Onsite Consumption: What is my Liability?

Here at Cover Cannabis we are asked 100s of questions every month about how to properly insure a cannabis operation. Here is a question we received recently:

Casey (Business Owner): My establishment has plans to allow on site consumption for recreational purposes as soon as it is allowed. What would be my liability if a customer causes damage or injury to a third party after consuming in my establishment?

Theresa: Thank you for your question Casey. In the case of alcohol, there are regulations when it comes to on site consumption that vary per state. An establishment can be liable in case of injury to the customer, or a third party if they willingly kept serving a customer that was clearly intoxicated. The extent of the liability depends on the specific state and scenario. In the state of CA there are strong protections for the establishments selling alcohol, protecting them from most liability.

The cannabis business, on the other hand, due to the newness of the industry does not currently have specific regulations when it comes to on-site consumption. Currently, on-site consumption is not legal here in the state of CA. However, this is something that may be changing with the legalization of recreational marijuana, and will likely start in 2018 allowing your establishment to offer on-site consumption.

Businesses allowing on-site consumption of cannabis might be held liable for injury to third parties, similar to rules for alcohol. Currently, one of the biggest fears is for those customers who consume cannabis and then get behind the wheel, and whether or not a business selling the marijuana and allowing consumers to consume on site should be liable.  Similar to alcohol, the current argument among many is that businesses should only be held liable if they are serving to an obviously impaired customer, making the situation more dangerous. Unfortunately, this is all unknown territory and the regulations that will arise in the future are uncertain and will depend on cases brought forward.

Did you know that most general liability policies held by compliant cannabis businesses exclude on-site consumption?  If you decide to allow on-site consumption in your establishment you should be aware of all regulations as they come out. Additionally, you should protect your business with product liability including the on-site consumption liability endorsement. Let us help you get covered, with over 10 years insuring cannabis businesses we can ensure you are always protected. Call us today and let’s explore your options.