Category: Retail Stores

SIC CODE: None

NAICS CODE: None

Note: SIC and NAICS codes are assigned by the US Government. Because this product remains illegal, no codes have been assigned.

Suggested ISO General Liability Code: None available

Suggested Workers Compensation Code: None available

Note: ISO and NCCI have not provided any codes specifically for marijuana dispensaries.

Description of operations: Marijuana is sold for medical use only in almost half of the states. The medical dispensaries are similar to drug stores. The patient must provide an identification card proving that they are eligible to receive the drug. Most stores provide a consultant who works with the patient to find the appropriate product for them. It may be a loose-leaf product but could be liquid, oil, powder, pill, rolled or a vapor. The product may be provided as an edible or it may be butter infused with marijuana that the patient can use when making his or her own edibles. Additional accessories may be available in the shop.

In states where recreational use is permitted the shops are similar to the medical marijuana dispensary, but customers are not required to provide marijuana identification cards. These stores are more similar to liquor or vape stores.

Some research indicates that marijuana is useful in pain relief for conditions such as chemotherapy-induced nausea, glaucoma, multiple sclerosis, and neuropathy, and as an appetite stimulant for such disorders as AIDS wasting syndrome. However, the FDA has not approved it for any type of medicinal or recreational use as no studies have been done in clinical trial settings. Conducting clinical research involves the FDA along with the DEA (Drug Enforcement Administration) and the NIDA (National Institute on Drug Abuse). Concerns have been expressed as to the lack of consistency in drug purity and potency, impact on fetuses by pregnant women, and long-term usage implications such as drug dependency.

Currently, over half of the states have approved the use of medicinal marijuana under specifically defined circumstances, while nine states have approved its recreational use in small quantities. Manufacturing and distribution guidelines vary by state, as well as the form in which the product may be sold. However, the federal government continues to criminalize the growth, cultivation, and use of marijuana regardless of the circumstances. It is unclear how the differences in state and federal law will ultimately be resolved.

Property exposures are those of a retail store with a very valuable product, similar to liquor or jewelry stores. The products are highly combustible and easily contaminated by smoke, temperature changes, and humidity. They are also targeted by thieves due to the high resale value in the black market. Vandalism can result from trespassers and protestors. Appropriate security controls must be taken including physical barriers to prevent entrance to the premises after hours and an alarm system that reports directly to a central station or the police department.

Crime exposures are chiefly from employee dishonesty and theft of money and securities due to the high resale value of marijuana products on the black market. Employees may act alone or in collusion with outsiders in stealing money, raw materials, or finished stock. Background checks should be conducted on all employees. There must be a separation of duties between persons handling deposits and disbursements and handling bank statements.

Inland marine exposures include goods in transit and valuable papers and records for customers' and suppliers' information as well as quality control testing results. Backup copies of all records should be made and stored off premises. Goods in transit may be damaged by fire, theft, collision and overturn, or contamination.

Premises liability exposure is like other retail stores except for the need for extra security due to the value of the product. Floor coverings should be in good condition, no frayed or worn spots on carpet and no cracks or holes in flooring. Steps and uneven floor surfaces should be prominently marked. Enough exits must be provided and be well marked, with backup lighting systems in case of power failure. Parking lots and sidewalks need to be in good repair with snow and ice removed, and generally level and free of exposure to slips and falls. If the business is open after dark, there should be adequate lighting and appropriate security for the area.

Products liability exposure will depend on the supplier and the type of services provided to the customer. If the dispensary is only providing a legal product, the exposure is limited. However, if the dispensary is providing lab services that certify potency and lack of pesticides and other harmful ingredients, the exposure increases significantly. The consultative role of the employees can also increase the dispensary’s product liability. The products exposure increases if the dispensary supplies its own product.

Automobile exposure is generally limited hired nonownership of the employees running errands. This could increase if the dispensary offers delivery service or if it picks up product from its suppliers. If the product is in the vehicle with the driver, adequate ventilation is important to prevent driving impairment.

Workers compensation exposure can be significant because of the value of the product and the amount of cash on hand. Appropriate security must be provided, and training provided employees in preventing injury. Appropriate ventilation of the dispensary is crucial because of the potential impairment of employees due to exposure to the product that may contribute to accidents and possible long-term health issues.

Minimum recommended coverage:

Business Personal Property, Business Income with Extra Expense, Employee Dishonesty, Money and Securities, Computers, Valuable Papers and Records, General Liability, Employee Benefits Liability, Umbrella Liability, Hired and Nonownership Auto Liability, Workers Compensation

Other coverages to consider:

Earthquake, Flood, Leasehold Interest, Real Property Legal Liability, Cyberliability, Employment-related Practices Liability, Business Auto Liability and Physical Damage, Stop Gap Liability