Bud, Bills & Break-Ins: Building a Cannabis Crime Coverage Stack That Actually Pays Out

The paradox of state-legal cannabis and industries exploding across the country, set against persistent federal prohibition, means that cannabis operators face unique operational vulnerabilities. The biggest of these is the industry’s reliance on cash; most major credit card processors still will not work with cannabis companies, even in states where the plant is legal. Holding large amounts of cash on-site makes any business a major theft risk.

Cannabis products also carry a high street value, especially in prohibition states. Between the amount of cash in dispensaries and the value of cannabis, retail outlets are prime targets for “smash-and-grabs,” a particularly damaging type of crime that involves huge amounts of property damage as well as inventory and financial loss. The initial cost of a smash-and-grab doesn’t touch on the psychological damage that these break-ins also cause.

While many companies have commercial insurance, these policies often fall short in the cannabis industry, not offering enough protection to cover the cost of building repairs, inventory, and cash on premises. What cannabis retailers really need is a strategic, layered stack of crime coverage, designed by a specialized cannabis insurance broker to protect business assets, ensure business continuity, and ensure claims are paid out.

What does adequate cannabis crime coverage look like?

External Threats: The Front Lines of Loss

Smash-and-Grab Burglaries

Smash-and-grab burglaries are fast and violent, often destroying the entrance of your store to gain access to the inside. Once in, thieves target cash registers, vaults, and high-value display items, breaking anything in their path to gain access to their targets. The damage here goes beyond property insurance and inventory loss; smash-and-grabs bring stores to their knees, unable to continue business operations until all of the damage is repaired. The most obvious point of entry is the easiest: any glass on the building in the front or back. If thieves run into reinforced physical barriers such as polycarbonate glass, it may deter them.

Armed & Unarmed Robbery

Unlike smash-and-grab robberies, which typically take place overnight, robberies happen during business hours. Perpetrators, armed or unarmed, will force their way into a store and focus on the same targets: cash registers, safes, and any high-value products. This type of theft is in-person and often violent, physically and psychologically. While smash-and-grab don’t usually result in injuries to staff, robberies can.

These types of crime often have mental effects that ripple beyond the physical store damage, causing fear in employees. While imagining a robbery is not fun, it is vital that employees are trained in proper responses so they react in a way that keeps everyone as safe as possible.

Cyber-Enabled & Social Engineering Fraud

In our modern age, digital theft is just as much of a threat as robbery. Digital vulnerabilities are exploited across all industries at every given opportunity, and cannabis businesses are no different. From phishing scams to invoice and wire transfer fraud, computer fraud puts businesses at risk. Unauthorized access to private systems puts sensitive customer information at risk and can ruin the reputation of any business. While cannabis retailers may not need the cybersecurity protections of businesses like banks, it is vital to have robust cybersecurity policies and to train staff on how to recognize potential digital fraud.

Counterfeit Currency Acceptance

All retailers have to be on guard against fake currency; that’s why grocery stores will often have a counterfeit ink-testing pen for large bills. Dispensaries must be aware of this risk, particularly as cash-heavy businesses. All front-line staff should be trained in spotting fake bills and the proper internal policies to follow if one is found in the store.

Internal Threats: The Hidden Drain on Profits

Employee Dishonesty & Theft

Unfortunately, employee theft is one of the leading causes of losses in businesses—some statistics put employee dishonesty as the cause of up to 90% of internal theft. This takes many forms, from cash skimming at the register to product diversion in inventory, all the way up to embezzlement of funds. However, it may also come in more subtle forms, such as accepting fraudulent returns or manipulating a POS system.

Of course, businesses must be able to trust their employees to operate. But this trust must be balanced with the knowledge that theft often comes from inside, and internal controls are necessary. Checks and balances in processes can help mitigate this risk; for example, the person responsible for taking cash at the register should not be the same person who counts and deposits this cash at closing time.

A typical commercial insurance coverage against crime may not go far enough to offer sufficient protection for cannabis businesses. Here’s what you actually need.

