Products Liability: What It Is and Why You Need It.

As we enter the New Year, it is time for us to start planning for the next twelve months. With that planning, we face a few questions. For example: What are our revenue goals? What are our plans for expansion? But most importantly, am I prepared for what lies ahead?

This may seem like an obvious point to address, but it can be difficult in a new industry to fully understand what it means to be prepared. It is more than just the goals of the business or what exists on the balance sheet. It is about understanding the risks facing your company, and the proper steps being taken to either avoid or mitigate those risks. One of the most important tools a new entrant into the cannabis industry can use to protect themselves is liability insurance, but more specifically: Products Liability Insurance. What is products liability you might ask? Let’s say for example you manufacture cannabis-infused edibles. You produce a cannabis cookie, and it has just gone to market and been placed on the shelves of retail dispensaries. A customer comes in and purchases your product, and is incredibly eager to get home and try it. The customer eats the cookie, which turns out to have far more THC in it than the customer was expecting, and they get sick. That customer then decides to sue, claiming that your cookie caused them bodily injury. This type of claim is what is called a products liability claim. Another serious example that is being seen more and more in the cannabis industry: that customer goes home and sets the cookie on the counter while they go to make a call in the other room. Their 4-year-old child, who is unable to read the warning label, sees the cookie on the counter and grabs and eats it. The THC is far too intense for the young child and he must be taken to the hospital. The parents then decide to go after you, the manufacturer of the edible. Again, a products liability claim.

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.