Like companies in any other industry, licensed cannabis companies typically carry insurance and sometimes find themselves at odds with their cannabis business insurers. Those companies purchase a policy to cover a specific risk for a stated premium and when that risk presents itself, their business insurers suddenly have fine-print explanations for everything.
In these situations, gone are the broader conversations about coverage for theft, or insuring the risk of a fire, or the downside protection available for financing. Suddenly, those broader conversations are replaced with terms and phrases like “subrogation,” “failure to cooperate,” “timely notice,” and “reservation of rights.” Many cannabis companies in this position find themselves wondering what comes next and how they might maximize their chances to collect any coverage for the premiums they paid.
Often, when a business insurer denies a claim for any reason, the policyholder must institute a “coverage action” alleging breach of contract claims, seeking declaratory relief, or both. In some circumstances (involving particularly ornery insurers) claims for bad faith might also be available. Depending on the particular claims at issue, and the resources available for litigation, cannabis policyholders should prioritize three primary before at the commencement of any coverage action.
Where should we