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3 Big Product Liability Risks Cannabis Companies Need to Know About

Most cannabis businesses don't realize they can be held liable for a defective product or even a customer's DUI. Find out what you need to know to protect your cannabis company from product liability.

Both legal and risk management experts are predicting a major wave of product liability lawsuits in the near future as the cannabis industry continues to grow and mature.  Everything from product contamination to manufacturer defects to improper labeling can derail a growing business.  Regardless of where your business sits on the supply chain, the risk is real.  For example, retailers can be held liable for a defective product, even if they had nothing to do with the manufacturing process. 

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There are three key areas of cannabis product liability exposures that cannabis business owners need to be aware of:

1. Product contamination.

When cannabis is sold in an edible form, business owners could be liable for food poisoning or illness. If the product is smoked, there are exposures to contamination, product mislabeling or misrepresentation, and possible health hazard claims related to long-term exposure to potential contaminants.

2. First party claims.

These are claims made in the event of an accident, injury, or loss - whether caused by the business owner or someone else. They can include manufacturing defects, failure to warn users on potential product usage hazards, improper labeling, or any product-related defect such as mold or odor that damages the product.

3. Third party claims.

Cannabis business owners could be liable for claims stemming from the use of the product that result in a DUI, property damage, loss of wages, medical expenses and bodily injury.

To reduce your risk and protect your business, talk to an experienced insurance broker about product liability insurance designed specifically for the cannabis industry.  You’ll need insurance to help defend your company against claims and allegations and help pay damages if you are found legally liable when something bad happens in connection with the use of your product.  The right coverage can help cover costs related to:  

  • Product recall
  • Fines and penalties for noncompliance with state regulation
  • Injury to others – bodily or property –caused by product misuse by a third party
  • Manufacturing defects or product-related defects

Equally important to having the right insurance coverage is having a sound risk mitigation process.  Ask your insurance broker to work with you to assess your business practices, site security and employee protocols to further reduce your risk.  

Whether you are a producer, processor, packager, distributor or retailer, product liability applies to your business. The right insurance and a solid risk management program are two key strategies for success in the cannabis space. Make sure you have the coverage you need. Click here to learn more about HUB International, a full-service insurance broker.

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