Tommy Truong: [00:00:00] The legal language in insurance policies is insane.
Michael Sampson: Yes. It's its own language. But I think, one of the things that's important and it's important not just insurance coverage, but it's important in all contracts: language matters, words matter whether it's an insurance policy, whether it's in a contract, whether you're reading and interpreting the document.
or whether you're drafting the document and paying attention to detail and acting intentionally and thinking through these issues, thinking through and testing what could happen if it's written this way, what could happen if it's read, written that way.
INTRO: Welcome to the KayaKast, the podcast for cannabis businesses looking to launch, grow, and scale their operations.
Tommy Truong: Michael, thank you so much for joining us.
So you have extensive experience helping dispensaries claim insurance when something [00:01:00] goes wrong. What are some of the insurance policies that a dispensary owner should look at when starting their business.
Michael Sampson: that's a great question, Tommy. And one point, even before we get to that, as you mentioned, my experience working with dispensaries when something goes wrong and implicit in your question, I think, is a really important point, which is you don't want to wait to deal with insurance until something has gone wrong.
Because back when I practiced as counsel to clients, I can't say how many times you get the phone call. And you say if you'd called me six months ago, we could have avoided this problem. And certainly one way of avoiding the problem is by making sure that you have the right insurance from the get go.
And we can go into any more detail that you want, but there's a number of insurance policies that I think a dispensary wants to be considering. One obviously is a property insurance. If you have your own building, you want to be protected against fire or [00:02:00] some sort of physical damage to the property.
You want to have general liability insurance that way if God forbid somebody slips and falls and sues you inside the slips and falls inside the dispensary and sues you're covered but beyond that, obviously you want to have products liability insurance You're selling you know as the case will be Something that's ingested or topical something that has the potential to cause bodily injury.
And that's why you want products, liability insurance. And then I think one that really gets overlooked a lot is cyber insurance, right? Dispensaries and others in the cannabis industry are acquiring lots of data and it puts them at risk for various bad Actors bad actions. So having cyber insurance is really important.
And then beyond that, you start getting into things like professional liability insurance. If you have a pharmacist or doctor, you might need some sort of malpractice insurance and directors and officers. Insurance is another one. That can be really important, [00:03:00] especially if you're trying to attract, individuals to serve on your board.
So we could discuss any of these, and there's certainly more coverages that a dispensary or anybody in the cannabis industry wants to have. But those would be some of the big ones to start.
Tommy Truong: So the property insurance, if I don't own the property, do I still need it?
Michael Sampson: Yes, because it can ensure both the physical building, but it can also ensure business property, business personal property. So if you have your own property inside the building, you can have coverage for that as well. You may need less. You may need different, but you can't avoid it altogether because you want something that's going to cover your business, personal property, and perhaps even other personal property.
The other thing that property insurance can do for you is it often includes what's called business interruption or extrinsic expense insurance. And that way, if there's some sort of property damage that [00:04:00] occurs and it prevents you from being able to operate your business or forces you to incur extra expenses, there may be insurance available for that as well.
And that can be available even if you're not physically owning the structure.
Tommy Truong: Oh, okay. Got it. And what are, what's typical to insure if you don't own the building?
Michael Sampson: I think, you're insuring again, what we call business personal property or business property. It can be any of the property that the dispensary owns on the inside, whether it's display cases or, sometimes it can be inventory, although with cannabis, you may need a separate policy, but you can also be looking at coverages for inventory and other products.
You can be looking at coverage for if there's tenant improvements in the structure, tenant
Tommy Truong: Can I buy insurance? Can I cover inventory under property and also under product liability? Can I double up?
Michael Sampson: No, you might be able to copy both, but under property, the idea is if the, the inventory goes up and smoke, goes [00:05:00] up and fire and use it. Products liability would be if your inventory or product harm somebody else. So they're really intended to serve two different purposes.