Commercial Crime Insurance: The Foundation of Protection

Core Crime Insurance Coverage Components

• Employee Dishonesty: This clause of crime insurance protects specifically against financial losses from employee acts, including theft, embezzlement, and forgery.
• Theft of Money and Securities (Inside and Outside Premises): This clause covers losses of cash, checks, and other “financial instruments” due to theft, disappearance, or destruction. The important differentiator between cash-in-transit and theft of money and securities is that this clause protects against losses both during transport and on-site.
• Forgery or Alteration: If your business accepts forged checks, drafts, or other financial documents, the forgery and alterations clause has your business (and your bank account) covered.
• Computer Fraud: This clause provides specific protection against losses from unauthorized computer access or manipulation—vital in our digital world.
• Social Engineering Fraud (often an endorsement): This crucial clause offers protection against losses from “deceptive schemes” like phishing and fraudulent wire transfers.
• Extortion: A less common form of theft, this clause of crime insurance covers any payments your business makes in response to extortion, threats of harm, or property damage.

There’s a lot of layers here—and they’re all important. There is a basic crime policy, but cannabis businesses often require specific endorsements to cover inventory and/ or higher limits to provide an adequate umbrella of coverage for valuable products and cash on-site. The worst-case scenario is to pay for a crime policy, only to find that it doesn’t cover what you need after a robbery.

Cash-in-Transit (CIT) Coverage: Protecting Cannabis Products on the Move

This specific clause is designed to cover losses (money, security, product) while in transport by your company or a named insured armored carrier. Many basic crime policies fail to offer protection for assets while off-site, but cannabis businesses must move large amounts of cash and valuable product, and require protection at all times.

CIT Policy Nuances & Requirements

• Armored Car Services vs. Internal Transport: How product is transported is vital to being adequately insured. Your insurance broker will need to know whether transport happens internally or is contracted out to a service, what types of vehicles are being used, how many people are present, if they have protection, and other important information.
• Security Protocols: How your product moves is also important. Throwing it in the back of a branded minivan while running errands isn’t a highly secure option; transporting cash in a lock box with a defined route and GPS tracking is.
• Sublimits: Cannabis products are worth differing amounts at different stages; this is one of the reasons typical insurance policies don’t offer enough protection. A layered stack of cannabis crime insurance spells out different sublimits for cash, finished cannabis products, and living plants, all of which must be reviewed and signed off by you.

Employee Dishonesty Insurance: Addressing the Insider Threat

No one hires employees thinking they’ll cause issues, but it’s important to plan for all contingencies in your cannabis coverage. Given the high incidences of internal theft, employee dishonesty insurance is vital. This policy protects against employee theft, defined as “direct financial loss caused by an employee’s dishonest acts, whether acting alone or in collusion.” However, this policy alone isn’t enough. Insurance brokers will often want to see a demonstration of a strong internal policy of safety and controls to reduce the risk of internal theft.

While having insurance that doesn’t provide accurate coverage is the most frustrating scenario, having the proper insurance and getting denied for a claim is a close second. Here’s how to avoid that.

5 Common Reasons for Commercial Crime Claim Denial:

1. Material Misrepresentation or Non-Disclosure: When you submit a claim to your insurance company, it must be entirely truthful and a complete representation of the events. This is not just about the details of the theft, but also includes an accurate description of your security measures, cash handling procedures, and prior losses. Glossing over information or providing inaccurate information, even unintentionally, can lead to claim denial or even policy voidance. Honesty is the best—and only—policy.
2. Policy Exclusions: You must know what your insurance policies cover and do not cover. Every insurance policy contains specific exclusions, ranging from excluding certain types of products to not covering losses due to non-compliance or acts of owners. Ensure you understand what your policy covers before you submit a claim.
3. Failure to Meet Protective Safeguard Requirements: Many insurance policies contain requirements for coverage, particularly for cannabis companies. If your business is falling short of your required security measures, such as having the wrong kind of safe or using a non-covered armored carrier, your claim may be denied. Read your policies thoroughly when you sign them to ensure you understand your legal requirements.
4. Insufficient Documentation: Claims of theft must be proven, and if you cannot provide the required documentation, you may be denied, even if you’re covered. The burden is on the insured to prove the loss and the value of the loss. If you’re not keeping meticulous records of inventory, cash reconciliation, and incident reports, or not properly saving security footage, your claim could be rejected, even if you suffered a loss.
5. Exceeding Coverage Limits: So your theft policy covers a loss, and you’ve submitted the documentation—but your policy limits don’t actually cover the value of your inventory. What next? The fluctuating value of cannabis can complicate the claims process in the event of theft, and it’s a major reason why it’s vital to ensure your policy limits actually cover the value of your assets and inventory. The best course of action here is to be proactive with setting up your policies—after you’ve been hit is too late, and you may have to come out of pocket to cover the gap.

