Can I Sign Montana Banking Lease Template

Can i industry sign banking montana lease template

okay why don't we um get started i'd like to welcome everybody uh my name is frank siegel i'm the chairman of the business lawyer and co-chairman of the cannabis business law group with my partner scott moscal and with me also is uh head of our banking cannabis banking katrina skinner and uh this is a continuation of a series of webinars that burns levinson has been doing throughout the year in the cannabis space we are very dedicated to this space we were one of the first law firms uh to enter the space over eight years ago and launch a dedicated practice group which today um has over 15 attorneys and clients from boston to california and we truly cover the entire spectrum um we're a leading corporate m a firm and we brought that expertise to the cannabis market over eight years ago and today we're doing uh transactions throughout the space representing state local regional multi-state operators um from startups to uh exits um and one of the areas that we're particularly proud of leading um in the space is on the banking regulatory side and katrina skinner joined us as a partner it's been almost six to eight months now katrina was the president and general counsel of safe harbor and really brings an incredible expertise on the cannabis banking regulatory side uh to our clients and we were thrilled that she joined us and uh as part of that um department one of the things we focus on is advising our clients on uh credit unions uh state chartered banks um other companies uh dealing with the banking issues in the industry and today we're thrilled to have our friends at hub join us we do a lot of work with them on the insurance side and you're going to meet patrick who is one of the heads of the cannabis group there and we're going to talk about protecting directors and officers in cannabis banking and the kind of coverages that are out there so uh with that i want to turn it over to my partner katrina and she'll lead us into the webinar today so thank you again for joining us thanks frank um hello everyone and happy holidays like frank said i am working closely with our cannabis all of the associates and my partners in the cannabis advisory department to advise financial institutions throughout the country on how to provide services compliantly to cannabis operators both plant touching and non-plant touching this topic is very timely we work closely with trusted vendor solution providers who are also out there educating financial institutions about the space we've got a couple blog posts that are a recent blog post that deal with what we're calling the green wave on what happened after the election throughout the country which legalized marijuana in some new states and also legalized adult use marijuana and some other states that have been medicinal so we've got five new states including south dakota montana arizona mississippi and new jersey did adult use and with those new states expanding the legal cannabis market we also expect probably in short term that states such as pennsylvania and connecticut and new york will also be starting to legalize adult use so this creates new market opportunities financial institutions who are either in the space or who are considering getting into the space but one of the things that we're seeing and that i find concerning is the fincen report that gives the numbers of financial institutions that are openly banking cannabis has declined for the third quarter in a row now there's a couple reasons that that may be maybe because um vincent uh issued some new guidance related to hemp so they don't have to file sars and some people speculate that it may be due to staffing issues with covets so stars aren't being filed on time but nevertheless what it shows me is that there's still financial institutions are standing on the sidelines waiting for some reason to jump in or still have hesitancies to do so what i've heard and what i've experienced myself is one of the biggest um hurdles and hesitations to getting into this space is the liability that officers and directors are um afraid of personal liability and liability for the institutions and so inevitably when institutions are implementing programming or even considering implementing programs this will um the liability that officers and directors face will end up being one of their concerns so in order to address those concerns um it is typically everybody looks for a dno policies but like with most things cannabis there's challenges so that's why today we're holding this topic and we've got two experts and um personally when i was um general counsel for safe harbor services scott moscow and frank served as outside counsel for me and they were the ones i turned to when i had questions on dnl and they've supported our efforts in the banking group um throughout the country answering these questions and so um scott again is co-chair of the cannabis advisory group and co-chair of the financial restructuring and distress transaction group at burns and levinson very knowledgeable works very closely with our financial institution clients but as a result of his work with cannabis operators as well we can bring both perspectives so we understand and that's one thing that's he's been so helpful with with um advising financial institutions who want to get into the space or who are already in the space and want to expand some of their offerings and we're lucky today to also have patrick ryder patrick is with hub international he's the senior vice president of management and professional liability he has more than 19 years of experience in customer service and client development and he works throughout the world with consulting with organizations about program design and management techniques which is absolutely critical to the programs that we're going to be talking about today so we're lucky to have his