Tommy Truong: So you would include both. It's just different purposes. So, sticking with property. You've probably helped a lot of dispensaries claim property insurance. What are some of the terms in property insurance that owners should be wary of?
Michael Sampson: Yeah, I think there's, there's a variety of things that when placing insurance or pursuing insurance, you need to be aware of, and just to tick off and some of them are applicable to all. First of all, making sure you've named the right entities, right? Especially in the cannabis industry, we often see Companies that have multiple companies, maybe an operating company, a holding company, you want to make sure that anybody who's going to need that insurance is listed or qualifies as an insured on the policy.
You want to make sure that the [00:06:00] locations are listed correctly. If you have a multi location dispensary, you want to make sure the values, how much is the property worth, are listed correctly. You also want to make sure that you have, to that end, therefore, that the limits. Are correct and available and you want to get if you can in my opinion as broad a coverage as possible There's a form out there.
It's called the special cause of loss form which basically says damage caused by anything Unless it's specifically excluded Is covered as opposed to trying to enumerate or list the certain things are covered. So if you get that special form you certainly are better off. You want to be cognizant, whether the policy that you have covers gardening covers the actual plant if you're maintaining it.
And so I think, those types of issues, especially around property insurance. are really important. The other thing that can often be important with property insurance is you may have specific requirements of things you have to [00:07:00] do. So if it requires, for example, having a sprinkler having some sort of fire suppression system and you don't have that may be a basis for the insurance company to avoid coverage.
So taking those types of requirements that are in your insurance policy or that are imposed by your insurer seriously and following them helps protect insurance in the long run.
Tommy Truong: interesting that form that you mentioned, how common is that? Or as somebody that do I, I'm getting insurance. Do I request that from my broker that, Hey, there's property insurance. Can I get that exclusion form or
Michael Sampson: The special cause loss. My experience is more policies than not include it, but it's definitely something you should talk to your broker about. And, to put a more finer point on it. And one of the reasons that your symphony grow and symphony risk are able to help their clients and do what we do is because you really want to work with a broker that is knowledgeable about the cannabis industry and able to help you walk through these issues.
And that's what we do with clients. All [00:08:00] the time, because as you can tell, Tommy, from your, your questions nobody really likes or think about insurance, right? This is not like sexy and fun. And so working with and relying on experts who are familiar with both insurance and cannabis is really important for dispensaries and others in the industry.
Tommy Truong: So general liability. In essence, what is it and what should I, sorry, general liability, what is it and what is, what are some of the terms that I have to include? What are some of the things that I must have under general liability?
Michael Sampson: So general liability insurance is generally going to cover you for bodily injury. or property damage caused to a third party. If you think, about your auto insurance if you run into somebody else, that's a liability claim. If your car gets damaged, that's a property claim.
We talked about property, so now we're thinking about things that happen that could cause injury to a third [00:09:00] party. Somebody walks in and slips and falls on your floor. Cash register, falls over and lands on somebody's toe and breaks their toe. You name it. So somebody that's causing liability to a third party, there's also a portion of general liability insurance that covers personal and advertising injury.
And that can include everything from defamation to false. So that coverage is really important because you're gonna have people passing through the dispensary, right? And the possibility of a slip and fall, the possibility of somebody slipping in the parking lot, whatever it may be. And so having the general liability insurance really protects you, especially when you have a space that's open to the public.
Sometimes, by the way, I'm sure we'll talk about more products. Liability insurance can be found within a general liability policy. You can offer both. What we call GL coverage and products coverage. And sometimes you need a separate policy for products coverage.
Tommy Truong: When would you want to separate it?
Michael Sampson: You [00:10:00] necessarily would, there's no reason that you would want to.
Oftentimes insurers are only willing to sell certain or make both available. So you can't just assume when you buy a general liability policy that there's going to be products coverage there. You need to look and make sure, and if it's not there, either find a policy that offers both. Or get a separate products liability policy.
Tommy Truong: What are some terms? In insurance agreements that have tripped up claims.