Cannabis-Specific Hurdles in Claims

Since cannabis is still federally illegal, cannabis insurance and theft claims can get tricky, particularly if you’re working with an insurance carrier who isn’t familiar with the industry. To save yourself the headache of trying to prove the true value of your inventory or dealing with carriers who interpret clauses specifically to exclude cannabis, it’s important to work with an insurance carrier who understands the unique challenges of this industry.

Partner with a Cannabis-Specialized Insurance Broker

The cannabis industry is a challenging industry to work in—but you can make insurance a little easier by working with a cannabis-specialized insurance broker. A broker who gets the cannabis industry gets the unique risks and regulatory landscape in a way that generalized providers cannot. As a result, specialized carriers are more willing to underwrite cannabis businesses with robust, tailored policies and go to bat on your behalf during a claim.

Conduct a Thorough Risk Assessment

The best offense is a good defense—and risk assessment is your best defensive strategy. It’s important for cannabis businesses to systematically and regularly evaluate their security protocols, from the physical and digital security practices to cash handling procedures and employee training. When your team knows how to and is empowered to keep your business safe, you mitigate your risk. If you need assistance putting risk management strategies into place, this blog breaks it down into actionable steps.

Beyond the Basics: Robust Security Measures

Basic security measures don’t go far enough to address the multitude of risks that cannabis retailers face. Even if your insurance policies don’t require the following, it helps build a culture of compliance and safety to have increased security at all levels, including:

• Physical Security:
  • Reinforced glass (laminated, polycarbonate),
  • Multi-layered access control (electronic locks, keycards, biometric scanners),
  • UL-listed safes/vaults
  • Comprehensive 24/7 CCTV surveillance (high-resolution, off-site storage, remote access)
  • Monitored alarm systems with panic buttons
• Operational Security:
  • Strict cash handling and drop procedures
  • Regular inventory audits (daily/weekly)
  • Seed-to-sale tracking systems
  • Clear documented opening/closing protocols
• Personnel Security:
  • Rigorous background checks
  • Ongoing security training for all staff
  • Clear chain of command for incident response
• Cybersecurity:
  • Network segmentation (Putting your POS and surveillance on a separate Wi-Fi from guests)
  • Strong firewalls
  • Multi-factor authentication for signing into business programs
  • Regular employee cybersecurity training (quarterly, biannually)

Understand Your Policy Details—Inside Out

Read your insurance policy. Read it thoroughly, and if there are any sections, clauses, endorsements, or exclusions you don’t understand, reach out to your insurance provider to go over it together. It is vitally important that business owners have a complete understanding of their insurance policies and coverage.

Maintain Meticulous Records

Keeping meticulous records should be a part of your organization’s internal policies before something happens, not after. Physical and digital documentation is your primary evidence in theft cases, and the more detailed you can be in advance, the better off you’ll be when you need to submit a claim. From inventory records and purchase orders to security logs, maintenance records, and incident reports, robust documentation ensures that you can make a compelling case for your business when you need to and you’re not scrambling after the fact.

There are a lot of things that are out of your control in the cannabis industry, from unyielding federal regulations to shifting local requirements. But a well-constructed crime insurance stack ensures that when the unexpected strikes, your business is protected. If crime comes to your door, cannabis insurance turns the catastrophic into the manageable.

Finding the right insurance coverage and building a robust risk management plan are investments in the cannabis industry and your business’s long-term success. Are you properly protected? If you’re not sure, ask an expert; review your current portfolio of insurance with a specialized broker to make sure that every exposure is properly covered and your business can weather any storm.

Protecting your cannabis company can seem confusing; however, we’re a full-service insurance brokerage working with carriers worldwide to offer you the best coverage possible. We’re here to help! Please reach out to us today by email [email protected] or calling 646-854-1093 for a customized letter or learning more about your cannabis insurance options.