of these property policies?
It should be included in the property. Yeah. It's like any other property policy.
(15:01):
Yeah. There are guarantees that are unique to cannabis.
So what's like the most psycho is claim that you've seen? Because I know you've seen some great stuff.
Like the thing that you're like, oh, this is interesting.
I would have to say.
So it's a retail, there's a retail cannabis store where a car runs into,
(15:29):
you know, the front glass, which this is actually common.
This part's not unique, but they run into it. They cause all this property damage to the building.
Violet Clay, all this product is stolen. Maybe there was like 15,000 in cash,
not much, but a lot of a significant amount of inventory stolen.
(15:49):
The, my client was the tenant and I'm like, okay, you know, sorry that happened. Let's file a claim.
Well, then I get a claim from the landlord and I'm like, you're,
we don't, you know, we don't do that.
And I had talked to him when I gave him a certificate and I was like,
well, who's your carrier? Cause you need a cannabis friendly real estate carrier on your building.
(16:13):
And he's like, well, I have state farm. I'm like, well, I'm sorry to tell you,
but they're not in the business of insuring cannabis operations.
And by you being a landlord, you are in the business of cannabis,
whether you intend to be or not. This is how it's seen.
And if you have a traditional mortgage, your assets are exposed to federal seizure.
You might want to just know this.
(16:35):
He didn't like this conversation. No, bam. Word.
Fast forward. It gets, he said, I need your help. My building's damaged $300,000. They smashed him.
So I said, okay, we'll file a claim. You know, that's your part.
I've read the lease. We'll do our part. You do yours.
State Farm denied the claim. He tries to subrogate. And I'm like,
I told you. This is crazy. So there's...
(16:59):
There are investment opportunities for people who hold assets and want to lease.
There's a lot of opportunities because you have to have a property.
You have to have real estate to apply for a license.
And so there's a lot of economic opportunities for landlords and to make sure
(17:22):
that you're zoned right and all that good stuff.
However, you need a broker who understands that you have a cannabis tenant because
it's too often I've seen they try to go under the radar because it's cheaper.
It is cheaper. Of course.
And then something happens and that includes fire. And, you know,
so I haven't seen like a straight up we're denying a fire claim.
(17:45):
I'm just saying that this particular scenario is one that sort of crushed me
because I'm like, you know, I get into these, I told you so.
Yeah. Discussions. A hundred percent. And, you know, a lot of times people don't
know what they don't know.
And they think that that's like a box that they don't need to disclose.
And unfortunately, it is a big one because the bread and butter carriers are,
(18:07):
you know, especially in today's market in California, I mean,
they're any time that there's a way to not have to cover something,
they're looking for it, friends.
So one of the other things I dig about you is your, you know,
we've just spoken when we started this conversation about you,
you know, being very involved in the,
you know, justice part of this pie and also the legislation and understanding
(18:28):
what is actually going on.
So it's not a lot of times that you find someone that's in the space that you're
in or any space for that matter when it comes to insurance and is super up to
know about what's going on out there.
So I follow you on all the different socials and you are bebopping all around
town, going all kinds of places to Sacramento, to Washington,
D.C. I mean, you're having high level conversations.
(18:50):
What's going on out there? I mean, what do we have? I mean, I'm sure 2025,
there's going to be some new rules and regs coming out. So what do we know?
Yeah, so I go to D.C. I enjoy it. I'm with NCIA and on the state regs committee.
But the lobby days is really something that I'm very passionate about.
(19:11):
It's really talking to state legislative staff on the federal part of all this.
So, you know, if anyone in this industry cares, they have some information about what's going on.
So currently what's going on is the the
DEA has recommended rescheduling cannabis from
(19:32):
a schedule one to schedule three so on a
high level just really simply you know schedule one
is cocaine heroin those types
of drugs and schedule three
is like it's prescription
medications so one
(19:52):
of the main one of the main aspects of schedule
one and how it directly impacts cannabis companies is
280e which is a tax law which was invented to
long ago by drug lords and
and people that are we're trying to write off business expenses by selling heroin
and drugs so there was a law that said if you're trafficking a schedule one
(20:16):
drug you can't write off business expenses so fast forward now we're discussing rescheduling.
Ideally, we want to de-schedule, which would just remove cannabis entirely off
of any of these schedules.
So schedule one to three would eliminate the 280E tax issue.
So there's a lot of perspectives going right now on is this good or bad?
