Eric Schneider – Alpha Root: Why Is Protecting Your Dispensary Against Lawsuits a Must, Not a Might?


Eric Schneider, MBA, MS Managing Director at AlphaRoot


Phone: 646-854-1093
Address: 114 E 25th St 4th Floor, New York, NY 10001

Bio: Eric Schneider is the managing director of AlphaRoot, a tech-enabled cannabis insurance broker in NYC. Empowered by a team of industry veterans with long-standing relationships in the cannabis and agriculture insurance space, AlphaRoot can provide customized coverage and access to select insurance markets. Schneider is dedicated to his clients’ best interests, attributing his success to taking steps one at a time instead of focussing solely on the bigger picture. This strategy helped triple AlphaRoot’s book of business within its first year. Eric’s mantra is to have heart, be smart, and most importantly, have fun — themes carrying the AlphaRoot team into becoming an industry giant.

Cannabis dispensaries face some of the most wide-ranging challenges in the industry, from theft to product liability lawsuits to cybersecurity threats. With a barrage of risks from all sides, protecting your dispensary against lawsuits is now necessary instead of optional.

We’ve teamed with AlphaRoot, a tech-enabled broker calibrated to cannabis, to review some of the most significant challenges dispensaries face, along with risk management tips to protect your business. 

Non-Compliance Issues

Cannabis regulations are different at the local, state, and federal levels. Unfortunately, very few regulatory guidelines align with each other. The ever-changing rules create an uncomfortable maze for dispensaries to navigate, often creating massive compliance issues. These operational challenges can lead to infractions, resulting in insurance-related claims. 

With much change occurring on the cannabis front, it’s only natural to feel overwhelmed. However, regulatory non-compliance is expensive, and some awful PR often accompanies non-compliance legal cases. It can be damaging to your long-term growth, reputation, and all aspects of your business. 

Aside from regulatory problems, data protection now tops the list of growing concerns. Consumer data privacy laws in the US have transformed over the past several years, bumping cybersecurity to the forefront. The global pandemic no doubt created the perfect storm for hackers and bad actors to infiltrate our confidential files and networks. 

Much like cannabis regulations, data protection is a matrix of scattershot ideas and attempts at consumer protection. Wirecutter summed up the legal landscape nicely, “The United States doesn’t have a singular law that covers the privacy of all types of data. Instead, it has a mix of laws that go by acronyms like HIPAA, FCRA, FERPA, GLBA, ECPA, COPPA, and VPPA.”  

Protecting Your Dispensary

Although regulatory compliance is a tall order, protecting your dispensary means completing monthly checkpoints. Remember to stay current on data protection standards, and follow best practices. These standard benchmarks, such as reviewing local government’s licensing and regulatory guidelines, can keep non-compliance issues at bay. Lastly, team with a seasoned broker to ensure your insurance policies protect you adequately.

Legal Liability Cases

Cannabis dispensaries are not unlike other retail facilities, with regular visitors and customers passing through the store daily. Although general liability insurance is typically a must-have for any operational business, you must know the extent of your coverage. This “slip-and-fall” or “all-risk” policy covers personal or property damage and bodily injury occurring on your business’s premises.  

Simple mishaps and accidents can snowball into costly liability lawsuits in a flash. Protecting your dispensary against these claims is necessary to keep your business on the path to profitability. 

Also, let’s think about the products you sell. What if someone claims your products cause injury or damage? Whether or not the product liability lawsuit is frivolous, defense can be expensive. Plus, since the federal government doesn’t regulate testing or manufacturing in the cannabis space, dispensaries are left to safeguard themselves from legal liability. Dispensaries must manage their supply chain to avoid product liability issues and have an adequate insurance safety net should a case arise. 

Protecting Your Dispensary

Purchasing a general liability policy is an excellent start, as it’s the foundation of any robust risk management plan. But don’t stop there. Be sure you understand the liability limits surrounding the products you sell at your dispensary. Know who and under what circumstances patrons can purchase them.  

Employment-Related Lawsuits

Employment-related disputes are not uncommon among American businesses, including cannabis dispensaries, especially in the wake of social movements like #MeToo and #BlackLivesMatter. As a result, the US government has created several federal statutes with broad sets of rules. Unsurprisingly, some states have even more stringent regulations.  

The shift to remote and hybrid work creates a unique environment for employment-related lawsuits to surface. Vaccine mandates and downsizing only muddy the landscape further. Some of the most common employment-related cases include:

  • Discrimination
  • Wrongful termination
  • Harassment
  • Wage violations
  • Personal injury


Although this list isn’t exhaustive, it’s a keyhole view into the costly legal ramifications of having employees. Consider also that typically employees who sustain work-related injuries fall under the financial care of their employer.  

Protecting Your Dispensary

Protecting your dispensary and workforce from all angles is necessary. Leaders of cannabis dispensaries must understand the legal liability of having employees. Workers’ compensation and employment practices liability (EPL) insurance are solid starts. Additionally, know employment laws in your area and stay current on workforce safety measures. Establish concrete HR policies, and have an employee handbook to back you up. 

