Cannabis Insurance Tips to Handle a COI and Additional Insured

Here’s a scenario we hear regularly: You have cannabis insurance, but your startup must provide an additional insured endorsement and certificate of insurance. If you’re like most cannabis company leaders, you scratch your head and ponder, “What the heck is that?”

Let’s tackle both of these common requirements so you can take on the next big contract with ease.

Additional Insured Endorsements

Additional insured endorsements on a cannabis company’s insurance policy adds another person or entity to the policy, effectively giving the “additional insured” coverage.   

If you’re running a cannabis-related company, you’ll undoubtedly run across this requirement in contracts. It’s a common feature in vendor agreements, commercial leases, service level agreements, and manufacturing agreements.

When endorsing the policy, the underwriter will classify the cannabis business based on its operations. However, exposures aren’t always aligned when two businesses create a partnership. Adding that new partner as an “additional insured” ensures that the new partner’s operations are contemplated by the insurance policy.

Example #1

Let’s take a vape pen manufacturer, for instance. A dispensary or distributor strikes a deal with the vape pen manufacturer, who will want to be added as an additional insured. If a manufacturing defect claim comes in against the retailer or distributor, they’ll want to ensure that the manufacturer’s insurance kicks in to provide coverage.

Example #2

As another example, consider a landlord/tenant relationship. The landlord may want to be added to the tenant’s insurance policy — for a good reason. The landlord doesn’t have control over what goes on in the tenant’s office, especially when this turns into large scale cultivation. If the tenant (a cannabis company) decides to host a yoga class for employees, the landlord doesn’t want to be responsible for injuries arising from tenant’s actions.

Caveat

One important caveat; being added as an additional insured to another’s policy does not completely cover your company. An additional insured endorsement just creates a pecking order of insurance policies.  

In our example above, the vape pen manufacturer’s coverage would kick in first. The distributor is exposed and will have to pay out if the claim exceeds that coverage.

The Takeaway

An additional insured endorsement extends the insured’s policy to cover other entities with whom the insured company is partnered. (It’s a common requirement so don’t be surprised when it pops up in a contract.) 

Depending on the partner (landlord or vendor) and industry, additional insured endorsements are often required pertaining to your general liability, cyber liability and professional liability insurance policies.

Endorsing a general liability policy is almost always free of cost — but there may be a fee to endorse other policies, such as cyber liability or professional liability.

Certificates of Insurance

To put it simply, a certificate of insurance (COI) proves you actually have insurance. It’s usually a one-page document detailing the coverage actively in place. This includes effective dates, limits of coverage, and insurance carriers providing the coverage.

Certificates of insurance are the simplest method to show that contract requirements relating to insurance have been met. Rather than reading through your full policies, your partners/landlord can quickly review a certificate of insurance then file it away.

Pro Tip ↓

For more in-depth information about COIs, see our post: What Is a COI, and Do I Need One?

Typically, a certificate can be produced as soon as the insurance policy listed is in force. To speed up the COI production, make sure to relay to your broker:

• The full name and address of the additional insured
• Any specific language the additional insured requires on the certificate

Your broker will generally ask to see the clause in the contract to make this process more seamless.

Protecting your cannabis company can seem confusing; however, we’re a full-service insurance brokerage working with carriers worldwide to offer you the best coverage possible. We’re here to help! Please reach out to us today by emailing [email protected] or calling 646-854-1093 for a customized letter of commitment or learning more about your cannabis insurance options.