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What are the Product Liability Risks in the Cannabis Industry?

16 October 2018 / Category: Blog
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Risks exist for any cannabis business—or, for that matter, any company that produces or markets consumer items. An ever-present issue, especially for all things ingestible, is the potential product liability claim.

Cannabis Product Liability (and Insurance) Will Evolve

A standard general liability policy—in which Schedule 1 substances face exclusions from coverage—was not designed with the cannabis business owner in mind.

Simply put, the insurance industry as a whole has yet to catch up to the legal cannabis industry. It is not clear where cannabis businesses’ liability for consumer safety starts and stops. As long as federal law bans cannabis, we have a scarcity of long-term, funded research on safe cannabis consumption.

Warning and label issues are still murky in this industry, making product liability all the more critical.

Some jurisdictions have proposed mandating product liability insurance, to help create stability in the fledgling legal cannabis sector.

Edibles, THC, and Liability

Cannabis-related legal actions may focus on the producer, supply chain, or point of sale. Most issues involve the product’s psychoactive effects. The more serious cases result in product recalls.

With edibles, if the products contain THC, consumers must understand that compared to smoking, edibles take longer to kick in and are stronger when they do. While makers are looking at restricting quantities of THC in edibles to very low doses, they’re also striving to strike a happy medium where the product promises a pleasant effect.

Even though the label clearly cautions the consumer about the effects, it’s easy to imagine a consumer “overdoing it” with sweets and other attractive products. Therefore, edibles containing THC are a particular hotspot in product liability. Moreover, we may anticipate bodily injury claims involving accidents under the influence.

Other Cannabis-Related Product Liability Risks

Risks may arise from the presence of fungus or pesticides. Risk management includes knowledge about how the product was tested, combined with insurance.

Even the retailer can be liable to an injured consumer with a claim breach of a warranty, intentional misrepresentation, or negligence.

Product liability coverage is important, and at Cover Cannabis, we’re at the leading edge of this and all facets of cannabis insurance. Call us to discuss how to protect your business: (833) 819-5010.