Michael Sampson: How long do you have? There's plenty, and it can run the gamut from absolute mundane. We've seen, we've litigated back when I was litigating. The difference between an insurance policy covering the insured versus a insured. It can really get down into the nitty gritty.
At the same time, the idea of what's covered is something, a bodily injury. Did it occur [00:11:00] during the policy period, if necessary, or was the claim made during the policy period, was notice timely given? And I do want to flag that for your listeners. Tommy, one of the most important things with any insurance policy, if you have a claim, is to make sure you're giving timely notice because that is often a precondition to coverage and insurers.
Tommy Truong: you mean by that?
Michael Sampson: So most insurance policies, maybe all insurance policies, have a provision in there, but usually it's a condition that sets forth the policyholders duties. In the event of a claim or a loss or an occurrence, and usually what it says is something to the effect of if a claim occurs or an occurrence that may give rise to a claim.
So if something happens, even if you haven't been sued, but it could lead to you getting sued, you have to give notice to the insurance company and they'll usually say things like as soon as practicable. as soon [00:12:00] as possible, sometimes immediately, sometimes as soon as somebody within a certain group, the CEO, the GC, learn about it.
There are two different types of policies and I don't want to get too insurance coverage geeky here, although I, Love being an insurance coverage nerd, love being a cannabis nerd. You can get what's either called an occurrence policy, which means if something happens during that, during the time that policy is in effect.
So let's say somebody slips and falls today, and you have a policy, a GL policy in effect, it's an occurrence based policy. And it happens today, then you look to see when did the accident occur. It doesn't matter when you get sued, that policy is going to provide coverage so long as the accident happened during the policy period.
There's also something called a claims made policy. And for a claims made policy, the claim itself, you look to not when did the accident occur, you look to when was the claim made. And [00:13:00] so the claim has to be made while the policy is in effect, and in particular, the claims made policy. If you don't give notice while that policy is still in effect, the insurer may say, Nope, you didn't give timely notice.
You didn't do it. You didn't meet the condition. We don't have to provide insurance. So it's really important to know. Do you have a claims made policy? You have an occurrence policy, which, we help our clients with all the time to
Tommy Truong: Are incur, occurrence policies more expensive? Why aren't,
Michael Sampson: generally speaking, they can be more expensive and you picked up right away, because they don't ever stop being available. And so they insurance companies tend to like those less, cause they offer less certainty. And definitely, tend to be more expensive.
The cannabis industry, pricing is a little bit wonkier. It doesn't necessarily follow all the same rules, but generally speaking, across insurance and occurrence policy is going to be, all things being equal. Most things aren't equal all the time is going to be slightly more expensive just because it [00:14:00] provides for coverage that doesn't
Tommy Truong: What would you recommend? Let's say, is it 25 percent more expensive? Is it 50%? And within those parameters, where would you go?
Michael Sampson: know, I don't know, I don't have that data at my fingertips as somebody who deals in the insurance claims world. And that's what I do at Symphony Risk. We have wonderfully talented insurance brokers who spend all day with the cannabis industry who I work closely with, but I'm not a broker. I deal with claims and lead our Symphony Solve claims team.
And in that capacity, I always argue for get, as much coverage, get as much protection reduce your risk as much as possible. Now, of course, that's not always. Cost efficient, business friendly, and businesses need to weigh their weigh their risks, weigh their risk tolerances, but, all things being equal, I would always rather have an occurrence policy [00:15:00] than a claims made policy because it's there, and so you look, for example, and I don't want to get too,
Tommy Truong: No, please. I think everybody listening, it's highly, they're, we're all highly interested in this.
Michael Sampson: they're all asleep right now, but that's okay. I appreciate your saying that. If you look at the history of toxic torts, so take asbestos, For example, somebody who was exposed to asbestos from 1960. To 1974 and was diagnosed with mesothelioma in 2000, if it's a claims made policy, the only policy that they're gonna, potentially be insurance for is 2000.