(20:41):
Would this put people out of business? Would this help businesses?
So at the end of the day, it really depends who you talk to,
but from my perspective on how I can plug this with insurance is that insurance
is a business expense that no one can write off right now.
And so everyone's cash, you know, cashflow issue, everybody has cashflow issues.
(21:02):
They can't go and get a traditional loan.
So it's just operating with super tight margins, massive cashflow,
you know, issues and strategic alignment.
Like annually i have clients where we have to strategize when
do you want your insurance to expire so that you're all of
the economics makes sense yeah do you want to pay
(21:23):
on the back end at an audit because right now you got it you know it's a it's
a different model that you got to talk to these businesses about so the 280e
issue would eliminate some of that it would make it so you can write off insurance
it would make it so you could write off normal customary business expenses that
any other business could,
which, in my opinion,
(21:45):
in California could possibly help buoy an industry that's.
Yeah. Very, very wobbly right now. I think it's fascinating how one part trickles
down to so many different parts.
And one thing I can say about the cannabis clients that I do have,
they always pay on time and they always pay in cash.
(22:08):
I remember the first time I ever
had a property owner come into the office and gave me $10,000 in cash.
And I was like, Like, I, you know, not normal, but we'll take we'll take the money.
It's a very interesting space and it's evolving constantly, which I think is the coolest part.
You know, in your thought process of the things that you're seeing just nationwide,
(22:28):
I mean, do you see a world where this is, you know, not such a,
you know, frowned upon industry across the nation?
Or do you think we'll be in this flux for forever? I think that the more that
I think it's normalizing every day, this is becoming more normal,
that there's an upside to that, which makes it more of legitimizing, right?
(22:54):
This is a legitimate business. These are legitimate people.
That also opens to what does that mean for the industry that has been unique
and niche and community sort of oriented?
So the talk is big pharma is next yep and what does that mean so if you look
at you know alcohol and prohibition.
(23:14):
And you look at big tobacco and right so
there's these are comparable industries so there's a
lot of people that are like well this is going to turn into you know
synthetic whatever it's going to be and we
don't know but what i know right now is it's not you know
we are not going to go back in time this is not going away
insurance is becoming more and more under
(23:36):
you know the carriers are more willing to
write limits they're more willing to put together programs there's you know
there's more product out there now than than ever before in terms of insurance
products so i don't think that's going to go away the day that travelers opens
up and decides to write cannabis i mean I mean, that's a day, right?
(23:57):
Heartburned travelers, we're waiting for you to turn the page.
I remember one of the client meetings I had had with my marketing rep at Heartburn.
I was like, what about cannabis?
And she looked at me, she goes, absolutely not. Right.
Yep. Well, Valerie, I mean, your knowledge and how you've grown into this role
that you're in and you are the expert.
(24:18):
That's why I wanted to really learn because I am not an expert and I feel a little bit smarter.
Smarter for any of our listeners that want to get in touch we'll go ahead and
post your linkedin so if you've got questions on cannabis risks
or where to place them what to do valerie's your girl she can help you and she
also really knows a lot about you know legislation and what's going on out there
in the industry so just to pick her brain i think would be a pleasure any day
(24:39):
we hope that everybody took a little bit of information from this episode and
this week you are kept up to speed.
Ooh, do we have a good one for you today? This is Samantha here with Up to Speed,
and I am joined with a very old dear friend of mine, Ms. Valerie Taylor. How are you?
I'm well on this Friday. How are you? So good. So good. So you and I have such an interesting past.
We have kind of grown up together in insurance, but we also used to work together,
it feels like a thousand years ago, in our property insurance world.
(00:23):
Then you decided to just kind of take a little bit of a turn.
And now you are somewhat of a cannabis insurance guru.
And so that is really why I wanted to have you on today, because it's a whole
world that I know nothing about.
And I'm sure most of our listeners are kind of in the same boat.
So tell me, even like, how did you go from, hey, I'm still on property insurance.
And now like, I'm going to become an expert in cannabis coverage.
(00:45):
Yeah, it's weird. I didn't plan this. I don't think anyone in the industry really
plans to be in the industry, but specifically cannabis. Yeah.
So yes, I was heavily into the property side.
And then when adult use passed in California, I was getting phone calls from
social equity applicants at Oakland who,
(01:07):
I don't know how they found me, but they were like, I need insurance to get
my license and start a cannabis company. And I was like, whoa, whoa, whoa, whoa, whoa.
