Product Liability Insurance for Cannabis Companies
Rapid growth and innovation in the cannabis industry bring with it new, dynamic risks with the potential of unseen legal and financial implications. Product liability insurance forms part of addressing those risks – tailored coverage from AlphaRoot will let cannabis firms innovate, knowing they’ll be shielded from possible claims and associated costs, thereby forming a much stronger safety net against unexpected issues.
This article breaks down what product liability insurance is, who it covers, and why it is so very important to your business. We’ll also take a closer look at what is usually covered with this type of insurance and what’s not covered.
What Is Product Liability Insurance?
Product liability is one of those lines of coverage that insurance companies sell to protect businesses from loss arising from litigation alleging that their manufactured product or that which they sold caused personal injury or property damage. Such protection is required in any industry. Employees in the cannabis industry have special risks both from the products themselves and from the regulatory states in which they are forced to operate.
Product liability insurance would also help cannabis companies in terms of the settlement costs of claims, defense costs, and compensation to affected parties. Attorney fees and hospitalization fees may represent such costs, as well as product recalls.
Manufacturers
Anyone creating a product intended for an end consumer needs this coverage, including manufacturers.
Dispensaries
The above recommendation also extends to brand only or white label companies that repackage products manufactured by other companies.
Cultivators
Let’s see who should invest in product liability insurance to cover possible lawsuits and financial losses.
Who Should Buy Product Liability Insurance?
Let’s see who should invest in product liability insurance to cover possible lawsuits and financial losses.
Producers
Product liability risks squarely fall directly on the shoulders of the cannabis manufacturer. In any case, whether one is making edibles or concentrates, it cannot be negated that the product might harm the consumer. With quality controls working hard to make sure that this never happens, the product can, in most cases, go on to cause unexpected problems. Liability for a product usually covers legal and financial liabilities arising from claims.
Dispensaries
Dispensaries operating a white label or reselling the products of other manufacturers also need product liability insurance. The bottom line is that dispensaries rarely manufacture their products, but they are liable for making sure that those products do not cause injury or harm to people, so they will require liability insurance if one of the products causes injury or harm. Because a dispensary could get named as a defendant in a lawsuit over a product, the liability is relevant to its safety net.
Cultivators
If the cultivators are the ones to produce and distribute cannabis flowers, they are more vulnerable to the risk of product liability lawsuits. To illustrate, one lot’s production is discovered to be contaminated or harmful by nature. In such a case, the growers can be liable to the affected consumers. Therefore, this product liability insurance acts as protection against such risks, covering legal costs and settlement.
Why Do You Need Product Liability Insurance?
Protects Customers Against Accidental Harm or Damage
The principal role of product liability insurance is to ensure compensation for customers who may be injured or damaged while using your product. This type of cannabis industry insurance, where the quality of products and safety are some of the top issues, ensures that any customer who is harmed through a defective product or infected by pollution will receive compensation.
Reimbursement for Legal Costs and Settlement Fees of Product Liability Claims
Product liability cases are not cheap. The total amount in attorney fees, settlement fees, and even court charges can increase rapidly. Product liability insurance entails all these expenses that would help your business stay running smoothly without getting derailed financially because of a lawsuit.
Prevents Your Product Or Service From Complete Failure
A single product liability claim can seriously hurt your business enough to send it towards financial instability and even close it down. Product liability insurance will act as a security valve that will ensure the business enterprise continues because you will be addressing the problems without those existential threats.
What Does Product Liability Insurance Cover?
Bodily injury
The most critical coverage of product liability insurance includes the bodily injury resulting from your products. This represents every injury that could be inflicted on a person’s body after using a defective or hazardous product. Other relevant areas of coverage would include the medical care and medical expenses connected to the injury; this is after hospitalization and subsequent treatment.
Product Recall
In this case, a product may be recalled if it is defective or harmful. The cost of recall usually comprises product liability insurance and normally includes shipping, disposal, restocking, public relations expenditures, and notification to consumers of their purchase.
Medical Costs
If your product causes injury and results in medical treatment, product liability insurance can pay for all but the most minor of your medical expense-related costs, including first aid, ambulance service, x-rays, surgery, and even post-operative professional nursing services.
What’s Not Covered Under Product Liability Insurance?
Injuries to Employees
Costs associated with injuries caused by employees related to work being performed are not covered under product liability insurance. Coverage does exist, however, through workers’ compensation insurance.
Damage to Products
Product liability insurance does not offer any protection against damage to your products or lost inventory costs. This is more of fighting claims against your products, inflicting any form of harm or injury rather than compensating for the loss of product or within your inventory.
Examples of Real-Life Claims for Product Liability Insurance
Product Recall
The cannabis edibles manufacturer was asked to conduct a product recall once it came to light that the THC content in one of its specific batches of brownies had more than twice the levels marked on the label. Consumers who took in the edibles started complaining about the side effects, and subsequent lawsuits were filed against the manufacturer.
Since the cost of the recall was covered through product liability insurance by the manufacturer, together with medical expenses for the consumers and lawyers, the company could deal with it very effectively and continue conducting its business activities.
Contamination
Besides the above, this grower was sued after one batch of flowers became contaminated with pesticides. The consumers of the tainted flower claimed to have suffered some adverse effects on health. Product liability insurance did pay for the cost of recalling, the medical expenses of those affected, and other legal defense expenses, hence the importance of adequate insurance coverage.
Frequently Asked Questions About Product Liability Insurance
First, determine what coverage limits will be based on the risk your products pose, the size of your business, and your revenue. If the products you are selling are hazardous or if you have a big company, then it will require a higher coverage limit. It would be proper to sit with an insurance broker to determine limits that would adequately cover possible liabilities.
Product liability insurance for marijuana products goes from thousands of dollars to tens of thousands, depending on the type, size, revenues, and claims. For the exact quote, engage an experienced cannabis market insurance broker such as AlphaRoot.
Product liability does not include compensations for employee injuries, damaged goods, losses from stockouts, willful acts, or fines and penalties executed by statutory bodies. Instead, it handles claims of liability immediately from your products, which leads to bodily injury or property damage. Other types of insurance or coverage will be required to handle the other risks.
Why AlphaRoot For Your Cannabis Insurance Broker?
AlphaRoot specializes in creating tailored products for the cannabis industry. With such diversified knowledge regarding the risks and exposures that seem all too characteristic of the cannabis industry, AlphaRoot offered product liability insurance developed to meet requirements from manufacturers, dispensaries, and cultivators’ by experts, ensuring proper coverage as well as remarkable advice on managing risk and compliance with industries’ regulations.
AlphaRoot’s personal service stance means you have a dedicated partner to protect your business. Contact AlphaRoot to get a quote!
Industry Expertise
AlphaRoot specializes in the cannabis business and offers insurance policies that are fit for the requirements of the industry. Based on knowledge of the multiple risks and challenges cannabis businesses face, AlphaRoot is dedicated to securing comprehensive coverage under the stipulations of the various regulations in the industry.
Commitment to Client Success:
AlphaRoot not only offers insurance services but also provides customized plans that may comprise risk audits and can offer continued assistance for better success of the cannabis business in today’s competitive and highly regulated scenario. In this connection, the emphasis of AlphaRoot on clients’ success is the perfect winning formula for good, long-term partnerships and proper risk management.
