In the age of virtual gatherings, Attorney Rabih Hamawi (Chair of the Insurance and Indemnity Law Section of the State Bar of Michigan, and Principal at the Law Office of Rabih Hamawi) took the digital stage as the keynote speaker in a Zoom conference. This online event provided a unique platform to explore the intricacies of property insurance as it intersects with the rapidly growing cannabis industry.
With a distinguished career as a solo practitioner specializing in fire, property damage, and insurance-coverage cases, Hamawi's insights are second to none. What sets him apart is his background in insurance coverage and insurance litigation.
Cannabis Industry Legal Distinctions:
Licensed companies in the legal cannabis industry, including sales, manufacturing, cultivation, transportation, testing, and related goods and services, face a crucial legal distinction highlighted by Mr. Hamawi. Products with over 0.3% THC are federally illegal, impacting insurance coverage and potentially leading to involvement with excess and surplus lines companies beyond admitted carriers.
Property Insurance Risks in the Cannabis Industry:
While cannabis businesses share a need for property insurance to protect assets and income, their increased risk stems from the unique nature of the industry. Specific products and supply chain intricacies elevate the potential for property damage losses, making insurance more challenging.
Operational Details and Insurance Disclosures:
Attorney Rabih Hamawi underscores the importance of disclosing operational details within the cannabis industry, particularly for insurance underwriting. This transparency influences exposure to property losses, with different risks for growers and retailers. The disclosure's impact on premiums is evident, with retailers potentially facing higher costs due to increased customer traffic and liability issues.
Essential Insurance Needs for Cannabis Businesses:
Outlining essential insurance needs for cannabis businesses, Mr. Hamawi emphasizes property coverage, including buildings, equipment, and inventory, as well as business income. He highlights the increased risk associated with cash transactions, the importance of liability coverage for defective products, and the rising need for umbrella and cyber liability coverage.
Commercial Auto Coverage and Personal Lines Challenges:
Attorney Rabih Hamawi addresses additional insurance considerations, such as commercial auto coverage for businesses with relevant exposure. He delves into challenges with personal lines policies, citing relevant case law, and emphasizing the limitations for cannabis-related losses. The discussion touches on cargo in transit and its often-limited coverage.
Challenges and Shifts in Cannabis Insurance:
Attorney Rabih Hamawi provides insights into the challenges of insuring cannabis businesses, anticipating potential shifts in federal classifications. He stresses accurate disclosure's role in impacting policy exclusions and emphasizes the crucial need for a centrally monitored fire alarm as a protective safeguard when policies require it.
Product Liability and Exclusions:
In examining liability within the cannabis industry, products with potential health risks, such as those causing cancer, may face exclusions from coverage. Assumption of risk, a defense in products liability, comes into play, emphasizing the importance of understanding potential health complications associated with product use, including vaping. Hardware exclusions and governmental acts exclusions further narrow coverage, highlighting the complexities of insurance within the cannabis sector.
Faulty Products, Premises Limitations, and More:
Exclusions associated with faulty products raise questions about when a product is considered faulty, either during manufacturing or at the point of sale. Designated premises limitations become crucial, as coverage for locations like kiosks may require specific scheduling. Ingredients exclusion and adverse health effects add layers of complexity to policy considerations, requiring a nuanced understanding of what is deemed faulty or harmful.
Lessor's Risk Only Endorsement and Policy Conditions:
Examining a case involving the lesser risk only endorsement, it becomes evident that compliance with specific conditions is vital. Lack of a written lease agreement and failure to name the landlord as an additional insured can void coverage. Understanding policy conditions, even for lesser risk policies, is crucial to ensuring coverage in the event of a claim.
Future Trends and Considerations:
Anticipating the future of insurance in the cannabis industry, Mr. Hamawi emphasizes the dependence on federal changes and the evolving loss experience in each state. The discussion touches on policy-based defenses raised before litigation and the challenges of obtaining coverage, highlighting the need for tailored policies based on individual cannabis operations.
If your insurance company has denied, delayed, or underpaid your insurance claim, contact Law Office of Rabih Hamawi for a case evaluation at (248) 905-1133 or www.hamawilaw.com.
Who is Rabih Hamawi?
Attorney & Counselor
Rabih Hamawi is a principal at the Law Office of Rabih Hamawi, P.C. and focuses his practice on representing policyholders in fire, property damage, and insurance-coverage disputes against insurance companies and in errors-and-omissions cases against insurance agents. He may be reached at (248) 905-1133.