How can I do this? I'm going to figure this out.
And at the time, Golden Bear was the only carrier that would even talk about
cannabis, let alone write it.
(01:28):
So that was a while back.
And they were really the only carrier speaking about it. So they had a CE course.
I went to that in the city.
And let's see, this was about eight years ago.
So I just did a deep dive, a lot of just nerding out on like reading a lot of
(01:49):
information and about six,
seven months into me becoming interested in how I could position myself to be an expert.
I was like the light bulb went off and I was like, holy crap.
I grew up in the cultivation like world, like my, in the legacy space.
(02:11):
You know, my mom, everywhere we lived, she was growing and harvesting and selling cannabis.
And her friends were all doing the same thing.
And I didn't know, you know, at the time as a kid, it was like this big secret. I knew it was a secret.
The war on drugs was full blown, you know, their program.
(02:32):
So I was, I was in, I grew up really terrified actually.
So it took me years in writing
insurance for me to actually start
to tell clients like hey you know the reason i talk the way i do and the way
i get what you're doing is because i actually grew up in the space and then
they're like what yep so i started realizing like it's legal i don't have to
(02:56):
hide the and the fear was really that my mom would get incarcerated so i am super passionate Yeah.
(03:18):
So that's why I'm super passionate about that. And I help, you know,
wherever I can with social equity applicants and just advising them.
So I'm super passionate on that front.
But yeah, I had a full circle moment. I realized, you know, my mom would be
like, are you kidding me?
Like, you can talk about this, let alone you're insuring it.
(03:40):
Like, this is so bizarre. And so I think it's just fueled me into,
you know, it's a cannabis is it's still a small community of,
you know, whatever vertical anyone's in.
So I you have to be passionate on some level to be doing this.
And so that's that's how I got into it. Which is great because I think you could
(04:02):
relate, you know, versus being some just insurance person that's like trying
to like, you know what it's like to be on the other side of the table.
So in preparing for this, I was doing a little bit of research,
which I found incredibly fascinating.
So as of 2023, only three states, which are Idaho, Nebraska and Kansas,
have not adopted some form of cannabis, you know, acceptance or,
(04:25):
you know, medical, personal, different types of usage, you know.
So when you think about everybody but three is doing some version of it,
like how in the heck does anybody keep up with these laws, the legislation?
I mean, it's there's not an even playing field when it comes to cannabis at
all, and especially when it comes to insurance. So how does how does one even navigate that?
Yeah. So because it's federally illegal, each state can determine right on their
(04:49):
own how their stance on this.
So so over the years, you know, we say states open up.
That's sort of how how I talk about it. So the majority of states are now open.
So the needle isn't going to go backward. Right.
And California and Colorado, Colorado being the first in California and Colorado,
(05:11):
sort of the old school states that have been doing this the longest.
Unfortunately, there's not, you know, there's not like a boilerplate regulations
that every single state just gets the template and they know how to do it.
So every state has their own specific challenges. Every state has their own
specific guidelines and their own headaches and hurdles and politics.
(05:37):
I mean, a lot of this is navigating how to do it right.
And behind the intention are a lot of different types of players.
So a lot of states, for example, think, oh, this is a great tax revenue,
tax really crazy high percentages. And we're going to have all this money and
(05:58):
it's going to be amazing.
And that's what California thought. This is a cash cow, like everyone's going to be rich.
And the reality is that in California, because of the way that the federal and
state is currently set up is that businesses are taxed at 70% as we sit here today.
Day. So you tell me if you and your family spent five years saving all your
(06:20):
money, writing up an ideal business plan that was like your dream little,
let's say you want to make cupcakes.
And you're going to have a storefront. It's going to be so cute.
And you saved up all this money to do all this research. When you went to school,
you figured out how to write business plans.
You open up shop, 70% taxed. Who would be in business?
(06:41):
No one. No one wants to be in business. But with respect to the insurance part
of the equation, like a carrier, let's just say Lloyd's, for instance,
we're going to throw them into the hopper here.
I mean, it isn't a one size fits all situation because each state is going to
be treated differently?
Or do the insurance companies just not care? They're either going to write it
(07:01):
or they're not. How does that get broken out?
Yeah, the states, I mean, the carriers are either cannabis carriers or they're not. That's it.
Either we're in or we're out. Excellent.
So here's something when I was deep diving into these different types of policies and coverages.
