The Tribal cannabis industry can be highly profitable if undertaken correctly but involves an ever-evolving series of complex hurdles and loopholes. Insurance coverage is an important business decision, and when it includes cannabis and Tribal components, it may be difficult to navigate. However, the complexity can be easily managed if Tribes utilize knowledgeable and reputable partners.
The top three issues that Tribes should keep in mind when choosing and purchasing insurance coverage for their Tribal cannabis businesses include:
Policy Wording. The policy wording (particularly exclusions and endorsements) needs to be carefully reviewed. Tribes should watch out for “Health Hazard Exclusion” on Products Liability policies, and a variety of exclusions (e.g., Definition of Claim, Cannabis Regulatory and Enforcement Exclusion, Bankruptcy and Insolvency & Creditor and Debtor Exclusions, Automatic Class Action, Automatic 10% Threshold for Reduction in Force Exclusion) on Management Liability/ Employment Practices Liability Insurance (EPLI) policies. The extent of the exclusions can render many policies basically worthless to Tribal cannabis businesses.
Tribal Sovereignty. The majority of cannabis insurers will not insure Tribal businesses due to concerns about Tribal sovereignty. Sometimes, their reinsurers exclude Tribes and, other times, these insurers are frightened of the concept of Tribal sovereignty. It may be necessary to negotiate a limited waiver of sovereign...
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