Does your cannabis business require all your business partners to list you as an additional insured on their insurance policies? Do you require them to have products and completed operations included on their general liability policy? If not, you are opening yourself up to huge potential liabilities.
Understanding your business’s risk exposures is the cornerstone to managing them. Marijuana manufactures and distributors should require any company that provides products for sale or used in the manufacturing process to list them as additional insured on their general liability policy which includes coverage for products and completed operations. You could easily be included in a lawsuit if you sell or manufacture marijuana products using marijuana produced by another entity. An indemnity agreement secured by an additional insured endorsement is a risk-transfer tool that can help insulate your business from potential risks. Pease visit our page on the importance of products and completed operations coverage in the marijuana industry for more information.
Insurance companies charge for each additional insured or provide a blanket additional insured for a fee. These charges vary company to company and can be the deciding factor on which insurance company you choose. Please contact Orcutt Insurance Group to discuss additional insured endorsements and your Colorado company.
It is a common practice to enter into contractual agreements with those involved in a project to formalize the terms and responsibilities for all parties. These contracts often include an indemnity agreement, also known as a hold harmless agreement, as a means to transfer the risk of future losses or damages from one party to another.
There are basically three kinds of indemnity or hold harmless clauses typically contained in contracts.
- Limited – obligates the indemnitor (the party paying compensation) to hold harmless the indemnitee (the party receiving compensation) only for the indemnitor’s own negligence.
- Intermediate – obligates the indemnitor to hold harmless the indemnitee for all liability exceptthat which arises out of the indemnitee’s sole negligence.
- Broad form – obligates the indemnitor to hold harmless for all liabilities, including the indemnitee’s negligence.
To support the terms of the indemnity agreement, the contract will often include insurance requirements. These spell out the insurance required by the various parties entering into the contract. It is common for one party to include another as an additional insured under its Commercial General Liability (CGL) policy. For example, owners or general contractors of construction projects commonly require those who are actively involved in the project operations, such as subcontractors, to sign a contract and name them as an additional insured on their CGL policy to limit their liability for damages caused by the subcontractor.
Carefully review the indemnity agreement prior to finalizing the contract to determine the extent of your company’s liability. Once the scope is understood, you may want to negotiate the terms to limit your exposure. The application and enforcement of an indemnification agreement does, however, depend upon the statutory and common law of the jurisdiction in which enforcement is sought.
Thank you for your consideration.
The Orcutt Group Team