expertise as well so what we wanted to do is try to run this in more of a casual format so scott and patrick are going to discuss some of the the intricacies of this area and some of the um policy considerations and some of the considerations that directors and officers should have went for when they're getting into the space or if they're evaluating current coverage that they may have if they're already serving um cannabis related businesses then at the end we were going to go ahead and take questions on the bottom of your screen you should have a q a box and if you type your questions in at the end of their discussion i'm going to go ahead and ask both of them the questions if we have any certainly um if you don't have time to stay that long for the q a session feel free to send the questions to us and then we will do our best to get you some answers um and we're really excited hopefully some of the attendees who we saw sign up are in some of the new markets such as south dakota pennsylvania and and those areas so we're excited that you're at least considering the space and um again if you have any questions put them in the box and without further ado here's scott and thanks katrina thanks frank and certainly thank you patrick um i i would say that you're the expert and and i'm just along for the ride um but it's it's great to have you here um and let's so let's talk about dno or dino insurance or do you know professional liability insurance and i think you know let's let's just start with what does dno what does this insurance coverage provide what does it protect what does it really protect these days from you know it's interesting you you use the common misnomer there with it people will say it's dno or professional liability and there's really a uh there's a definitive line there between the two so professional liability is obviously the liability associated with the deliverance of professional services when you talk about directors and officers you're talking about the services that are delivered to the organization from either the board level or the director level so there is kind of a quasi-professional exposure there and that they're managing a company and they're providing services to the company directors and officers traditionally just covers those services provided the management of the com company and the financial consequences that arise from those decisions as it relates to financial institutions and the decision whether or not to bank cannabis deposits make loans or participate in this business there are potential financial consequences that could come from that whether it's regulatory fines and penalties a massive withdrawal from a a client base due to the fact that there's a moral you know objection to the banking of of cannabis deposits that could impact the bank's bottom line so the decisions that are made in running a financial institution at the board level or at the director level is what we're trying to pick up coverage for with directors and officers and and i know you know this is this uh our talk today is centered on specific types of polls a specific type of dna policy for financial institutions but but you know just generally in the cannabis space i know you know a bunch of our clients have had difficulties obtaining and might as our clients mean plant touching msos ssos obtaining what i would call um decent dno coverage um and i i know the market's kind of weird and and awkward right now because of the whole covet situation but you know i was looking at a non-cannabis dna policy earlier and just kind of thinking okay well what does this really provide for a cannabis operator or an fi and you know i just went through a bunch of the provisions and for instance there's an exclusion uh for no coverage for conduct arising out of or resulting from any deliberate criminal act um there's the definition of loss doesn't include um any any uh amounts that would constitute an amount that's not insurable under the law um and then even with respect to possible rescission you know there's provisions that say you know if the application contains any misrepresentations or with an actual intent to deceive which sometimes you know when uh mrbs or cannabis operators don't actually tell you their cannabis operator i think that's when that comes to place so i guess my question patrick is i mean is there really any coverage at all because it seems somewhat exclusionary well you know it depends right so the cannabis market in general is very tight uh when it comes to the number of carriers that are participating and the types of coverages that are available so when you talk about directors and officers there might be seven to ten markets that are actively participating in the cannabis industry comes the financial institution there's more but they are actively looking to suppress the exposure that's presented by taking on cannabis deposits or working in that space with that being said this is not your typical general liability policy a typical property policy each carrier has their own intricacies and each broker that's working in this space does something a little bit differently in order to affect the policies to create coverage where those exclusions might uh uh bar it in the beginning or the interesting part yeah go ahead well so so patrick is it is it just my paranoia that if you had one of these regular non-cannabis dino policies and you have and every dno policy i've seen i've been working the space since 1999 has the intentional axe exclusion um which has you know no coverage if you know you could commit a deliberate criminal act or violation i mean is it my imagination that um insurers might use this as a basis to deny coverage for cannabis operators because well canvas is illegal federally so paranoid well i mean you're obviously paranoid that's a fact we all know that yes but uh you know beyond that yeah there have been there has been case law