I mean, we're going to talk about, you know, there's the flower,
the concentrate, and then the infused products, which a lot of things are infused,
(07:24):
which then qualify into this cannabis area.
All of these get treated differently with respect to insurance and coverage.
And so, I mean, how do you even break that out? What are some of the things
that if somebody were to come to you, you would need to know as an agent?
Yeah. So there's verticals. There's the cultivators.
(07:45):
There's the manufacturers. So the cultivators grow cannabis.
The manufacturers manufacturers and processors, they take the product that's
already grown and they make it into something.
Either they're making an oil that then they wholesale out and someone else makes
a cookie with it or whatever. The manufacturing is a piece of it.
(08:06):
And then you have the distributors. So the distributors are taking whatever
that product is from A to B.
And then you have manufacturing, retail, wholesale, distro, and then there's delivery as well.
Oh, yeah. There's so many different parts.
So based on that, you have different types of insurance, but really it's...
(08:31):
It's all the same with some exceptions that are very nuanced to cannabis.
So you can get insurance for anything just like any other business,
but there's different exposures that are not typical in any other type of business.
So because it's a cash intensive business, because of the way that banking is set up.
(08:53):
Let's just unpack because maybe everybody understands. the cannabis clientele
cannot necessarily get access to banking like the normal traditional businesses.
Right. So because it's federal, banks are FDIC insured and there's a federal,
right, there's federal parameters around that.
The banks that are being used are credit unions and those banks charge quite
(09:18):
a lot per month to bank cannabis cash because it has to be traced,
tracked monitored there's fees involved in doing
all that so for example it costs like two thousand
bucks a month wow to have your
bank bank your cash crazy so
your tax is 70 so anyway there's all these why we
(09:41):
call this a whole other episode a whole other episode i'll
stick to insurance okay so so yes
it's cash heavy so what that means for
insurance too though is that there's it's known right
so it's known that on site retail specifically there's
cash so if you don't have the correct protocol
(10:01):
set up where there's a daily truck coming and taking and doing deposits you're
exposed for theft theft is the most common claim that i see it's not if it will
happen it's when and that could be an entirely its own separate episode but
it all stems from the federal.
(10:21):
Banking issues yeah right so cash
intensive draws people to break in that
so then you got some property damage involved and then you've got is it the
landlord's responsibility the tenant's responsibility the lease and this and
that there's you know it's a public safety issue there's like shootouts in the
parking lot between the police force and these rings of people that are growing going around,
(10:46):
a lot of lost revenue.
And it's dangerous. And then you have product liability.
So for all of those products, like you mentioned, that are being created,
the product liability really is through the entire chain.
So everyone in the entire cycle of the supply chain should carry product liability, ideally.
(11:14):
It depends how business want to structure, you know, their, their flow.
So I have different structures that I advise different clients on how to where
to protect themselves that way.
But ultimately, if a product claim hits, and you know, everyone in the supply
chain could get named in a suit.
And so you want to be sure to cover yourself. And always even to if you're private
labeling, you've got, you know, you're buying, you know, a serum,
(11:36):
and then you're slapping your logo on it.
All of a sudden, this now becomes a bigger problem on a product liability stance.
Something that I always thought was interesting was the crop insurance, like the growers.
And could you because in the old days, like I say old days, like five,
six years ago, you couldn't insure crop like if it were to catch on fire,
you know, in our wildfires.
(11:58):
Sorry, you know, that's millions of dollars that's gone. Or if it gets,
you know, weather problems or whatever. Can you do that now?
So the last I recall, because I don't I don't I don't have any,
at this point, any more outdoor cultivators, but when I did have a few...
(12:19):
Is that not a thing anymore?
Everybody grows it in greenhouses? No, there are a lot of farms still operating,
but ensuring the crop, there was only one carrier, and I don't know if they're
still doing this, but it's extremely hard because there's too many Any outdoor elements.
Too much. Pests, mold, fire, mainly fires.
(12:41):
But indoor, yeah. You can insure that. If it's inside, under lock and key, safe, probably.
Sprinkler systems. I'm just, I'm like insurance girl racketing my brain of all
the protective safeguards.
Yeah, all the safeguards it has to have.
The entry points have to be specific to, and this is whatever type of vertical
(13:03):
you're in, you have to have certain things in place in order for theft coverage to kick in.
So if you don't have the right vault, if your safe isn't bolted,
if you don't have keyless entry to certain entry points where there's cultivation,
if there's not sprinklers, all of that stuff, and something happens,
a covered cause of loss, but you don't follow the warranties of your policy,
(13:24):
you're out of luck. Yeah.