Cannabis D&O Litigation

Directors and officers of cannabis dispensaries have various duties, including fiduciary and cybersecurity responsibilities. However, these leadership positions are also vulnerable to directors and officers (D&O) litigation if someone makes claims against the dispensary and its executives. Unsurprisingly, cyber liability claims morph into D&O litigation now more than ever. 

Many assume that only the leaders of massive public companies face lawsuits, but that’s far from reality. Shareholders, competitors, and investors, to name a few, can sue the leaders of cannabis dispensaries. Most of these claims alleging wrongful acts managing the business put the leader’s personal assets at stake. 

Protecting Your Dispensary

We live in a litigious society, so it’s no surprise that D&O litigation often plasters media headlines. The first step in protecting your dispensary against D&O lawsuits is understanding what’s at stake. Working with a seasoned broker is a step in the right direction. They can help make sense of what D&O insurance covers and how to build a powerful management liability program with bespoke insurance products. Below is a graph explaining the three parts of this coverage.

Source: Founder Shield

Cybersecurity Threats

As mentioned, cyber liability claims have begun to impact company leaders tremendously. Directors and officers are expected to maintain proper cyber controls through regulation and industry requirements.

Unfortunately, the cybersecurity landscape is shaky, with twice as many cyber attacks in 2021 as the year before. The global pandemic exposed us to more sophisticated phishing and ransomware attacks, for example. Remote work and hybrid schedules have opened the door to hackers and bad actors. According to IBM, the average cost of a global data breach is $4.35 million per incident.  

Cannabis dispensaries, like many other retailers using point of sale (POS) systems, face added threats. Protecting your operation starts with accepting the new cyber landscape for what it is: vulnerable.

Protecting Your Dispensary

There are several ways to up your cybersecurity game, including:

  • Creating a healthy cybersecurity environment with ongoing employee training
  • Understanding the cybersecurity landscape, risks, and challenges
  • Undergo regular network and system health checks
  • Implementing software updates
  • Protect your dispensary with cyber liability coverage, safeguarding your company against damages from specific electronic activities (i.e., phishing attacks, ransomware, etc.) 

Financing and Funding Challenges

While many investors are on board with the ever-evolving cannabis industry, many are still wary and only back ancillary services. Dispensary founders often face financing and funding challenges that other retailers don’t. Also, the cannabis industry functions as a cash-only business model, creating other hoops to jump through for cannabis operations.

The SAFE Banking Act would change many things for the cannabis industry — but it’s currently stalled in the Senate. Simply put, the proposed legislation would prohibit financial institutions (i.e., banks, credit card companies, etc.) from refusing to do business with cannabis companies as they currently can. 

We expect many positive changes in the future, positively impacting the current financing and funding challenges dispensaries face. In the meantime, dispensary leaders can stay protected from financial and legal issues by facing the problems head-on. 

Protecting Your Dispensary

Operating in a cash-only environment means being vulnerable to theft, so dispensaries must establish various preventive measures. Furthermore, many insurance carriers require specific protective safeguards before covering the company. It pays to know your way around these required safeguards. And remember to protect your assets in case your plans go awry. 

Protecting your dispensary against lawsuits is a must, not a might. Cannabis companies face more risks than most, so it’s not if something adverse happens; it’s when. Staying a step ahead of the exposures is about playing this game offensively and defensively, using risk management plans and insurance coverage as a shield and a sword.

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Author Bios

Matt Maurer – Minden Gross
Jeff Hergot – Wildboer Dellelce LLP

Costa Rica
Tim Morales – The Cannabis Industry Association Costa Rica

Elvin Rodríguez Fabilena


Julie Godard
Carl L Rowley -Thompson Coburn LLP

Jerry Chesler – Chesler Consulting

Ian Stewart – Wilson Elser Moskowitz Edelman & Dicker LLP
Otis Felder – Wilson Elser Moskowitz Edelman & Dicker LLP
Lance Rogers – Greenspoon Marder – San Diego
Jessica McElfresh -McElfresh Law – San Diego
Tracy Gallegos – Partner – Fox Rothschild

Adam Detsky – Knight Nicastro
Dave Rodman – Dave Rodman Law Group
Peter Fendel – CMR Real Estate Network
Nate Reed – CMR Real Estate Network

Matthew Ginder – Greenspoon Marder
David C. Kotler – Cohen Kotler

William Bogot – Fox Rothschild

Valerio Romano, Attorney – VGR Law Firm, PC

Neal Gidvani – Snr Assoc: Greenspoon Marder
Phillip Silvestri – Snr Assoc: Greenspoon Marder

Tracy Gallegos – Associate Fox Rothschild

New Jersey

Matthew G. Miller – MG Miller Intellectual Property Law LLC
Daniel T. McKillop – Scarinci Hollenbeck, LLC

New York
Gregory J. Ryan, Esq. Tesser, Ryan & Rochman, LLP
Tim Nolen Tesser, Ryan & Rochman, LLP
Cadwalader, Wickersham & Taft LLP

Paul Loney & Kristie Cromwell – Loney Law Group
William Stewart – Half Baked Labs

Andrew B. Sacks – Managing Partner Sacks Weston Diamond
William Roark – Principal Hamburg, Rubin, Mullin, Maxwell & Lupin
Joshua Horn – Partner Fox Rothschild

Washington DC
Teddy Eynon – Partner Fox Rothschild