Cannabis Employment Practices Liability Insurance

What Does Cannabis Employment Practices Liability Insurance Cover?

EPLI covers defense costs and damages for claims arising from the employment process. The most frequent covered claims are wrongful termination, discrimination, sexual harassment and retaliation.

IRMI's insurance glossary describes EPLI as liability insurance covering wrongful acts arising from the employment process. Beyond the four most common claim types, coverage can extend to:

• Defamation and invasion of privacy.
• Failure to promote and deprivation of career opportunity.
• Negligent evaluation.

Common exclusions include bodily injury, property damage, and intentional or dishonest acts. Workplace injuries fall under workers compensation, not EPLI.

EPLI is sold as a standalone policy or bundled into a management liability package with directors and officers and fiduciary liability coverage.

Why Is Employment Practices Liability Different For Cannabis Businesses?

Cannabis employers are subject to the same federal employment laws as other employers, despite the federal status of marijuana, and federal agencies have brought cases against cannabis retailers. At the same time, coverage can be harder to place.

Federal law applies. In Kenney v. Helix TCS (2019), the U.S. Court of Appeals for the Tenth Circuit held that employers are not excused from complying with federal laws because their business violates other federal statutes, and that workers in Colorado's marijuana industry are protected by the Fair Labor Standards Act. The case involved security guards alleging they were misclassified as exempt and denied overtime.

Federal enforcement is on record. Examples from the U.S. Equal Employment Opportunity Commission:

• October 2024: a Colorado marijuana retailer with seven locations agreed to pay $95,000 under a consent decree to resolve an Americans with Disabilities Act case alleging failure to accommodate and retaliatory termination. The decree required policy revisions, annual ADA training at all locations and reporting to the EEOC.
• March 2026: the EEOC filed a Title VII sexual harassment lawsuit against a cannabis company over conduct at an Illinois facility, alleging a manager participated and that complaints to human resources were not acted on. These are allegations.

Labor peace requirements. Some states tie licensing to labor relations. The California Department of Cannabis Control states that applicants and licensees with 10 or more employees must enter into labor peace agreements, citing Business and Professions Code section 26051.5.

Availability. The NAIC's 2023 cannabis insurance guide notes anecdotal reports of challenges finding employment practices liability coverage for cannabis retailers.

Which Cannabis Businesses Commonly Carry It?

Any cannabis business with employees has employment practices exposure. Retailers, cultivators and manufacturers with larger or shift-based workforces, and multi-location operators, commonly carry EPLI.

• Dispensaries and retailers: customer-facing staff, managers supervising shifts, and multiple locations. The NAIC lists EPLI among the typical business insurance needs of cannabis retailers.
• Cultivators: seasonal and harvest labor, supervisors in grow and processing rooms.
• Manufacturers and processors: production staff working under strict standard operating procedures.
• Distributors and delivery operators: drivers and security staff, often across several shifts.
• Multistate and vertically integrated operators: employees subject to different state laws in one company.

Investors, lenders and acquirers may also look for EPLI as part of a management liability program.

How Are Limits Typically Structured?

EPLI is written on a claims-made basis, with a limit per claim and an aggregate for the policy period, and a retention the business pays first. Defense costs usually reduce the limit, unlike general liability.

Key structural features, as described by IRMI and SHRM:

• Claims-made trigger: the policy responds to claims reported during the policy period, so the retroactive date and continuity of coverage matter when switching carriers.
• Defense within limits: the insurer's payment of defense costs, often a substantial part of a claim, reduces the policy limit. In commercial general liability, defense costs are paid in addition to limits.
• Retention: a deductible or self-insured retention applies per claim.
• Wage and hour carve-outs: SHRM reports that EPLI historically has not covered Fair Labor Standards Act and similar state wage claims. Where coverage exists, it is often limited to defense costs, not judgments or settlements, and may carry large deductibles and sublimits.

Given Kenney v. Helix TCS, wage and hour exposure for cannabis employers is real, so how a policy treats it is a key review point.

What Do Carriers Ask For When Quoting Employment Practices Liability?

Underwriters typically review headcount, locations, HR practices and claim history. Written policies and training are a central part of the review.

• Number of employees by state and location, including part-time and seasonal staff.
• Employee handbook, anti-harassment and anti-discrimination policies, and complaint procedures.
• Management training records.
• Use of outside HR or employment counsel.
• Turnover and recent terminations.
• Prior employment claims, EEOC or state agency charges, and demand letters.

Frequently Asked Questions