Product Liability [OLD]
Cannabis companies that offer tangible products or services risk third-party lawsuits claiming bodily injury or property damage. Products liability insurance covers defense fees and settlements, even for ungrounded claims. This coverage is particularly critical in the cannabis space as testing and manufacturing aren’t regulated at the federal level.
Who is Product Liability Insurance for?
Most cannabis companies offer some service or tangible product to customers. However, it’s not uncommon for a product or service to “fail” or fall short of customers’ expectations. Substandard work is one thing, but not meeting someone else’s presumption is another, mostly if marketing messages were unclear. Many elements can cause this disappointment, such as inadequate labeling, design defects, and manufacturing defects.
All too often, customers take legal action against your product or service, claiming bodily injury or property damage. Products liability insurance protects your company against lawsuits alleging injury or damage caused by your product or service. This policy helps to cover affected customers, but it also protects your cannabis company against costly litigation, frivolous or not. Plus, since the federal government doesn’t regulate testing or manufacturing in the cannabis space, it’s essential coverage for this industry.
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
Cannabis cultivators distributing the flower are one of the most likely to be named in a lawsuit.
Why you need Product Liability Insurance?
Protects customers against inadvertent injuries or damages
Covers legal fees and settlement in product liability lawsuits
Safeguards your product or service from failing entirely
400K
There were more than 400,000 product liability cases in 2021.
50%
Over half of pending US federal cases consolidated in multidistrict litigation are product liability cases.
$4M
In the past decade, the highest median award was more than $4M in a medical products liability case.
What does Product Liability
Insurance cover?
Products liability insurance protects your company against lawsuits alleging injury or damage caused by your product or service. This policy helps to cover affected customers, but it also protects your cannabis company against costly litigation, frivolous or not.
What Product Liability Does Not Cover
What Product Liability Does Not Cover
Product Liability Insurance
Claim Examples?
Defective Labeling
There was a defect with the product labels on an entire product shipment. The label stated the product had ½ the THC as was actually present. Product liability can help protect against financial loss from this situation.
Bodily Injury
An online cosmetics retailer gets dragged into a suit when one of the products sold on their website begins causing painful rashes. Even though they didn’t manufacture the product, they share liability for bodily injuries to several customers as part of the supply chain.
Manufacturing Defects
A manufacturing error taints a batch of cosmetic products, which severely irritate customers’ skin.
Property Liability FAQ’s?
The cost of Product Liability insurance will depend on several things, including the company’s size and the company’s stage of development. Other factors include:
- Exposures: risks being insured.
- Company practices: views on safety, compliance, and risk management.
- Program structure: the amount of deductible and willingness for a company to assume more risk
- Claims history: the type and amount of past claims against the company
