As we approach the end of 2018, it is imperative that businesses are looking forward and forecasting operational strategy. With that planning, we face a few questions: Where are projecting our upcoming annual revenue? What are our expansion capabilities? But most importantly, am I prepared for what lies ahead, and are we covered for it?
The point of coverage I will touch on is what I can consider one of the most important coverages for businesses in the current cannabis industry: Products Liability Insurance. This industry yields a new set of loss scenarios that business owners may not be aware of yet given the infancy of the industry.
When it comes to products liability, people frighteningly ask me “well how is that applicable to my business?”. I will run through a few scenarios below, in order to give some examples of prominent claims arising from product liability in some of the main segments of the industry:
a.) The manufacturer did not fully test for any gas residue within the edibles, which can cause serious injury, and has put people in the ER (W/O Prod Liab, those lawsuits come straight out of your pocket as the owner)
b.) A child crawls up on the counter and eats his Dad’s innocent looking chocolate….well now he is in the ER, and if the package was not child-proof, nor had clear, compliant labels, that claim is on the manufacturer (These lawsuits can reach up to $100k)
c.) Improper labelling can also lead to allergy issues bt clients who may not have realized there was a bad ingredient.
a.) One of the batches that came in “claimed” to be tested. Well, given what typically happens, they cut corners and they did not test for what they should have before selling to retail. This is where products liability, think of it in terms of a Restaurant, someone eats food, gets sick and then sues, on behalf of food poisoning. An equivalent scenario to most edible product claims, but the medical costs an requires higher limit
3.) Cannabis Extraction
a.) The risk here is pretty standard for products liability. Your firm is specializing a concentrate of cannabis, with about 8,000,000 things that can go wrong. ie: butane residue remaining in oil, over-potency, impurities left within the shatter….and the list goes on.
In this instance, I will say that whether you think you need products liability or not, you do.
It is easy to say, “Oh that will never happen to me”, but it can and to some businesses, it will. Without the proper coverage in place to protect the business, new owners are typically unprepared to deal with the financial consequences of a products liability claim; especially one involving cannabis. It is important to understand the importance of properly protecting your business as we head into the new year and seek to expand our companies. When reviewing your policy with your agent, it is crucial to understand how you are covered should a legal situation arise from your product or operations.