that has shown that carriers and some of the guys that we all know and we see their flags up at golf tournaments have used the illegal ass exclusion to bar coverage in federal court and honestly uh and once you get to federal court you're seeing judges that aren't sympathetic to state law they look at federal law and the rules and regulations around that and they basically see the control substances act boom you're done coverage doesn't apply on the flip side we have seen in state court some of these saying well you knew based off of the application that this was a marijuana related business or this was you know this was a cannabis entity you offered coverage we're not going to let you rely on that exclusion so to that end what we've seen is some of these larger national carriers do two things one increase their applications which do exactly what you said it creates the basis for rescindable policy so misrepresentation on an application where you say we're not banking marijuana business you are banking marijuana business kaput that's a misrepresentation and they can rescind the policy the issue with that in the event of a claim rescission only comes in the event of a claim right these guys aren't going back through every policy to check your deposit holders and going through all that stuff but in the event of a claim they find that they want to rescind the policy what do they have to do they got to give back the premium if there's no consideration there could be no contract so they remove the contract and give you back your money insurance carriers aren't in the business of giving back money and so what what we've seen probably in the last 12 to 15 months is assertion language specifically as it relates to some of the larger carriers in the fi space there's assertion language that says that if you have banked or you're taking on cannabis related business the policy is going to assert that there's no coverage because either you didn't you know you didn't disclose it but we don't want to pick that up anyways because it's federally illegal so if you look at a company like a zurich or a cna they have that language that's going into their policies at renewals and other businesses are saying you know they're adding this into the application at which point in time they're just non-renewing the business so at renewal you're seeing them say okay listen we don't want to be involved in that we're out and that just depletes the marketplace and creates a lack of a competitive environment for the rest of the folks that are are participating here um and unfortunately it's hardening the market from a pricing standpoint um so premiums are going up and coverages is less than desirable with some of the relate uh remaining carriers out there well let's just talk for for a few minutes about dino solely for plant touching entities and i know we're going to get to fi so let's but you know i've you know we've sent some folks your way uh over the past you know and who are plant touching operators and i guess the question is i mean is there real any real affordable and emphasis or effective coverage out there um that doesn't have what i call a big donut of an exclusion that basically if you were to be found violating the controlled substances act which every plant touching entity is um is a basis for denial yeah so there's it's tough scott i mean it's it's a difficult marketplace when you start talking about publicly traded companies the coverage is actually fairly robust um you're looking at the same kind of base coverage form that you would see from a fortune 1000 publicly traded company and that's a good thing and the issue there is it's really really expensive it's not out of line with what we're seeing in some you know biotech and ipo california ipo business where you're looking at somewhere between a 17 and a half to 22 and a half percent rate what that means is basically per million you're paying 175 000 to 225 000 or more premium or premium for a premium that's correct and then you're starting under retention that basically matches the limit so if you're buying a five million dollar limit policy your retention at the front end of that is gonna be five million dollars you can knock that so what's the retention just just so we make sure you know people listening know the jargon so what's a retention our retention is basically a front loaded deductible so the very first thing that you you see when you work with the dno claim is you have to hire a awyer and uh you know right thank you uh thank god thank god for lawyers they're they're here they're here to help um but no you you go through defense costs and so the initial retainer for the the policy is you expend x number of dollars on defense in private companies it's significantly lower right you're not talking about a securities class action you're not talking about an sec investigation although with financial institutions you can so you start off with a defense based retention and you kind of have to pay that upfront and then the indemnification available through the policy is above that retention so five million dollar policy you could spend a million dollars on the coverage spend five million dollars on the retention before you even touch the limit of insurance it's really expensive um at least yeah and to that end you know we've been spending a lot of time looking at different solutions for plant touching uh companies and you know that don't involve traditional risk transfer of insurance right so you've got captives that are potentially available uh you've got insurance trusts that are potentially available depending on on how you can collateralize those the issue is cash right cash is king in order to collateralize a a captive you have to have a certain amount of cash and a lot of that money is not designed to spend on dno policies it's designed to build out operations so that's on the public side on the private side it's a lot