Now, how hard is it to find other lines of insurance like comp and EPLI and
those types of other lines for these industries?
Because, you know, the GL, they don't have problems with it.
I mean, it's, yeah, it's so much easier today than when I started.
Like I told you, you couldn't find, there was state fund, there was one work
(13:46):
comp carrier, and there was one package carrier.
And now there's programs put together.
There's you know there's for delivery you
can you can have an entire fleet i mean the auto
coverage so you've got property and transit because you've
got all this cannabis high value product and cash you know
all over driving around do you know you can get cyber everything that's key
(14:12):
man you can get your pli work hump is is i mean it's easy to get but it is one
of the lines where there's not a ton of options.
Yeah. So there's a lot of property liability carriers and programs now.
Workers comp, it's growing, but it's still a handful.
(14:35):
So the normal like, you know, GL policy is going to have the normal limits,
just like you would see your occurrence, your ag, you know, your personal advertising injury,
product liability, we've talked about crop, the theft part, is that something
that you you would almost buy a separate policy for, or is it something that
is included in many of these property policies?
It should be included in the property. Yeah. It's like any other property policy.
(15:01):
Yeah. There are guarantees that are unique to cannabis.
So what's like the most psycho is claim that you've seen? Because I know you've seen some great stuff.
Like the thing that you're like, oh, this is interesting.
I would have to say.
So it's a retail, there's a retail cannabis store where a car runs into,
(15:29):
you know, the front glass, which this is actually common.
This part's not unique, but they run into it. They cause all this property damage to the building.
Violet Clay, all this product is stolen. Maybe there was like 15,000 in cash,
not much, but a lot of a significant amount of inventory stolen.
(15:49):
The, my client was the tenant and I'm like, okay, you know, sorry that happened. Let's file a claim.
Well, then I get a claim from the landlord and I'm like, you're,
we don't, you know, we don't do that.
And I had talked to him when I gave him a certificate and I was like,
well, who's your carrier? Cause you need a cannabis friendly real estate carrier on your building.
(16:13):
And he's like, well, I have state farm. I'm like, well, I'm sorry to tell you,
but they're not in the business of insuring cannabis operations.
And by you being a landlord, you are in the business of cannabis,
whether you intend to be or not. This is how it's seen.
And if you have a traditional mortgage, your assets are exposed to federal seizure.
You might want to just know this.
(16:35):
He didn't like this conversation. No, bam. Word.
Fast forward. It gets, he said, I need your help. My building's damaged $300,000. They smashed him.
So I said, okay, we'll file a claim. You know, that's your part.
I've read the lease. We'll do our part. You do yours.
State Farm denied the claim. He tries to subrogate. And I'm like,
I told you. This is crazy. So there's...
(16:59):
There are investment opportunities for people who hold assets and want to lease.
There's a lot of opportunities because you have to have a property.
You have to have real estate to apply for a license.
And so there's a lot of economic opportunities for landlords and to make sure
(17:22):
that you're zoned right and all that good stuff.
However, you need a broker who understands that you have a cannabis tenant because
it's too often I've seen they try to go under the radar because it's cheaper.
It is cheaper. Of course.
And then something happens and that includes fire. And, you know,
so I haven't seen like a straight up we're denying a fire claim.
(17:45):
I'm just saying that this particular scenario is one that sort of crushed me
because I'm like, you know, I get into these, I told you so.
Yeah. Discussions. A hundred percent. And, you know, a lot of times people don't
know what they don't know.
And they think that that's like a box that they don't need to disclose.
And unfortunately, it is a big one because the bread and butter carriers are,
(18:07):
you know, especially in today's market in California, I mean,
they're any time that there's a way to not have to cover something,
they're looking for it, friends.
So one of the other things I dig about you is your, you know,
we've just spoken when we started this conversation about you,
you know, being very involved in the,
you know, justice part of this pie and also the legislation and understanding
(18:28):
what is actually going on.
So it's not a lot of times that you find someone that's in the space that you're
in or any space for that matter when it comes to insurance and is super up to
know about what's going on out there.
So I follow you on all the different socials and you are bebopping all around
town, going all kinds of places to Sacramento, to Washington,
D.C. I mean, you're having high level conversations.
