Area Code 420 (AC 420): What type of insurance is available to companies selling CBD and hemp products?
Doherty: All types of commercial insurance are available. However, far and away the most important insurance purchase, and the hardest to obtain, is commercial general liability, including product liability insurance. This will help the company sleep better at night and/or pave the way for entering a retail facility with its brand. With more large retailers such as CVS, Kroger, and Vitamin Shoppe starting to sell CBD products, the need for this insurance will only increase as the CBD market expands. Other types of commercial insurance, such as automobile, worker’s comp, directors and officers, and property (fire) insurance, are relatively easy to secure, in comparison.
AC 420: Didn’t the passage of the Farm Bill open the door to legal selling, thus making insurance coverage as easy as purchasing auto insurance?
Doherty: No. Remember that insurance companies are cautious beasts. Just like the merchant banking industry, many insurance companies are still sitting on the sidelines with respect to insuring CBD. It is true that two or three more insurance companies did start offering liability insurance for CBD after the Farm Bill passed, but as of this interview, there are still only a handful offering liability insurance for the CBD industry.
AC 420: Where does insurance stand as it pertains to cannabis, either recreational or medical?
Doherty: I am not trading in cannabis, only CBD. I decided to stay out of cannabis because the availability of insurance for that industry is even more limited than that for CBD. There are plenty of people out there holding themselves out as cannabis experts and I am not one of them.
AC 420: Can all areas of CBD and hemp growers and product manufacturers obtain insurance coverage and what might the cost be?
Doherty: Yes, insurance is available but again, the market is thin. Hemp growers can get crop insurance. CBD extracting facilities, wholesalers, and retailers—be it their own brand or white label—can get insurance. Because the market is limited, you need to know where to look to get it.
AC 420: Can product testing labs get coverage?
Doherty: Yes. This is not a problem because the labs are not selling CBD products for human consumption. The kind of insurance they need for this is called errors and omissions, not product liability, and yes, it is available.
AC 420: Is there a way to compare insurance company costs (i.e., shop around)?
Doherty: There is nothing wrong with shopping around. However, all carriers selling CBD liability insurance command the use of a broker. Further, broker shopping is a bad idea for two reasons. First, what most people do not realize is that an insurance company will only work with one broker at a time; in other words, the insurer won’t release multiple or different quotes to multiple brokers. Second, when you are talking to brokers who aren’t knowledgeable about CBD, they may give you a broker quote, which is worthless and will probably only serve to confuse. Yes, one should shop for the broker who exhibits the most knowledge on the subject and select that broker to approach the viable CBD insurers on their behalf.
AC 420: As a supplement industry insurance expert, how do you think the insurance industry will evolve around the CBD and hemp marketplace?
Doherty: I believe the availability of insurance products for the CBD industry will definitely expand, which will of course increase competition and lower prices. I am not sure of the timing, but I believe as the industry matures, insurers will begin to smell what I call “the perfume of the premium” from CBD companies.
Sheldon Baker is CEO of the Baker Dillon Group LLC and has created numerous nutraceutical brand marketing communications and public relations campaigns for many well-known supplement and food industry companies. For Health E-Insights interview consideration or brand marketing consulting, contact him at Contact@The420AreaCode.com.