different significantly different so a privately held company you know you've got a limited shareholder base you might have 100 to 200 investors in the company on some of the larger ones the coverage is just not as robust you're not getting a publicly uh you're not getting a public dno form you're getting a private company form which should be broader and that it provides entity coverage not just shareholder suits but you're starting to see control substance act csa exclusions you're starting to see bankruptcy exclusions majority shareholder exclusions and if you're buying a policy that's primary purpose is to defend a director an officer in the event of a bankruptcy for mismanagement or in the case of something that's antitrust related from a competitive standpoint or from a shareholder that doesn't have board rep that's a big that's a big exposure but if you're excluding all those what is it actually covering so understanding what you're buying and who you're buying it from and who you're buying it for is also very important because there's different ways to structure those things luckily in the financial institutions world because they're not plant touching there tends to be a broader coverage form available if you know how to manipulate your way through those illegal exclusions well that's that's a good question because i know when we worked with katrina when when she was the client um we did look at certain financial institutions dno policies they had in place and i mean probably no surprise i kept seeing this intentional criminal act exclusion and you know i was constantly concerned and um i mean has that i mean and i think a lot of my guess is most financial institutions still have that donut in there um well i called don for an exclusion unless they get a specialized or work you know specialized i'll call that cannabis type dna policy for fis so there's a there's a two-way go really um one is to manipulate and negotiate through that exclusion and that's that's preferable because that can tough though because i've tried that as katrina's been on the phone with me yeah and in a broad form what you're looking for is a state level carve back the issue is the federal courts may not may not accept that card back because it's still federally illegal so the carve back that we utilize is you know it basically says that i've got it pulled up here um but not limited to medical adult use marijuana and the applicable state law will govern the definition of the criminal act that tends to stand up and hold in state court in federal court we actually haven't gotten there because there's not a whole lot of outside shareholder activity in the financial institutions that we work with kind of coming into the banks and those that do have a you know a cross-border so to speak exposure are generally publicly traded and so they're already working with a form that is that that will defend them and and create indemnification above retention anyways so that's the first way the second way is to say the entity's on its own and the entity can indemnify itself they can take care of they can pick up the exposure they can pay for any kind of litigation that comes in but what the entity is not going to do is the we're not going to indemnify the board because they've made a decision to participate in a federally illegal business and then you start talking about the structure of the policy how do you want to do that and one of the ways that we do that uh in our industry is create a side a access tower with a dic component that drops down and cuts through the illegal axe exclusion to provide indemnification only for the directors and officers so only for the board so when you when you say a separate side a policy um i know what it means but what does it mean for for you know the customer for the yeah yeah so a traditional policy has an abc component there's three parts to the policy form you've got side c which is the entity right so the entity gets sued uh side b is for indemnifiable risk to the directors and officers that's where the company can still provide indemnification and most policies will presume that uh the entity is providing indemnification to the d's and o's inside a coverage is non-indemnifiable risk typically what we see in in private company business and in public company businesses side a coverage is reserved for a really really bad day so think bankruptcy think uh you know so some really nasty stuff where the company cannot or will not indemnify the directors and officers the problem with the side a policy decide a coverage component on a private company policy is that it will maintain the policy wording in the exclusion for illegal acts so above your primary layer let's just say you buy a primary 5 million dna policy above the primary layer what we have tended to do is is create an excess policy that cuts through that illegal axe exclusion and and and indemnifies the directors and officers on a first dollar basis because if it's a non-indemnifiable claim and there's still a 250 000 retention you know katrina who's sitting on the board will be 250 000 out of pocket before the policy kicks in so we replace that high retention with a zero dollar retention coverage responds on a first dollar basis and we include that cut through language to get to the point where okay the bank's not going to indemnify it can't because it's a violation of public policy to indemnify you for a claim alleging acts that are illegal so so in a way so is this like a would you consider this a separate policy just for the directors and officers or is this because excess generally will follow form right right so so this isn't a traditional access policy although it kind of it's supplemental right it's supplemental it's access and it's standalone so it's it's all three wrapped in one we call it a difference in conditions policy so the very first part of the policy is to follow form up the tower and it