But if it's an occurrence policy, and I won't belabor the test to get you there, but if it's a occurrence policy, every single policy between 1960 and 1974 may be available to cover the loss. And it's just one more, consideration, we see, I will say, and I'll defer to my colleagues at Symphony Grove, but my experience historically certainly has been that you tend to see more [00:16:00] claims made policies in the cannabis industry for whatever reason.
And so it's sometimes harder, especially products liability again, historically to get an occurrence based policy, never hurts to ask. And again, I'll keep harping on it. That's why working with a broker who knows the industry and knows what to ask is so important. And that's what we do all the time for our clients.
Tommy Truong: So what are some other top reasons claims get denied?
Michael Sampson: Um, claims get denied for all sorts of reasons, right? So an insurance policy, and I'm sure you and most of your listeners know this, can basically be broken down into a few different parts. There's the insuring agreement or the coverage grant. What is covered? And then there's terms and conditions.
What do you do in the event of a loss? And then there's exclusions. The exclusions are what the insurance company generally relies on to try to defeat coverage. And just as a note the general rule is coverage grants get interpreted [00:17:00] expansively. And exclusions are supposed to be interpreted narrowly.
Doesn't always, play out that way, at least in the first instance, but there can be any number of exclusions that an insurance company may look to. And, in particular in the cannabis industry, you may see insurance companies rely on health hazard exclusions. Carcinogen exclusions, back in the day, and it's really not the case anymore, but in the early cannabis days, they were relying on legal contraband exclusions, saying, whoa, we said we don't insure contraband, this is against public policy.
Thankfully we've moved past that stage in the insurance battles, but you can see battles, that are specific to cannabis. Like those or you may just get back to is it an insured who's an insured? Is it an additional shirt? Do you have rights under the policy things like that?
And then you get in depending on Which path you're headed down, there can be vape exclusions or product specific exclusions you know throughout time there have been vape exclusions that turned on the [00:18:00] name of the Manufacturer or location from which they were coming So again, and I think I don't want again.
I want to get ahead of ourselves here tommy But I think this is why it's so important And where we started, which is do your due diligence at the beginning because, when you get an insurance policy, nobody wants to read it, right? But it's worth working, walking and working through, know what's in there, know what's covered, know what isn't covered.
Because it gives you one, the opportunity to go try to get a different policy if you don't like the one that's, out there, the one you have. And two, it gives you the opportunity to conform your business operations. To meet you have a policy. So if you have a policy that says we're not going to cover X, maybe you don't do X, and so I think it's
Tommy Truong: heard insurance policies that require a specific type of safe, for example, or like very minutiae. requirements. Have you seen these requirements I guess being leveraged to [00:19:00] not pay out payments or claims?
Michael Sampson: absolutely a hundred percent. And that goes back to some of the things, again, that we were talking about earlier is you need to make sure you're doing what the insurance policy. Requires you to do so in a crime policy. In other policies, you may see requirements for a certain type of safe, for a certain thickness of display windows that a safe be bolted to the floor that cannabis be kept in a safe as opposed to In some other room or something like that, and insurance companies absolutely will use the alleged failure to comply with those requirements as a basis to deny coverage.
Now, their interpretation and the policy was interpretation may not align. I've seen, believe it or not, I've seen disputes over what constitutes a safe. And, whether that really means or vault rather, what causes a vault, does that have to be like a vault in the bank where you're, or is it enough that the, it's a separate room set off and locked and [00:20:00] hermetically sealed.
So as clear as some of these things may seem, At the end of the day, if it ends up being a dispute, it's really important that the policy holder, not just accept whatever's presented to them, but do their own due diligence and think through the issues because nothing is ever as simple as it seems, but to your point, definitely, insurers will use those what they call subjectivities or other requirements to defeat coverage if they can.
