Understanding Insurance Obligations in the Cannabis Industry: What Every Operator Needs to Know
In the cannabis industry, insurance is not optional—it’s foundational. Whether you’re a grower, processor, transporter, or dispensary owner, securing proper coverage is a regulatory requirement and a business imperative. But too often, cannabis operators purchase policies without fully understanding what they cover, how they function, or what obligations they impose on the licensee. That’s where we come in.
At Cure Strategies, we combine legal, compliance, and insurance expertise to guide operators through the layers of protection—and responsibility—that come with cannabis insurance policies. In this article, we break down what you need to know about coverage, compliance, and co-obligations as a cannabis business owner.
1. Required Coverage: More Than Just a Policy
Most state agencies, including the Oklahoma Medical Marijuana Authority (OMMA) and the Oklahoma Bureau of Narcotics and Dangerous Drugs (OBNDD), require cannabis licensees to maintain specific types of insurance to stay in good standing. The most common include:
General Liability Insurance – Protects against third-party claims involving bodily injury or property damage.
Product Liability Insurance – Essential for processors and dispensaries, this coverage addresses claims stemming from adverse effects or alleged contamination.
Commercial Property Insurance – Covers your building, equipment, and inventory—but beware, many standard policies exclude cannabis unless properly endorsed.
Crop Coverage – Often overlooked, this protects your plants, which are arguably your most valuable asset.
Workers’ Compensation Insurance – Legally required if you have employees, and critical for mitigating employee injury risks.
Cyber and Data Breach Insurance – As cannabis businesses increasingly digitize patient records, transactions, and tracking systems, this coverage has become essential.
2. The Policyholder vs. the Licensee
A key issue we see regularly is a mismatch between the named insured on the policy and the licensed business entity. If your operating entity is different from the entity listed on your policy, your claim could be denied—even if you’ve been paying premiums faithfully.
Equally important is clarity about roles and responsibilities. The policyholder (the person or entity named in the policy) is responsible for:
- Accurate disclosures at the time of application;
- Ongoing reporting of any operational changes, claims, or incidents;
- Compliance with all policy terms—including maintaining security, inventory, and recordkeeping standards;
- Ensuring timely payment of premiums and renewal of policies.
If you’re leasing a facility, operating under a management agreement, or sharing ownership with investors, it's critical to review who holds the policy, how the business is structured, and whether the licensee’s operations are fully covered.
3. Avoiding Common Insurance and Compliance Pitfalls
One of the most frequent problems we encounter is generic or improperly tailored coverage. Many policies still carry cannabis exclusions or omit coverage for high-risk components like manufacturing solvents, infused product processing, or THC variance testing failures. Others are underwritten by brokers unfamiliar with cannabis licensing, resulting in noncompliant or incomplete protection.
Another red flag: policies that don’t align with your standard operating procedures, vendor contracts, events, or lease agreements. If your SOP says you're using a specific security protocol and you deviate from that in practice, a claim could be denied. The same applies to lease agreements that fail to account for insurance responsibilities, indemnity provisions, or compliance reporting.
Have an attorney—not a paralegal, compliance agent, CPA, or consultant (etc.)—draft your lease agreements. Leases in the cannabis industry are high-risk, high-stakes documents that must be customized to reflect licensing laws, zoning issues, federal illegality, and liability risks. We frequently review and revise leases for cannabis clients who unknowingly sign documents that expose them to eviction, uninsured losses, or loss of license. Do it right the first time—or risk paying for it later.
4. A Coordinated, Industry-Specific Strategy
Cannabis insurance cannot be handled in isolation. It must be coordinated with your licensing requirements, operational structure, vendor relationships, and compliance framework. At Cure Strategies, we treat insurance not as a product—but as a strategy.
We routinely help clients review policies for adequacy, negotiate with carriers, and integrate insurance requirements into broader legal and compliance planning. Our team’s combined legal and insurance experience means we can spot gaps others miss—and help protect your license, your assets, and your future.
If you hold a cannabis license, insurance is one of your most important regulatory tools—and one of your most powerful shields against liability. But only if it's done right.
Let us help you make sure it is.
Rachel Klubeck is a licensed attorney at Jarman Law, and the founding partner at Cure Strategies, a cannabis compliance and insurance consulting firm based in Oklahoma. Sabrina Alkire is a nationally-recognized insurance agent and risk management expert providing full coverage and specializing in high risk industries. She is a partner and the other half of Cure Strategies. For questions about policy review, lease analysis, or regulatory defense, contact us now.