kind of goes in lockstep and and if there's an abc claim and b and c respond and then there's access and all the way up until the bank can't indemnify it will follow form on the terms and conditions if there is a a claim that comes in where the bank cannot or i'm sorry financial institution cannot or will not indemnify because of violation of public policy or potential bankruptcy then the policy drops down and it acts as a standalone indemnification policy for the directors and officers only there's no entity coverage the bank is separate from this and that's very important uh distinction to make because in the event of a bankruptcy or a receivership of some sort in that regard the dnl policy can become an asset of the organization nbc's side a with no entity coverage involved cannot and and scarily i've litigated that in bankruptcy court but that's that's a story for another day um because now we're geeking out but so so let's say well katrina used to be an officer of a financial institution so you know they're looking financial institutions looking to get into the cannabis banking space um you know step one i'm assuming is they look at their dino policy and and they'll see this big old donut you know what then they come to their lawyer they come to you or whatnot i mean what's your general recommendation should they negotiate and or purchase like a new overall policy do they limit themselves to investigating just the side adic policy combination of both it depends that for beer is that for katrina oh that was for you patrick oh i'm sorry um you know it's it's important to maintain a traditional insurance program especially for a financial institution that is not going to be exclusive to the cannabis industry i would tell you that if you're exclusive to the cannabis industry and you're just going to focus on taking deposits and making loans there don't buy bnc coverage it's just you'll run into issues with legalities and regulatory environment that you just don't want to have you don't have to litigate to get to your policy so if but if you are operating in a certain fashion and then you decide that you know what we're going to take on a million dollars five million whatever it is and it's a smaller percentage of your overall portfolio which is what we see quite often but the rates are good you know the the profit margins on taking that business makes sense um you know considering adjusting your program to take on a dic component above your traditional insurance would make sense because you're on the board that takes on that exposure i would probably want to cover myself for that yeah probably um well not probably definitely but you know when you you've mentioned pricing is better you know so earlier we're talking about that the you know the premiums for plant touching are expensive and we were talking about these incredible retentions um and you know there weren't that many choices you know obviously a little bit more in the public side but there aren't that many choices um when you go to uh applying or looking for dno on behalf of the bank or credit union or other financial covered financial institution i mean is the price is there pricing really better is it is there really more selection and i think most importantly i'm assuming if it's side a there's there's very little of a retention but but sometimes we know what happens when we assume so side a is zero retention it's a first dollar it comes down to the first dollar and why we provide a dic component is for exactly this right if it is a non-indemnifiable claim we don't want the d's and o's paying out of pocket to access the insurance so there's no retention associated with it um and it's there for the directors and officers pricing for financial institutions varies widely between carriers it is certainly not to the extent that public company directors and officers is for uh you know an mso uh it's not even to the point where you would see it for a traditional financial institution you know think you know a new york publicly traded banker or somebody in the midwest or somebody like that they're not going to be paying the same rates as an mso that's traded in canada which by the way is ridiculous the fact that we're we're talking about you know 22 and a half percent rate for a canadian publicly traded company is absolutely absurd but when you start looking at financial institutions you're looking at very specialized policy forms right it's a combination of dnl and eno because they are providing professional services to their constituents and due to their you know their clients um and so there's a very specialized coverage form you're probably looking at retentions that start at 25 to 50 thousand dollars to go up from there depending on the amount of assets held by the bank and one of the arguments that we make is right if you're a billion dollar asset bank and you're taking on 10 million dollars worth of cannabis deposits is that really material to your operation no it's not and so we we make the case that hey you want to stay on risk it's still a good risk the only the only negative here is that they're taking on less than 5 less than 10 of their annual assets to make some more money and that's good for dno right if you show profit margin that is good and that that insulates litigation um and so the liability is not as great if it's a smaller percentage of your business of your business and i saw a question in here about professional liability for like a lawyer or an accountant uh same thing applies it depends on how much of your practice is going to be associated with marijuana related activity i will tell you that uh hemp not a big deal if you're working with strictly cbd it's it's not material at all but if you are a cannabis firm and it makes up 50 of your annual revenue you're probably going to pay more in premium sure but you're on these ancillary businesses you're not going to see a great deal of