Those operating in the legal marijuana sector face innumerable exposures related to things like motor vehicle accidents, bodily injuries and property damage. Of all the risks associated with the cannabis industry, product liability is one of most substantial. A seller, distributor or manufacturer of a defective product is often the one liable to a person injured by that product, regardless of whether the defendant did everything possible to ensure the defect never happened.
In order to protect themselves effectively, it’s important for organizations to have a basic understanding of the most common exposures and secure the proper coverage.
Product Liability Risks
Whether you’re a wholesale grower or a retailer, there are a variety of product liability concerns to consider. Edibles, vaporizers, pesticides, breaches of warranty, misrepresentation, label claims and deceptive practices all present a real risk of litigation, even for a cautious business.
All of these risks can generally be broken into three main areas of risk:
- Product contamination—In the event that a consumer experiences adverse health effects or illnesses after using cannabis, your company can be held liable. For those that sell edibles, customers can easily experience food poisoning or similar conditions from tainted products. For those that sell vaporizers or other smoking products, you could be sued following issues of contamination, product mislabelling and misrepresentation. What’s more, contaminated products can cause long-term health effects, increasing the cost to your business. Further complicating matters, in the event of an expensive recall and without the proper protections in place, your organization may be left without financial recourse.
- First-party claims—First-party claims are common for nearly all organizations that sell goods or services. However, due to the mind-altering nature of cannabis, your business is particularly at risk. Product liability claims related to accidents, injuries, product defects and similar losses are increasingly common in the cannabis industry. And even just one claim can have a lasting impact on your bottom line.
- Third-party claims—Third-party claims are particularly troubling, as your business can be held responsible for accidents even if you aren’t directly at fault. In the event that one of your customers gets into an accident, you may have to recoup the costs should they cause property damage or bodily injuries to a third party.
To properly address these risks and more, it’s critical that organizations not only produce high-quality and safe products, but secure the right insurance as well.
How Product Liability Insurance Can Help
When it comes to growing or selling cannabis, product liability insurance is a must. This coverage can protect organizations from a wide array of exposures, including:
- Product contamination and recalls
- Bodily injury damages
- Fines and penalties for non-compliance with federal, provincial and local regulations
- Bodily or property harm caused by product misuse by a third party
- Manufacturing defects or product-related defects
Having the right risk-management procedures in place can go a long way toward mitigating product liability exposures. However, product liability is just one piece of the puzzle, and those operating in the cannabis industry can benefit from a variety of coverage options.
To learn more about your business’s unique risks and to secure the appropriate protection, contact our team of experienced insurance brokers today.