Most cannabis operators walk into a coverage review with two questions: how much does it cost, and what are the limit? A third almost never comes up: what would cause this policy not to pay?
Stephanie Bozzuto (pictured), chief executive officer of Bozzuto Surety Insurance Services in San Diego, uses that question to open a different kind of conversation about cannabis insurance with her clients. She identifies the gaps operators miss most often, the claims conditions they overlook, and what brokers can do differently at placement.
For many cannabis operators, the answer to that question starts with a clause buried in their property policy. According to Bozzuto, the protective safeguards endorsement appears in almost every cannabis property policy, and most clients have no idea what it actually requires.
The endorsement sets active conditions on security equipment. Alarms, cameras, and sometimes the safe must be operational and actively monitored at all times. Installation alone is not enough.
Bozzuto has seen the clause deny claims in two specific ways. “If the alarm was down for a service call the night someone broke in, or the monitoring contract lapsed because a card on file expired, the carrier can deny the theft claim outright," she said. "I’ve seen it happen.”
Both scenarios share a common cause. Most operators treat cameras and alarms as state compliance tools and give little thought to the insurance conditions that apply alongside. Bozzuto noted that both sets of obligations run at the same time.
“Operators assume the cameras are for the state regulators," she said. "They’re also a condition of the insurance and need to be connected to a third party monitoring company.”
Passive CCTV does not satisfy the monitoring requirement. The system must connect to a third-party company. Bozzuto added that she extends the safeguards conversation beyond ownership.
“I make sure the people running the site, not just the owner, know exactly what the safeguards require,” she said.
The safeguards endorsement is not the only gap Bozzuto sees repeat across her cannabis clients. Ask most operators which line of coverage worries them most and the answer is usually product liability. According to Bozzuto, that instinct points them toward the wrong risk. The line she identifies as most consistently underestimated is directors and officers liability.
“This industry has so much volatility: ownership changes, investors coming in and out, partners falling out, acquisitions that get announced and then fall apart,” she said. “Every one of those is a potential lawsuit against the owners and board personally. A lot of operators don’t buy D&O until they’re raising money, or a deal is on the table, and by then it’s often too late.”
The policy’s structure adds another complication. D&O is written on a claims-made basis. The policy responds when a claim is filed, not when the underlying event occurred. If a dispute predates the policy’s inception, the coverage does not apply.
Bozzuto pointed out that the timing trap is one she has seen play out firsthand. “I’ve seen operators buy a policy in the middle of a falling-out with an investor and assume they’re protected when the problem was already there,” she said. “Without coverage, the legal defense alone can run into six figures, and it can reach the personal assets of the people running the company.”
For operators considering a sale or merger, Bozzuto stressed that the obligation does not end at closing. “If you’re selling or merging, you also need to think about tail coverage, so the old leadership is still protected after the deal closes,” she said
Property coverage presents its own version of the same problem. Bozzuto identified two root causes behind most claims she sees after a loss. The first is property limits set too low at placement. The second is a business income projection that never accounts for how long rebuilding takes.
Cost pressure drives the first. “Property insurance is very expensive in this space and is usually the main premium driver, so when we send a quote, clients often come back asking for revisions, usually to lower their limits because of cost,” Bozzuto said.
The second gap compounds the first after a major loss. “Cannabis operators also grow fast, and business income gets underestimated because people don’t account for how long it takes to rebuild,” she added.
When both exposures fall short, the consequences stack. Property cover runs out before the rebuild is complete. Income replacement is exhausted before the business is operational again.
Bozzuto noted that both gaps are preventable. She reviews limits with clients during the policy year, not just at renewal. She added that most surprises after a loss trace back to exactly those two gaps going unaddressed.
The gaps Bozzuto identifies all point to the same failure at placement. Too much time goes toward what the policy covers, and not enough toward what it won’t.
“Spend more time on what’s excluded than on what’s covered,” she said. “I’d rather sit down with an owner and say, ‘Here are the five things this policy won’t pay for,’ than hand them a summary of limits.”
She noted that safeguards requirements should be walked through line by line with site-level staff, not just ownership. Operational questions also belong in the placement conversation: how inventory moves, where cash is held overnight, who handles deliveries. Key exclusions should be confirmed in writing, in plain language.
Bozzuto argued that one question, asked before binding, shifts the whole cannabis insurance conversation.
“‘What would cause this policy not to pay?’ Most people ask how much it costs and what the limits are,” she said. “That question flips the conversation and forces the broker to talk about warranties, exclusions, and sublimits.”
The question also works as a diagnostic tool for operators evaluating their broker, Bozzuto added. “If your broker can’t answer it without pulling out the policy and reading it to you for the first time, that tells you something,” she said.