difference in coverage um what you'll see is a narrowing of of markets that are available to you but we've had a great deal of success in negotiating uh with professional liability with law firms and accounting firms that are in this space saying hey this is uh standard form let's get into standard business and and so there are a lot of you know let's return to banks in a second but there's a lot of groups out there doing consulting or management um providing management services to the campus industry so um so there's hope that there is eno or professional liability insurance for them at somewhat of an affordable basis with with decent coverage options yeah it's uh the coverage is fairly somewhat somewhat and that's a that's a well-done qualifier there uh allegedly there's coverage up um i will tell you that for consultants it's still a little bit tough okay uh you're you know anybody that's on the call is familiar with what we refer to as the cannabis tax so if you are in the business and you are are in and around it uh you're gonna pay a little bit more for everything whether that's a guy swinging a hammer to build your building whether that's an insurance broker selling you insurance or whether that's a lawyer defending you there are there is a tax to be paid in the insurance world for mrbs uh related and ancillary the tax is probably two and a half to three times um in directors and officers playing touching businesses for for that stuff the tax is more like five to ten depending on on the financial condition of the company shareholder base and some other you know some other underwriting criteria but the tax is legit it's real so so then turn let's let's just turn back to uh fi's for a second or however long we have left so you know and and when an fi is contemplating getting into the industry there's a lot of different things they need to um investigate various vendors which are crucial and when i say industry obviously cannabis uh taking canvas deposits but from an insurance perspective other than calling you and other than being completely transparent through the entire time is there anything that the board or the officers should do to kind of make the underwriting process that much easier um you know any kind of hints that you you have or it's just here's here's the application you've already filled out your normal dno i will tell you yeah i would say that from a management liability side transparency is good uh understanding what your strategy is going to be around uh cannabis deposits and cannabis banking period so there is a significant difference from an underwriting standpoint in taking deposits and holding them and just kind of charging a fee and making loans right so as soon as you dip into the fact that you're going to be making loans and and really leveraging the bank's ability uh to create revenue off of loans to a marijuana related company and you're going to help them build their uilding you're going to help them hire folks right i mean you're going to create a business loan for a plant touching entity that's going to spook some underwriters um and you're going to narrow your your field a little more existing relationships with carriers won't matter right so if you're sitting here in denver colorado and you have a 20-year relationship with uh your bank and you've decided you know i'm sorry your insurance carrier and you say to them okay we're going to take on cannabis deposits and you happen to be one of the golf course guys right cna jab travelers jobs or they're not going to care they are not going to care they are going to add assertion language they are going to potentially non-renew your property casualty program as well there are significant ramifications from the standard markets uh they just don't want to be around it they are you know it is such a my nude portion of their portfolio they're operating under the five percent rule don't let the five percent ruin the 95 so they're just not going to do it um but you work with some other carriers that that people may not have heard of financially sound very strong uh but true risk bearing entities right they they're willing to take risk and they're willing to price for that risk but just be ready that you may have a dramatic shift in your program away from a carrier that you've been with for 20 years so so you mentioned about loans just earlier in that you know if if a fi is making loans that could um increase the premiums make it more difficult subject to renewal is there a difference if you're making loans to let's say an ancillary company versus an actual plant touching and by actually i mean you know totally separate special purpose vehicle that's buying the real estate and then leasing it out to the actual um plant touching entity but itself is one step removed does that does that matter or it does it it absolutely does it absolutely does right so if you are working with a real estate firm and they've decided that they're going to buy a block in downtown denver and part of that block at the end of it upon renovation they're gonna you know lease out a portion of it to native roots that's fine right you're you're not leasing you're not doing anything with the plant-touching entity you're basically funding construction that's and that's okay um if you're funding construction to an llc that is under the corporate umbrella of a plant-touching entity that's different and we've seen those reits pop up and raise money in different ways i think that's a little bit different than a financial institution's exposure but i will tell you that if there's anybody on the call that's working in private equity or through a reit and your investment strategy is around cannabis it's going to be more expensive it's just the coverage needs to be altered it needs to be specialized around that space and i i'll say the same thing about spax which have have really come into vogue in the last two years i think you