Case Study: Employment Practices Liability Coverage Challenges for a Cannabis Retailer

Background

A California-based cannabis retailer faced significant challenges in securing Employment Practices Liabiltiy coverage due to a previous claim related to sexual harassment. The claim had made their policy high-risk, leading to exclusions on key coverages and significantly higher pricing. Additionally, the business had expanded and now required coverage for three separate entities under one policy, further complicating the situation.

The Challenge

Several factors contributed to the difficulty in securing necessary coverages:

• Industry Risk: Cannabis businesses are considered high-risk by insurers.
• Location Risk: California has a high incidence of employment-related claims, making coverage even more expensive.
• Previous Claim: The business had a prior Employment Practices Liability claim, which resulted in coverage exclusions and inflated premiums.
• Complex Needs: The retailer had grown to include three entities and needed a policy structure that accommodated all entities under one plan.
• Lack of Key Coverages: Their expiring policy lacked crucial protections such as crisis management, workplace violence, and wage and hour coverages.

Flow’s Approach

The Flow broker took a strategic approach to resolve the issue:

1. Marketed the Account Aggressively – Within just three days, our broker was able to secure responses from insurance carriers.
2. Negotiated Better Terms – Our broker successfully bundled all three entities under one policy, improving coverage while reducing costs.
3. Mitigated Risk Factors – By excluding the employee involved in the prior claim and his romantic partner (who was no longer with the company), they alleviated the main obstacle to securing affordable coverage.
4. Enhanced Coverage – The new policy included crucial protections such as crisis management, workplace violence, and wage and hour, which were missing from the previous policy.
5. Educated the Client – Our broker provided a detailed coverage review and comparison, breaking down the benefits of the new policy versus the expiring one in an easy-to-understand format.

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The Results

• Comprehensive Coverage: All three entities were insured under one streamlined policy.
• Lower Costs: Despite being a high-risk account, the broker secured a competitive rate, with a $4,000 difference from the prior policy—while offering significantly more coverage, as well as coverage for the 3 entities rather than only one insured.
• Reduced Retention: The client’s retention, initially expected to be no less than $50,000 due to California’s high-risk environment, was negotiated down to $35,000.
• Improved Client Confidence: The client was pleased not only with the cost savings but also with the expanded coverage and clarity provided by the broker’s detailed policy review.

Working with an experienced insurance broker who understands the nuances of high-risk industries is critical for securing the necessary coverages. By leveraging market expertise, strategic negotiation, and client education, Flow can help you secure superior coverage at a competitive rate.

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