In the rapidly growing cannabis industry, protecting your business is crucial. One of the essential coverages for your venture is cannabis product liability insurance. This commercial insurance helps safeguard your business against claims related to the products you grow, manufacture, distribute or sell.
In this article, you’ll learn what cannabis product liability insurance is, its protections, how it works, and the types of businesses it covers. You’ll also see picks for the top carriers. Here’s everything you need to know about product liability coverage for cannabis businesses.
What Is Cannabis Product Liability Insurance?
Cannabis product liability insurance protects you from claims of bodily injury, property damage or other harm that may be linked to the use of your products. This coverage is vital for any business in the cannabis supply chain, including growers, processors, manufacturers, distributors and retailers.
Protections Offered Under Cannabis Product Liability Insurance Plans
Cannabis product liability insurance policies protect a wide scope of issues.
Bodily Injury
If a customer gets hurt after using one of your cannabis products, your policy can offer protection. It may offset the costs of their medical expenses, legal fees and settlements or judgments made against you.
Property Damage
Product liability coverage can also protect you against property damage claims. Carefully read your policy documents to ensure the plan provides a large scope of coverage. Most policies will cover direct damage, as well as indirect incidents that can be linked to your product.
For example, let’s say that someone experiences a medical episode while using your cannabis products and they damage property belonging to another person. If that person sues the consumer, they may also go after your business. Your policy would offer protection in this incident.
Defense Costs
Navigating a personal injury claim can be tedious and time-consuming. You may also incur tens of thousands of dollars in legal fees. A product liability policy will cover your defense costs up to the limit established in your service agreement.
Make sure you have adequate defense cost coverage as part of your plan. Once you reach your limit, you’ll have to pay for your attorney out-of-pocket.
Settlement and Judgment Payouts
If you lose your case, the policy will also pay the settlement amount or award ordered by the judge. Personal injury claims can total tens of thousands or even millions of dollars. Make sure you have a robust policy that offers high coverage limits.
A single personal injury claim could put you out of business if you don’t have the right policy. Always opt for more coverage than you think you’ll need.
How Does Cannabis Product Liability Insurance Work?
Cannabis product liability policies provide financial protection if a consumer claims against your business for a product-related issue. After you purchase a policy, you’ll pay monthly, biannual or annual premiums to the insurance carrier. In return, they agree to cover certain claims up to the policy’s limits.
For example, a consumer files a claim that one of your products caused them to experience adverse health effects. Your policy would kick in. It would cover medical expenses, legal defense costs and settlements up to the coverage limits.
The policy will help protect you financially and ensure you have the legal support necessary to defend your reputation from frivolous claims.
Businesses Cannabis Product Liability Insurance Can Cover
A cannabis product liability policy can cover any business entity within the industry, including:
- Cultivators
- Processors
- Manufacturers
- Distributors
- Retailers
- Testing laboratories
If you operate in any of these sectors, having a comprehensive product liability policy is vital. Otherwise, you could face frivolous claims and have no financial protection.
Example of a Cannabis Product Liability Insurance Claim
Imagine that you sell a batch of edibles that, unknown to you, contain a higher-than-labeled concentration of THC.
Several customers experience severe adverse effects and seek medical treatment. They then file lawsuits against your dispensary. Their claims accuse you of negligence and demand compensation for their medical bills and suffering.
In this case, you’d contact your cannabis product liability insurance provider. They would cover the legal defense costs and, if necessary, the settlement amounts or judgments up to the policy’s limits. This protection helps you avoid substantial financial loss and potential bankruptcy.
It is also important to choose a cannabis-friendly state to launch and expand your business. States with favorable laws will help insulate your company from frivolous lawsuits and reduce the likelihood of product liability claims.
Best Cannabis Product Liability Insurance Carriers
One of the absolute top carriers for product liability coverage is Carma Cannabis Insurnace. They specialize in commercial insurance for hemp and cannabis businesses. Thanks to their CARMA365 industry expertise, CARMA365 can provide a custom policy that offers your business adequate protection based on its unique risk profile.
Carma Cannabis insurance is a top pick for the best partner for personalized coverage. They have an exceptional reputation within the industry and will be in your corner if you have to file a claim.
There are several other great cannabis product liability insurance carriers out there. Here are the companies that made the list, as well as what they are best for:
- Carma Cannabis Insurance: Specializes in tailored solutions for every size operator
- AlphaRoot: Offers comprehensive coverage
- MFE Insurance: Provides competitive pricing
- Cannabis Insurance Company: Has many different products
- Cannasure: Known for great customer service
- AFIG Cannabis Insurance: Best for crop cultivation
- 420 Insurance: Insures medical marijuana providers
- SafeHerb: Serves all states
- Admiral Insurance Cannabis Insurance: Offers high coverage amounts
- Cover Cannabis: Best for smoke shops
Explore the guide on cannabis business insurance for a full breakdown of Carma Cannabis Insurance and other reputable carriers. You’ll have access to a list of pros and cons for each provider, a synopsis of their quote process and a rundown of why these carriers are great options.
Compare your options and find the ideal policy to protect your business venture. No matter who you choose, you’ll be in great hands.
Frequently Asked Questions
Does the federal legal status impact cannabis product liability insurance?
The federal legal status of cannabis can impact the availability and cost of cannabis product liability insurance, but many carriers offer policies regardless of federal legality. The substance remains a Schedule I drug, but a recent proposal to downgrade marijuana to Schedule III has gained significant traction among federal lawmakers.
Your state’s laws will have a bigger impact on your ability to acquire insurance protection. Therefore, it’s important to carefully evaluate the current policies in your jurisdiction before opening or expanding your business. This list of the best states for multistate operators can help guide your search for your next dispensary location.
What types of cannabis insurance are available?
Product liability coverage is one of the most important types of policy available. Carriers also offer general liability insurance, crop insurance, workers’ comp coverage, and property insurance.
While you may not necessarily need all of these types of policies, it’s important to consider your business’s unique risk profile.
Each policy protects you against specific risks. For example, crop insurance can reimburse you for lost revenue if a cannabis field you manage gets destroyed by an accident or natural events.