know the multi-billion dollars backs and i think there's a huge one out in california right now that's just gobbling up stuff those guys are paying a grip for their insurance right now um i think there was one uh i think the rate is somewhere in the neighborhood for a two-year policy term of 750 000 for a 2 million dollar policy and uh yeah and that's just side a oh wow which makes sense for us because the vehicle is not going to exist post transaction and that's when the litigation going gonna come so it's not there to indemnify the d's and o's anyways but uh it's really very expensive so i i know we're running close to out of time and we do want to get the questions but i do have sort of one last topic and and that's that's on the safe banking act and and it looks more and more likely regardless what happens in the uh georgia special election that there's a good chance the safe banking act will pass in some capacity especially with uh senator toomey taking over from pennsylvania the banking committee he's a republican if the republicans uh keep georgia on the board and i guess my question for you is will this impact the the insurance the dino market at all uh will it make things easier cheaper more affordable different limits different products or is it just hey it's it's dno and dno for non-cannabis companies as expensive and difficult as it is or yes uh i think it'll make i think it'll make it easier right so we started off the conversations talking specifically around coverage and why that illegal acts exclusion is so onerous right there's a lot of gray area depending on where litigation is brought what what venue there is and and who's defining illegal acts if the safe banking act passes and the ability to bank cannabis becomes legal that opens up a tremendous amount of room from a coverage standpoint that does not necessarily mean that it opens up any room from an appetite standpoint so you could still have the big three the big four the big five say that we're going to continue on with our assertion language because we don't feel comfortable with the exposure even though you're taking deposits and you're making loans and everything is on the up and up we just don't like the exposure so you could still also because because also because cannabis will remain federally illegal with just solely the passage of the safe act right so that should right right all it would really do in my opinion is say that okay that illegal asset exclusion it's no longer illegal to bank cannabis it's still illegal to sell it still illegal to have it still illegal to smoke it but it's not illegal to bank businesses that are in that industry that's that's really the benefit there it will open up some avenues to folks um i just don't see it being again that whole portfolio program why bother why get into it because if you're going to start looking at banks that are saying oh great now i can take this on and i can make loans to people where is the cannabis index right now for msos as as compared to where it was two years ago right i mean the burn rate of these entities has been massive and you're looking at people that are struggling financially and then you're going to give them a 20 million loan i don't know from a dno standpoint if i really want to walk into that or from a professional liability standpoint on a carrier side if i want to walk into that exposure so i i think even with the passage of it i think the language in the policy gets better and more easily approached if litigation comes i just don't think carrier appetite will shift with it immediately i think we're probably you know federal legalization plus x to get the right actuarial data there for the big guys to really participate got it got it well this has been really informative and i think it's been probably very informative for a lot of our um audience um obviously you know to the extent folks have questions or want to approach you because they're interested in getting the space i think there was information on the general invite but certainly patrick if you want to plug yourself for a second before we get to the questions uh feel free sure thank you scott uh patrick ryder hub international insurance services out of denver colorado i sit on top of our national cannabis practice for management liability so my focus is really on complex risk and financial institutions uh specifically as it relates to the management liability exposures we have 13 000 employees we've got over 400 offices across the united states uh my job is to support our sales force and really create the solutions uh for the companies that want to work and participate in this industry and as much as we talked about scaring people right i mean part of my job is to scare people into buying insurance this is a great industry there are some really cool people that are involved here they're doing an amazing job they're doing some really fun stuff and there's only so many times in my life that i'm gonna see the opportunity to get in on the ground floor and be part of something that is not just an industry but it's really a movement i know scott you have a personal connection and i i think as you kind of go through this you'll find a lot of people that have a personal connection to cannabis and the stories and the people are fascinating so if you're thinking about doing it you know you've got some great resources here to talk to uh and we're happy to support you to help grow this industry you want do you want to give your email other people or contact you sure it's patrick.rider at hub international.com you can also find me on linkedin is patrick ryder and i look like this and it's r-y-d-e-r just like the trucks that's right just like the trucks no relation which is why i'm selling insurance so so katrina let's turn it to you if we have some questions i i know we got about 10 minutes left so we um just have one one question that patrick hasn't already addressed