One licensed cannabis cultivator on Vancouver Island recently got a scare when they received a letter telling them their home insurance would soon not be renewed because of their small, outdoor cannabis farm on the property.
The couple say that although their long-time insurer originally gave them coverage on their home and the rest of their farm, as long as they got third party coverage for their new, small 200m outdoor cannabis farm, they received a letter in mid August telling them their coverage for their home and farm would end by September 15.
We followed all the rules, talked at length with multiple brokers to make sure that we were covered. Our insurance company said ‘We will cover you if you do X, Y, Z’, and we did it all. And now in the middle of our harvest season they’re cancelling our insurance.katy connelly, sea dog farm
Shawn and Katy Connelly own and operate Sea Dog Farm, growing cannabis as well as fruits, vegetables, berries, eggs, herbs and producing yarn from their alpacas on their five acre home property on Vancouver Island.
When the couple received their cannabis cultivation licence in November 2019, initially the company who was already covering their home and farm, Western Coast, had declined to cover the cannabis business. They told the Connellys they would still insure the couple’s home as long as they received commercial insurance coverage for their micro cannabis business from another insurer.
The Connellys were then able to get liability insurance for their cannabis covered by a third party, and say everything went fine for the first four and a half months. Then they received a letter in August telling them they would be canceling their insurance in one month because their operations exceeded the insurance underwriter’s current guidelines.
Western Coast did not respond to requests for comment.
Katy Connelly, along with husband Shawn provide all the labour for the farm, says the entire process has been incredibly stressful, especially given the timing. “We don’t have staff, it is just Shawn and I and we’re in the middle of farming season, we have harvest after harvest right now,”
It’s really essential that you will have someone who will advocate on your behalf and knows what to look for when it comes to the fine print in a policy.Kyle Mons, HUB International Insurance Brokers
“We did our due diligence. We got everything lined up. We have it in writing from our insurance company. We gave them six months notice before we even put a seed in the ground to make sure that everything was in place. We followed all the rules, talked at length with multiple brokers to make sure that we were covered. Our insurance company said ‘We will cover you if you do X, Y, Z’, and we did it all. And now in the middle of our harvest season they’re cancelling our insurance, or technically not renewing it, and I just don’t have time to do the paperwork and run a farm.”
Kyle Mons, a Commercial Insurance Account Executive specializing in cannabis insurance with HUB International Insurance Brokers in Victoria, BC says the issue facing the Connely’s will only become more common as more small farmers look to supplement their farm income with a small cannabis operation, especially micro cultivation licences.
Part of the challenge, he says, is that some companies offering insurance for commercial cannabis growers may not fully understand the distinction between a legal personal medical grow and a commercial licence. While many of these personal or designated medical grows are covered under existing insurance plans because they have been around much longer, commercial growers operating on the same property as their home is relatively new since the implementation of new licence categories in 2018.
Start insurance conversations before your licence arrives, before even sending in your evidence packaging or even thinking about a licence.Kyle mons, HUB International Insurance Brokers
“It’s certainly becoming more frequent now that more farmers are seeing the advantage of adding cannabis to their crops,” says Mons. “I applaud Katy and Shawn not only for their own organization, but for their work helping other farmers to better understand and enter this business.
He says he’s optimistic that he will be able to find a solution for them in time.
“Challenges like this arise for cannabis businesses, just as challenges arise with every evolving market, but our team takes great pride in our ability to think outside of the box when it comes to finding solutions and we don’t turn clients away when they face a bump the road.”
When choosing a broker, he says it’s important to find someone who truly understands the cannabis space and knows how to navigate the industry’s agreements and legalese.
“You want to partner with a broker who has done this before with specific knowledge and experience in this industry. It’s really essential that you will have someone who will advocate on your behalf and knows what to look for when it comes to the fine print in a policy.
“Start insurance conversations before your licence arrives, before even sending in your evidence packaging or even thinking about a licence. Do your homework and find a broker who has experienced this and then start the process form there.”
The number one problem going on here with insurance companies is if they are in any way, shape, or form owned by a company in the US, then they aren’t allowed to cover cannabis business.Kelli Hunt, Nextwave Insurance Canada
Kelli Hunt, of Nextwave Insurance Canada, which specializes in cannabis insurance for personal and commercial growers, says this is an issue she is also familiar with. Through Nextwave, she says she has provided insurance solutions for many cannabis growers, including micro cultivators, but like Mons at HUB, they can only cover the cannabis business, not the home if it’s on the same property.
Part of the problem, says Hunt, is that many insurers are based in the US, where cannabis is still illegal according to federal law.
“The number one problem going on here with insurance companies is if they are in any way, shape, or form owned by a company in the US, then they aren’t allowed to cover cannabis business,” explains Hunt. “That’s why cannabis insurance is such a big problem in Canada, because most insurance companies in Canada are tied in some way to the US. That’s the biggest problem facing us right now.”
For Katy Connelly, although these kinds of solutions exist and helped them initially, she says it’s primarily just window dressing to satisfy their home insurance. Their coverage of their cannabis crop is only for theft and liability, not for recall insurance or shipping, which she says is what they really need, and will cost much more. Her immediate concern remains that in just a few days, they won’t have any home insurance.
“It only covers the cannabis in the room once it’s harvested and there are other things we could do with four thousand dollars a year,” says Connely. “Right now we have no option. If we continue running the farm and having a micro, we will be uninsured by the fifteenth.”
That additional coverage, explained Hunt, can be upwards of forty thousand a year or more for the $10 million in recall insurance required by most provinces like BC, and $50,000 or more for the $15,000 in recall insurance Ontario requires. That’s in addition to several thousand a year for basic liability.
Connelly also points out that since they are a small, outdoor farm, they plan on having all products sold and off the farm in the coming months, meaning they wouldn’t even necessarily need liability insurance on it by then. If they could just walk away from cannabis entirely and keep their home insurance, they would consider it, but with already losing their policy, she thinks it will still be hard to find new home insurance.
“I’d rather just quit the cannabis, and go back to a homeowners policy. But then once you’ve been uninsured for a set period of time, it’s hard to get insurance anyway.”
“We’re trying to not get stressed out,” Connelly continues. ‘We have no next steps. We have to wait for the system to change and we just need to steel ourselves for months without any insurance. My only hope is that we never have to put up a gofundme page because our house gets destroyed.”