Tommy Truong: So what do you recommend if I was shopping right now for insurance, I have a broker, we have terms X, Y, and Z, do you recommend going through the policy line by line with the broker, finding out when Where these minutiae things are and really assessing, is this practical? Can we actually do this?
Michael Sampson: So first of all, and I, I got to get the self serving plugin. You want to be with Symphony Grow as your broker, because this is what we all, ultimately do. And I work with our team, to work with policy holders to do [00:21:00] this. Yes, you got to read the policy before you purchase it, before you bind it.
Because if there's something in there that you can't meet, you have to have a certain type of safe. And you don't have it you're buying coverage that doesn't You have to have a fire suppression system. You don't have it. You've, given the insurer a reason not to pay the coverage. You may be able to, there are certain cases where you're not going to be able to get any insurer to write a policy, for if you have your, make up your example, your cannabis is out in a tent in the middle of the freeway.
Probably not going to get coverage, but there are things where, different insurers may have different risks, different premiums may be implicated. And, so if you can't meet a requirement, you can shop the market to find a policy that meets it. And I can't stress enough the importance of doing the due diligence upfront, because again, you can't go back and insure something after it's already happened.
And if something isn't insured, it gives you the perfect [00:22:00] opportunity to make sure, if your safe isn't good enough, maybe you need to go buy a new safe. Easier said than done, I understand, but I use that as an example.
Tommy Truong: Okay. I can see the value in, no, nobody likes reading an insurance policy. Nobody. It's, there's so many terms. It's very wry. Is this where the broker comes in? Because I, I can't picture any owner sitting down and reading a policy.
Michael Sampson: Yeah, I think, it's the broker. And if you're not working, with a sophisticated broker Symphony, that you're, perhaps involving outside counsel or doing that due diligence ahead of
Tommy Truong: time
so what goes into an insurance strategy? Like how would I approach that?
Michael Sampson: So I always start, first of all, with basics, right? Who are you trying to insure, tell me all of your businesses, do you have an operating company? Do you have a management [00:23:00] company? Do you have directors understanding what the properties are, the locations are.
But more than that, I think what's really important is understanding what the risk is that you're trying to solve for, right? So if you let me give you an example. I'll have had clients who are brand companies, so celebrity brands, right? And all they're doing is licensing out a name and I'm oversimplifying, of course, but all they're doing, and I'll say I don't need insurance.
I don't need products, liability insurance. And, my reaction is who do you think is going to get sued? If a brand of a product with your person's name on it hurts somebody, right? They're going to sue the celebrity in the deep pockets. If you're doing delivery if you're in a state that allows for cannabis delivery, you can't just assume that your policies, cover that. You need a policy that covers delivery. What is the risk that you're assuming and that you're trying to ensure against? That's the first question. You've got to do that [00:24:00] thoughtful exercise on the policy with the client's side.
And then once you know what those risks are you can start to build an insurance program around it. If you don't actually touch or don't grow cannabis, you don't need crop insurance. But if you're growing cannabis, you're going to want outdoors to have a crop insurance program. And there's different ways you can do that.
You can build that program. And in addition I think the policyholder, the client needs to know what its own risk tolerances, know its financials. And obviously that's something you work with a broker on as well, but I can't tell you what your risk tolerance is. I can't tell you, if you have a particular director who's not going to join the board unless you don't have or unless you have.
a certain amount of coverage. And so understanding holistically, all of these issues, what is your risk? What do you need? What are you willing to risk? Are [00:25:00] you up high have a high risk tolerance and you're willing to take the chance that, our product might do X worth dollars worth of damage, or do you want to be protected from dollar one, those are all part of it.
And then once you've identified the risk and identified, risk tolerance and identified what you can afford, then you can just build the program. on it and take into account very specifically the needs of the policyholder while also Understanding, going back to what you and I were talking about the beginning, the various coverages that are needed, generally speaking, or should be thought of or considered for cannabis business.
