The use of marijuana for recreational and medical use has been legalized for a relatively short amount of time. As of 2018, a total of 30 states plus Washington D.C. have in some form or another, legalized marijuana. The cannabis industry is marked by many by first-time business owners. To make things more complicated cannabis dispensary businesses have risks that are unique to their industry. Product liability insurance helps to mitigate these additional risks that cannabis business owners face.
Retail business owners generally understand that liability insurance is a necessity to have. After all, they don’t want to expose their business to the financial and legal implications of an accident or injury on their property. Owners of a dispensary need to protect themselves too, which is why product liability insurance is important. Here are some ways that insurance protects your dispensary.
Customer Illness Can Lead to Claims Against Your Dispensary
Growers generally test their products for the presence of any harmful substances. This includes bacteria, fungicides, herbicides, traces of metal, and insecticides. However, there are also growers out there who don’t test their products or fail to do a thorough job.
Many dispensaries take the extra step to independently test their growers’ and manufacturers’ products. Even with this extra action, a dispensary is not immune from the potential of a customer bringing on a claim. Even if the claim is not a valid claim, the dispensary will still have to spend money to hire legal representation to defend them from a liability claim.
How Edible Products Open New Areas of Risk
Edible cannabis products pose a new and different risk to a dispensary. As the product might be made by a grower or product manufacturer, some dispensary owners believe that those parties would be held responsible if the product caused an injury to a user.
This is not always true. Cannabis products that are meant to be consumed may have experienced some changes while under the control of the retailer. The handling of the product could have led to its contamination. The product may have not been stored properly which led to its growing fungus, mold, or bacteria, ultimately making the consumer sick.
Many dispensaries have decided to vertically integrate their business by making their own edibles or other products. The consumption in edibles has grown quickly from 2.5% to 13.7% of total cannabis consumption. It’s a smart business decision to get into edible cannabis products, but it also opens the door to more liability. Dispensaries making their own product are the responsible party for every stage of the process of making their product.
Assuming Risk By Retailing Variety of Products
The products that dispensaries carry are generally not from recognized brands. Because of this, many customers will identify the dispensary that sold the product that they were harmed by as the starting point to sue. For example, when we think of Coca-Cola, we think first of the company that makes it, not what store that we buy it from. In the cannabis industry, this is the exact opposite.
Products are also at times mislabeled. This could be due to the mistake of a processor, distributor or cultivator. Other times it is due to the misinformation provided by an employee at a dispensary. The employee may tell a customer the wrong information, and that improper advice could lead to the customer experiencing a negative reaction.
Understanding How Product Liability Insurance Protects Dispensaries
Peace of mind is the greatest gift that product liability gives to a dispensary. The focus of a dispensary should be to sell their products to the patients and customers who want them. It already costs between $150,000 and $2 million to run a dispensary. Dispensary owners shouldn’t have to further worry about being involved in a lawsuit because someone was harmed by a product that they sell.
Product liability insurance covers the dispensary’s products. In the event of a claim, the insurer will be the one to handle it. They will bring in the expertise that’s necessary to determine whether to settle the claim or defend it and pay the legal fees necessary to make that happen. The lawyers that are the best match for a claim will be engaged by the insurer as well. The burden of the claim is taken off of the dispensary.
Contact MFE Insurance to Discuss Coverage
Your dispensary business was started for the purpose of selling cannabis products to patients and customers. The focus of your time and money should be used for those goals. Unfortunately, there are risks that get transferred to your business when you sell certain products, either from another source or made on your own.
Cover your reputation and business with product liability insurance. Contact the experienced cannabis insurance brokers at MFE Insurance to get an insurance policy that protects your interests and is tailored specifically to your business.