Medical Marijuana Facility Insurance - Construction Insurance for Building a Grow Operation
When a Licensed Producer (LP) is ready to break ground on their Medical Marijuana
facilities, it is an exciting time. It validates that operations are moving forward with a major next step - construction.
In this post, I’ll provide a general overview of construction insurance for a licensed, marijuana producer who is building a production facility and explore the specifics of a builder’s risk policy. It’s a policy that LPs’ need regardless but companies have the choice between two main insurance options with distinct differences– source their own Builders Risk Insurance, or piggy-back on the contractor’s policy. I’ll tell you why an LP should be sourcing their own insurance and why.
What is Builders Risk Insurance?
Not to get confused with Surety Bonds, Builders Risk insurance is a unique type of property insurance which provides coverage against damage to the building or materials during construction. Specifically, a builders risk policy provides coverage to a person or organization's insurable interest in materials, fixtures and, or equipment being used in the construction of a building or structure should those items sustain a physical loss from an insured peril.
Project Specific Builder’s Risk is your Best Option
An individual or organization building a facility, whether it’s a retro-fit or from the ground up is the best option for LP’s from both a coverage an pricing perspective. The policy should cover all property being incorporated into the construction project including all construction related materials used on site, stored off site, or in transit to the site.
The builders risk provides valuable protection in the event of a direct property loss experienced by the general contractor, subcontractors or project owner.
Why Project Specific Builders Risk is the best option for Licensed Producers?
One insurer and one deductible - This is especially important if the claim involves multiple parties
Dedicated limits for the project - Which means no sharing of limits with the contractors other projects
Owner Controlled Projects can take a higher deductible - Whereas CCDC contracts will transfer the responsibility of the deductible to the responsible party
Owner Controlled Project will be provided at cost - Versus a general contractor adding mark up for extending their coverage to your project
Through Owner Controlled Coverage, the owner controlled has the option of purchasing Delayed Opening Insurance
Especially as an LP – you’re accountable to your shareholders. Any delay in construction can create a domino effect leading to unhappy shareholders. Adding this will allow for increased security on your project deadlines.
Delayed Opening Coverage – Business Interruption for Construction
Another consideration for businesses purchasing builders risk insurance, especially project owners and Licensed Producers, is whether their policies cover lost business income. This coverage, which can be added to a builders risk policy through an endorsement, replaces lost revenue or profits that would have been earned by the policyholder had the project been completed on time.
What is CCDC?
The Canadian Construction Documents Committee (CCDC), is a national committee comprised of the various industry stakeholders in the private, public and engineering sectors. In Canada, we are lucky to have standardized construction contracts within the construction industry, whereby most construction follows the guidelines set out by these standardized documents.
In Conclusion
We believe that it’s best that LP’s are reviewing their policy to understand the importance of both the options and why it’s best to stick with securing their own Builders Risk Policy. Although it’s common to use a contractors insurance, many contractors will charge for this and their coverage will be less than adequate for your projects.