Facility Security, Policies and Training, Strategy

Cannabis Security: 3 Legal Considerations When Working at Dispensaries

This is Part 2 in a two-part series covering the Security Industry Association’s (SIA) recently held Vertical Insights Symposium on Cannabis Security. Part 1 explored how security managers can protect cannabis establishments, and Part 2 will examine legal considerations when working with such businesses.

Imagine seeing robbers sawing through the ceiling, descending with ropes, and heisting everything from a vault room in a style reminiscent of the 2001 Ocean’s Eleven movie. While the movie was about a casino heist, similar heists of cannabis outlets have taken place.

Matthew Johnson, vice president of risk services for QuadScore Insurance Services, emphasizes how important it is for cannabis businesses to use state-of-the-art video surveillance and employ security guards and other security precautions. He also explains why adequate insurance coverage is important for cannabis outlets.

Because cannabis is still illegal federally, these outlets are primarily cash-heavy, making them targets for the bad guys. Therefore, security professionals should work in conjunction with owners and managers to ensure that when bad things do happen, insurance will be able to cover as much of the loss as possible. This is especially important as more states make marijuana legal for medical use, recreational use, or both and new facilities open.

There are three legal issues security professionals should consider when working with cannabis establishments:

1. Insurance

Doug Esposito, renewable energy, construction, and cannabis practice leader from Assured Partners and member of the Risk Management and Insurance Committee for the National Cannabis Industry Association, says, “Many people will say they got their license, but that has nothing to do with qualifying for the highest levels and the best rates from the insurance carrier standpoint.”

Moreover, Esposito advises cannabis businesses to meet with insurance consultants regarding property and product liability insurance, as it’s important that businesses follow insurance paperwork requirements regarding best practices.

Cannabis companies should work with security professionals to consider the following issues that could arise:

  • Crops—indoor coverage is available; outdoor is often not
  • Pests and lighting issues
  • Business continuity planning
  • Equipment failures

2. Contracts

Attorney Michael Sampson, a partner of the Leech Tishman law firm, tells security professionals, “There is a real demand for your services and for thoughtful consideration of protecting this industry.”

When entering into a contract, security professionals should work with businesses to ensure they do the following:

  • Understand state regulations they are subject to, and follow them.
  • How cannabis products will be delivered to dispensaries, as well as whether the product will be delivered to people’s homes.
  • Ensure their license is current, they have all necessary local and state permits, and they are generally in good standing.
  • Determine whether they had previous lawsuits filed against them or missed payments.
  • Ensure facilities have a security plan, access control, video surveillance, and a relationship with local law enforcement.

3. Transferring Liability

Security professionals should transfer risk to the party they are doing business with.

“At the end of the day, you want to make sure you are dealing with licensed and reputable cannabis businesses, of which there are many,” Sampson adds.

The best way security professionals can protect themselves when working with cannabis businesses is by keeping the following risk-transfer and mitigation considerations in mind:

Representations and warranties. Identify the product being sold in the contract, and have the promise to follow applicable local and state laws in writing.  

Insurance requirements. Make sure the cannabis business has professional liability, commercial general liability, cyber, theft, and other insurance, and possibly be added as an additional insured under the policy. Security professionals should also limit their insurance requirements, costs, and other people’s access to their insurance. All possible risks, scenarios, and needs should be considered.

Indemnification provisions. It should be clear who will pay if something goes wrong and what the insurance covers. Determine whether there should also be a carve-out for gross negligence or willful misconduct.

Limitation-of-liability clauses. This limits the exposure if a lawsuit is filed or a claim is made.

Force majeure clauses. This provides an exemption due to weather events such as hurricanes, floods, and earthquakes.

By following best practices, taking due diligence, and transferring liability, security professionals can use legal considerations when working with cannabis businesses.

The information contained in this article is provided for informational purposes only and should not be construed as legal advice on any subject matter.