Tommy Truong: So you, let me summarize this. Let me know if I'm missing anything. The first step is create an insurance strategy. Understand the risks of the business and the risk tolerance, your individual risk tolerance. So the risk of the business is, in my view, is really where are you making money? Somewhat where's the [00:26:00] transaction happening and where's the property, those two things.
Michael Sampson: Where's the exposure, right? Because if it's a let's take cyber, for example, one of the risks that comes with cyber these days is some sort of social engineering fraud. or some data breach. So if for example, and this is really, there's a corollary to the point you're making about physical property.
If you know your data is stored on a cloud server or you know that you're capturing P. I. personally identifiable information, which is subject, we do another podcast on that. It's subject to, all sorts of heightened regulation. If you know you're getting that data now you have this aha moment of okay.
If I get breached and that PII goes against out there, I'm getting sued. So now you've identified a risk that could come you know from how you behave if you're managing somebody else's dispensary in addition to your own you've set up a management company I could get sued for what they're doing too or for giving bad advice.
So identifying not just the physical Risk but [00:27:00] conceptually what could I you know, it's to put it a different way to summarize your summary. What can I get sued for? What could go wrong? It's really as simple as that. What could go big given what my business is what could go wrong? I'm an ice cream shop The mint chocolate chip could spoil, the pecans and the rocky road or whatever, I don't like rocky road, whatever, nut is in the rocky road could break somebody's tooth, the ice cream could melt and I could slip on it.
Whatever it is, the ice cream store could be robbed. And so it's going through that exercise, I hate to say it, but living in the worst case scenario so that you're prepared for it.
Tommy Truong: And then once you have an understanding of where the risk is and your risk tolerance and how much you're willing to pay for it, then it comes down to finding the right policy that meets your situation. And then going line by line with your broker minutiae's. What's required of you as a holder
Michael Sampson: That's always been my approach because if you're. a [00:28:00] business and you're in the responsibility of buying insurance, you probably owe a fiduciary duty to to your company. And I think in order to, meet that duty that means making an informed decision. Now, maybe it doesn't mean, reading every last line because there are certain forms within an insurance policy that are pretty standard.
But it may mean reading the key terms. It may be reading, comparing one exclusion versus another. They may have different names, yeah, I think working again with a sophisticated broker who knows the industry really helps. I think it takes down that, that process. But if I'm in those shoes owning a dispensary or advising somebody who owns a dispensary, I'm going to do my due diligence and meet my fiduciary duties.
Tommy Truong: So after getting a policy, how can a business owner be proactive?
Michael Sampson: So I think, again, knowing what the policy says, just so that you can conform, knowing that [00:29:00] you've got to meet, if it's a requirement or subjectivity that says you have to have your safe bolted to the floor, or you have to have two factor authentication when it comes to cyber, making sure you're meeting those.
And then I would say beyond that, I think it's really important that you know where you're stupid. It sounds that you know where your insurance policies are. God forbid you get a dispensary gets destroyed by a hurricane or something of that nature. You're going to need to be able to go find those policies.
You're not going to want to spend time looking for them. I try to remember where did I put them? You want to be able to go pull them and know what is in there as far as how do you give notice? Are there specific disaster remediation, mitigation providers or vendors that you're supposed to use?
And so having access to that's really important. Having a plan in place, just that you're not caught flat footed. If I have a loss, I know that I need to. You know keep all the invoices. I need to retain all paperwork. I need to take pictures and just having that thought [00:30:00] process I think is really important because when a loss occurs whether it's a Robbery or fire or cyber breach.
One, you're not gonna want to do insurance, right? Because you're gonna have a lot more important things to deal with. And two, you're not gonna have time to or want to have the time to, flip through your insurance policy and try to find the provision. Of course, you can always call your insurance broker.
But I just think having these things thought out ahead of time, take an afternoon, think about it, write a few things down, make some notes, know where your files are. And then hopefully you never have to use them, never have to look at them ever again. But if you do, you've saved yourself a huge hassle down the road,
Tommy Truong: You've mentioned this earlier. That there are times when a customer has an incident or an insurance claim or whatever the case may be and in your head, you wish that they came to you earlier. So what are some of these instances?