(18:50):
What's going on out there? I mean, what do we have? I mean, I'm sure 2025,
there's going to be some new rules and regs coming out. So what do we know?
Yeah, so I go to D.C. I enjoy it. I'm with NCIA and on the state regs committee.
But the lobby days is really something that I'm very passionate about.
(19:11):
It's really talking to state legislative staff on the federal part of all this.
So, you know, if anyone in this industry cares, they have some information about what's going on.
So currently what's going on is the the
DEA has recommended rescheduling cannabis from
(19:32):
a schedule one to schedule three so on a
high level just really simply you know schedule one
is cocaine heroin those types
of drugs and schedule three
is like it's prescription
medications so one
(19:52):
of the main one of the main aspects of schedule
one and how it directly impacts cannabis companies is
280e which is a tax law which was invented to
long ago by drug lords and
and people that are we're trying to write off business expenses by selling heroin
and drugs so there was a law that said if you're trafficking a schedule one
(20:16):
drug you can't write off business expenses so fast forward now we're discussing rescheduling.
Ideally, we want to de-schedule, which would just remove cannabis entirely off
of any of these schedules.
So schedule one to three would eliminate the 280E tax issue.
So there's a lot of perspectives going right now on is this good or bad?
(20:41):
Would this put people out of business? Would this help businesses?
So at the end of the day, it really depends who you talk to,
but from my perspective on how I can plug this with insurance is that insurance
is a business expense that no one can write off right now.
And so everyone's cash, you know, cashflow issue, everybody has cashflow issues.
(21:02):
They can't go and get a traditional loan.
So it's just operating with super tight margins, massive cashflow,
you know, issues and strategic alignment.
Like annually i have clients where we have to strategize when
do you want your insurance to expire so that you're all of
the economics makes sense yeah do you want to pay
(21:23):
on the back end at an audit because right now you got it you know it's a it's
a different model that you got to talk to these businesses about so the 280e
issue would eliminate some of that it would make it so you can write off insurance
it would make it so you could write off normal customary business expenses that
any other business could,
which, in my opinion,
(21:45):
in California could possibly help buoy an industry that's.
Yeah. Very, very wobbly right now. I think it's fascinating how one part trickles
down to so many different parts.
And one thing I can say about the cannabis clients that I do have,
they always pay on time and they always pay in cash.
(22:08):
I remember the first time I ever
had a property owner come into the office and gave me $10,000 in cash.
And I was like, Like, I, you know, not normal, but we'll take we'll take the money.
It's a very interesting space and it's evolving constantly, which I think is the coolest part.
You know, in your thought process of the things that you're seeing just nationwide,
(22:28):
I mean, do you see a world where this is, you know, not such a,
you know, frowned upon industry across the nation?
Or do you think we'll be in this flux for forever? I think that the more that
I think it's normalizing every day, this is becoming more normal,
that there's an upside to that, which makes it more of legitimizing, right?
(22:54):
This is a legitimate business. These are legitimate people.
That also opens to what does that mean for the industry that has been unique
and niche and community sort of oriented?
So the talk is big pharma is next yep and what does that mean so if you look
at you know alcohol and prohibition.
(23:14):
And you look at big tobacco and right so
there's these are comparable industries so there's a
lot of people that are like well this is going to turn into you know
synthetic whatever it's going to be and we
don't know but what i know right now is it's not you know
we are not going to go back in time this is not going away
insurance is becoming more and more under
(23:36):
you know the carriers are more willing to
write limits they're more willing to put together programs there's you know
there's more product out there now than than ever before in terms of insurance
products so i don't think that's going to go away the day that travelers opens
up and decides to write cannabis i mean I mean, that's a day, right?
(23:57):
Heartburned travelers, we're waiting for you to turn the page.
I remember one of the client meetings I had had with my marketing rep at Heartburn.
I was like, what about cannabis?
And she looked at me, she goes, absolutely not. Right.
Yep. Well, Valerie, I mean, your knowledge and how you've grown into this role
that you're in and you are the expert.
(24:18):
That's why I wanted to really learn because I am not an expert and I feel a little bit smarter.
Smarter for any of our listeners that want to get in touch we'll go ahead and
post your linkedin so if you've got questions on cannabis risks
or where to place them what to do valerie's your girl she can help you and she
also really knows a lot about you know legislation and what's going on out there
in the industry so just to pick her brain i think would be a pleasure any day
(24:39):
we hope that everybody took a little bit of information from this episode and
this week you are kept up to speed.
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