Cannabis Product Liability

Cannabis Product Liability Insurance is a specific type of insurance that provides coverage for businesses involved in the production and distribution of cannabis products. This insurance is crucial because these businesses face unique risks, including the potential for lawsuits if a consumer claims harm from their product.

Here are some key points to understand about Cannabis Product Liability Insurance:

1. Why is it needed?

   Like most businesses, cannabis companies need insurance to protect them from financial, legal, and reputational risks. The valuable products they produce and distribute make them a potential target for lawsuits, putting both the business’s assets and reputation at risk.

2. What does it cover?

   Cannabis Product Liability Insurance can cover a variety of risks. Some common types of coverage include General Liability Insurance (covering basic risks like customer injuries, property damage, and lawsuits), Product Liability Insurance (protection if someone gets sick or injured from your products), and Property Insurance (covering your building, crop, inventory, and equipment in case of fire, theft, or other disasters)¹.

3. Costs:

   The cost of Cannabis Product Liability Insurance can vary depending on the type of coverage needed and various factors such as location, size of operation, and claims history. General liability insurance typically starts at around $1,000 per year, while crop insurance can range from $500 to $3,000 per acre². For dispensaries, the total cannabis insurance cost can be around $2,500 to $7,500 per year. For growers, the cost of insurance can range from $4,000 to $10,000 a year for general liability and commercial property insurance plus crop insurance for another $5,000 to $8,000 total³.

4. State-specific requirements:

   The specific insurance requirements for cannabis businesses can vary by state. For example, some states require certain types of cannabis operations to have general liability coverage up to specified limits. It’s important to consult with an insurance professional or your state’s Department of Insurance and cannabis regulatory body to understand the specific requirements for your business.

5. State-specific examples:
   

   • California: California state law mandates that all cannabis business owners have insurance. California only recently started providing property insurance to cannabis businesses. Numerous insurance companies and brokers offer insurance plans tailored specifically for the cannabis industry.
   • New York: In New York, cannabis businesses are regulated by the New York State Office of Cannabis Management (OCM). The OCM does not require licensed dispensaries and other cannabis-related businesses to carry cannabis business insurance. However, when submitting an application for a business license, cannabis businesses should include a plan for obtaining liability insurance.
   • New Jersey: In New Jersey, cannabis businesses are regulated by the New Jersey Cannabis Regulatory Commission (CRC). The CRC does not require licensed cannabis businesses to carry cannabis business insurance. However, when submitting an application for a business license, cannabis businesses should include a plan for obtaining liability insurance. We can help you with that.

Remember, it’s always best to consult with an insurance professional to understand which type of insurance is most suitable for your specific business needs. If you have questions on whether or not cannabis product liability coverage is a good idea for your operation, talk to one of our Cover Cannabis expert representatives today and discuss your current needs. They will be able to guide you and advise on the right coverage for your cannabis operation.

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