Many investors and cannabis businesses are keen on opportunities to participate in financing rounds. As with any other investment or business venture, financing rounds for cannabis operations carry various risks. Investors and businesses looking to participate in these financing rounds naturally wonder how to insure cannabis financing, and what insurance options are available to protect their investments.
It turns out, often investors and businesses don’t need to look too far. Obviously there are few (if any) options to insure against the failure of a particular business plan or idea in the marketplace. But savvy investors and businesses can insure themselves against other risks outside of their control by conditioning their capital investments on being named an “additional insured” under insurance policies issued to the cannabis business itself.
The “additional insured” strategy
An “additional insured” in an insurance policy is just that: an additional third-party designated to receive the same rights under the policy as the named insured itself. Investors and businesses may condition their capital investments on being named as one of these “additional insureds” on any of the policies held by the business they are financing. Depending on the situation, investors may be able to require the business they