Cannabis Delivery Services: The Insurance Considerations for 2023

In the United States the cannabis industry has been rapidly growing and is projected to reach as high as $3.7 billion by 2027. While cannabis (on a federal level) is still being classified as a Schedule I drug, many states have legalized cannabis for both medical and recreational use and because of this, new business opportunities have emerged to the industry.

As a result of the ongoing COVID-19 pandemic and lockdown orders, an increasingly popular service within the cannabis industry are delivery-only dispensaries. For example, Apple’s App Store Review Guidelines, updated June 7, ban “facilitating the sale of controlled substances” but made an exception for “licensed or otherwise legal cannabis dispensaries.”

The guidelines have noted that as the demand for more shopping and delivery options increase and delivery services likewise increase, cannabis businesses should review their insurance coverages to make sure that they have enough coverage for delivery operations. The following options are some coverages that cannabis delivery services might consider.

1. Business Auto Insurance

Many of the cannabis delivery services use their own cars and personal auto insurance coverage. However, most personal auto policies have exclusions for business use and if the driver gets involved in an accident while engaged in a delivery, the policy might not cover the damage to vehicles, third party property and medical bills, on top of that the business may be held responsible for all damages. This is the main reason why cannabis businesses should consider acquiring a business auto policy to cover both owned and hired vehicles, independent contractors and employees, and the product that is being transported. It is important that the business discloses that they are transporting cannabis products so that the policy will have the necessary coverage.

2. General Liability Insurance

This coverage is not always required for a cannabis license; however, it is worth considering because it provides coverage for bodily injuries, protection from property damage claims, medical expenses and associated legal fees. While a delivery-only cannabis business does not encourage customers to physically visit the store, general liability insurance is not limited to business premises, and third-party claims remain a reality because accidents may occur during a delivery and can result in serious injuries and liability claims.

3. Property Insurance

Property insurance generally covers a business if the business’ property, equipment, or assets get damaged or stolen. On the other hand, property insurance does not cover property in transit, or property that is owned by another person.

4. Product Liability Insurance

While property insurance protects the cannabis business’s commercial property (including inventory from perils such as natural disasters and theft), the right product liability coverage is necessary if a product results in harm or unwanted side effects. Product liability coverage also covers claims related to product defects.

5. Cargo Insurance

While coverage for a business’s cannabis products (stock and inventory) or cash in transit (money/securities) can often be purchased as part of the property coverage, the policy generally does not cover goods that leave the premises, or if the covered goods are owned by someone else. Cargo coverage can help cover physical loss and damage to cannabis products once they are in transit.

6. Workers’ Compensation 

This insurance policy is mandatory in most states. Workers’ compensation generally covers medical expenses, death benefits, lost wages, and rehabilitation for injured employees. The coverage applies to injuries employees sustain while on the job. Documentation of the connection of employment is important in claims, especially in the context of delivery, in which the worker is away from the workplace.

Looking towards the future we can see that as cannabis deliveries continue to expand, new coverages and exclusions will emerge. As a cannabis business owner, it is important to review all your business insurance policies routinely as to avoid unexpected gaps in coverages or any exclusions.

For more information, contact Cover Cannabis now!