Michael Sampson: [00:31:00] I'm not sure I can come up with a specific example, but it goes back to, yeah, this isn't covered, and say if we had sat down together when you were buying the policy, we could have made sure recognize that you had this exclusion, or we can try to negotiate this exclusion out, or we could have bought more coverage or bought a separate products liability coverage.
Any of those things or, you should have another one might be and this dovetails with what we were just talking about is there's something called voluntary payments. Generally, insurance companies won't cover voluntary payments. What's a voluntary payment? A payment that a policyholder voluntarily makes to somebody that they didn't have to.
So if you walk out and you pay somebody 1, 000 to go away, before they've even made a claim against you. That may not be covered because it's a deemed a voluntary payment. So knowing, boy, if you had waited, we could have gotten the insurer's permission. We could have gotten [00:32:00] the insurer's consent.
And so that's why when there is a claim, it's so important to involve your broker and your attorney early on, because we're attuned to those things. It can say, wait a sec. Take a breath. Don't pay, before we look and see if there's a voluntary payment provision before we at least give notice the insurer before the notice consent before the insurer consents.
And so it's those type of things. And they're. To your point, insurance coverage language is complicated. Fortunately for those of us who have been in the industry, we know where to look, to get started. And so you can make those determinations if you know what you're looking for relatively, quickly to at least start to formulate some advice and strategy for handling your claim.
Tommy Truong: How should somebody prepare for a claim?
Michael Sampson: Assuming one, something's already happened. I think there's a number of things. First of all, notice notice. What do I mean by that? Again, notice is a precondition to coverage. Almost every policy failure to give timely notice, especially if you're a member of the claims made policies, can defeat [00:33:00] coverage altogether.
Making sure you're meeting the notice requirements. Of the policy that's one two is again, preserve all evidence So whether that is, something has burned to the ground you're taking pictures You're giving the insurance company an opportunity to come in and do an inspection before you clean up you know if somebody has sued you making sure whatever the subject matter is you've documented it if you've got a complaint about a product that you've recorded it in the normal course So that's, notice recording, evidence and then keeping keeping documentation.
So if you have a property loss, for example, that requires remediation or cleanup, that you keep your invoices so that you can submit it. Insurance companies aren't going to pay without proof. So keep your proof. And so I think it's doing things. Like that keeping your insurance company informed as you move through it.
So you get sued day one, you get an amended complaint day two. Tell your insurance [00:34:00] company. And I always say that the golden rule is communicate and then communicate some more. The worst will happen is you'll be accused of over communicating, but nobody's ever lost coverage for over communicating.
Failure to inform your insurer of key developments can be a problem. Document, retain evidence, notify your insurer, communicate with your insurer, and all policies have, generally speaking, a duty to cooperate. So a policyholder has a duty to cooperate with their insurer. We can probably do another podcast on reasonableness and all that.
There's a reasonableness requirement built into that. But cooperate. You want to, remember, you want to get paid, right? And so you're going to want to respond to questions and provide the information, so long as it's reasonable that the insurer is asking for.
Tommy Truong: Do you have any wild stories that you can share?
Michael Sampson: I'll tell you my favorite cannabis story. And maybe this only applies again to coverage, geeks like myself and you won't [00:35:00] find it that, that funny, but I had a client, they had a dispenser, a grow facility out in California. And they purchased that. We talked earlier about business interruption coverage, and they purchased the policy that provided for business interruption coverage.
So if their business was interrupted for any reason, they were supposed to get, made whole and just to be clear, the only thing this client did was cannabis. So it wasn't like All of a sudden their sightseeing tours were going to dry up or their ice cream business and I talk about ice cream a lot, but my kids have got me thinking about ice cream.