and i think it's a great question to kind of summarize everything that you've been talking about which is in your opinion what should a bank or financial institution credit union considering getting into the space what if any special considerations are there or should they be thinking about regarding their obtaining insurance for their new corporate or their new cannabis banking program good question um you know the considerations are really are twofold who are you going to bank are you going to bank lawyers accountants testing facilities labs uh security forces are you going to be touching are you going to be considering taking on straight cannabis deposits cash deposits from cannabis firms once you make that consider you know once you develop that strategy around your uh cannabis portfolio then it's time to start looking at the illegal last exclusion in your policy whether or not as a board of directors and and as a you know as a c-suite representative you want to consider some personal asset protection from a side a policy and expanding your dnl uh really taking a hard look at the conduct illegal act exclusion and and you may have an existing program in place right now that has abc has side a right you may be working at a financial institution that has a robust dnl platform doesn't mean that the language is right and so i would just encourage you to work with your broker or somebody that you trust like a scott moskel uh to review your policies in order to feel comfortable with how coverage is going to be applied in the event of a claim the second part of this is again if you're with the aba and you've got a great american policy it's a great policy form good people they know what they're doing and they are not shying away from this understand that their policy is not going to remove or carve back that illegal axe exclusion you can stay there and they'll stay with you however really consider that dead side adic with some card back language i think is important and on the property and casualty side don't think that just because most of the exposure is from a d o standpoint that you're safe from non-renewal of a property casualty program so in this particular market right now where we are your insurance program if you're concerned about your corporate insurance program start your underwriting early um the dnl market in particular is hard we're looking at you know underwriters have 250 submissions at a time on their desk right now it's insane because of the way that the rate structure and bankruptcies are coming in and the impacts of covid and and the unknown there's a lot of marketing going on and so carriers are really slammed and stretched for resources right you can't get everybody in a room at one time to walk through 20 risks and so it's just taking longer so get out early same is true on the property and casualty side right anytime you see a depressed economy um regardless of what the stock market is doing we've seen a ton of activity on the property side specifically from property damage and that's not just domestically from from some of the civil unrest we've seen tornadoes we've seen hurricanes we've seen these things that are impacting the property market and hardening that as well so i'd encourage you to start your renewal process not 60 days out not 30 days out more in the 90 to 120 days out just give yourself time be ready to adjust and be ready for some increases not just cannabis related but you're looking at 25 increase across the board right now on your property casualty programs so start developing a strategy as to how you tell your story and what you're going to do to mitigate loss and risk to carriers and separate yourself from the herb i think all of that's important right now but but i want to just add one thing and i think this is also important you know back three four five years ago there really was a lack of true uh functional policies or policy alternatives for banks and credit unions and i know katrina and i worked on some of this together i think the good news is yes it might be more costly but there are alternatives or or there are policies or products available to kind of plug any hole that your present you dino policy might have that's true i think i think you know let's let's end it on a good note um yes it might be more expensive but as opposed to like three or four years ago there is actually good coverage available this is true and just think about it if you're getting that much percentage on your deposits you can afford a little more coverage there you go it's like paying taxes right if you paid taxes you made money and that's all good katrina any more questions or is that that we i just want to um reiterate and underscore what patrick said is i've seen it a million times so if you're out there and you're um one of the members of the team who's exploring cannabis banking if you start early like patrick said it's going to help your board feel more comfortable with the decision of actually banking cannabis because you would have already explored this and it will um alleviate some of those delays that may happen when you don't understand what is going to be coming down the road with this so on that note i also want to let everyone know that in january on january 6 we're going to have another webinar on payroll providers in the cannabis industry um how it affects the industry itself but also those financial institutions that may be interested in helping bank these pay payroll processors and so that will have paragon and adaptive hr on his guests so we hope you can attend those as well and other than that scott that's all i'd just like to thank both you and patrick and all our attendees and if you have any questions you should have our contact information um please feel free to reach out because we'd love to help you and um we appreciate you attending great thank you thank you patrick happy new year happy holidays guys take care