It's our favorite in the house. Your ice cream business is dry. So all this business did. was cannabis. Now, it also had an exclusion in its property policy for cannabis, okay, in the policy for cannabis. If the cannabis went up in smoke, the policy, there wasn't coverage because the insurer didn't want to insure the actual [00:36:00] plants.
Okay, fair enough. It says that everybody was up front. In this particular case, the client suffered a generator stoppage. The generator stopped working, and as a result, they couldn't grow plants and their business income went down. And, we said, okay, we're not, we want coverage for the business income insurance.
And the insurer said, Nope, you have a cannabis exclusion. He said no, the cannabis exclusion only applies to the physical property. It would be ridiculous to apply the cannabis exclusion to a business interruption loss. Because the the only business they did was cannabis. So you've effectively written out that entire coverage if you're going to take that position.
The matter resolved itself before we could
Tommy Truong: Positively? Positively. Yeah.
Michael Sampson: in a way that made one of the secret, Tommy, you've probably heard this, a good [00:37:00] settlement is when everybody walks away unhappy. So yes, it was positive. Never as positive as you, if you want to win the whole thing, but so we never got to decide that issue, but I would have.
I think that was a bad faith position because what other business would a cannabis business have other than cannabis? But that's the type of stuff you run into. And the problem is, the insurer is holding the money and you've got to go get it. And so sometimes that can be a real a real challenge for a policy holder.
But one of the things you want to do from the broker side and certainly from outside counsels, try to help navigate that and break down and some of the walls and some of the policy language and, try to get common sense across because at the end of the day, the hope is that common sense will prevail.
Tommy Truong: Michael, is there anything that we didn't cover in our conversations today that would be useful?
Michael Sampson: I, boy, we could do a whole bunch more of these on any of these subjects, but I think we really [00:38:00] have hit the high points and the thing that I always like to leave dispensaries with, because I think most dispensary operators are thinking in terms of when they think of insurance or thinking in terms of product liability and property insurance is to think about things like cyber.
To think about things like do you know and the only other thing I guess I would add, and again you probably find a million things to add but Think about again, come back to what I said insurance is a risk transfer mechanism Okay, but there's lots of ways that you can transfer risk.
And so Think about how you can use insurance in conjunction with other contractual risk transfer provisions and that can include things like indemnification provisions. If you get, if you're a dispensary and you get sued because a company X's product, maybe you want to make sure that company X is indemnifying you, is paying for any defense or liability.
Maybe you want to have what's called a force majeure clause, which is if an act of God, happens [00:39:00] that you're, excused from payment. These are all ways of defining who bears the risk. You may want to have rights on somebody else's insurance. So if you and I are doing a deal or you're supplying a product to my dispensary, I might say, great, Tommy, I'm happy to sell your product, but I want you to name me as an additional insured on your insurance policy.
And that way if I get sued I'm not going to go after my own insurance. I'm going to keep that asset intact. I'm going to have rights under your insurance. And so now not only have I accounted for insurance, but I'm not going to have to tap into mine. It's going to leave that resource available. And so you want to use these things all together.
And much like we talked about thinking about your insurance risks and needs holistically, you want to think about your entire risk mitigation, risk management approach holistically as well.
Tommy Truong: That is really insightful. I never really thought of it that way.
Michael, thank you so much for joining us. Where can our listeners [00:40:00] find you?
Michael Sampson: Absolutely. First of all, they can find me in Pittsburgh home with the Pittsburgh Penguins, which are step ahead of the Canucks there. But they can also find us online at symphonyrisk.com. My email is m sampson M-S-A-M-P-S-O-N, at symphony risk.com. symphony, like the musical orchestra risk all one word dot com.
Tommy Truong: Thanks so much, Michael. We have to get you back on and dive deeper in some of these issues.
Michael Sampson: Now, this is great stuff, and I appreciate the, the informedness. If that's a word on your side, I think it makes for a great discussion, and I'm always happy to. to join on and try to help a dispensary owners and operators.
