Errors and Omissions (E&O) Insurance is a type of professional liability coverage designed to protect businesses if they are found liable for providing faulty advice or negligence with regard to the services they offer.
Cannabis businesses often make recommendations to their customers on cannabis use and the types of strains they should try. This alone means that this is an avenue of liability dissatisfied customers may travel down if they experience any negative effects. E&O insurance coverage is a ‘must have’ for any cannabis business, and it is important to understand exactly what sort of coverage it offers.
E&O Insurance Coverage In The Cannabis Industry
The cannabis industry regularly provides a service to its customers. The burgeoning cannabis industry is welcoming people who have never tried cannabis products before, and so they offer recommendations and advice.
Any business in any industry which makes recommendations must have E&O insurance or customers are within their rights to sue if they experience a negative outcome.
Cannabis is a legal drug and first-time users may experience unintended side effects. E&O insurance not only protects cannabis businesses against this but also against claims brought for failure to provide promised services, professional negligence and mistakes. These are scenarios an ordinary product liability insurance policy does not cover.
What Does It Help Cover?
E&O insurance is often forgotten by business owners. Most cannabis businesses think about public liability and professional liability insurance policies, but there are many risks these policies do not cover.
E&O insurance accounts for many of the gaps ordinary public and professional liability policies have. Before opening the doors of any cannabis business, business owners must be aware of how E&O coverage can protect their ventures.
Defense Costs In A Lawsuit
Lawsuits are expensive. Even if the defendant wins, they still need to cover defense costs, which can easily accrue to tens of thousands of dollars.
E&O does not just cover legal costs in valid legal cases. This type of cover will pay for all legal costs, even when a lawsuit is deemed frivolous by a court.
Damages Resulting From Suits
Cannabis-related lawsuits can spell the end of a thriving business without adequate cover.
Most recently, Marijuana Business Daily reported on a growing class action lawsuit against cannabis businesses for allegedly violating the Federal Telephone Consumer Protection Act (TPCA) through their use of automated calls and texts.
Reports reveal similar cases can yield six-figure settlements from businesses involved. Imagine if a simple professional miserrortake leads to mistakenly spamming customers with marketing materials. Does your business have enough to cover a potential lawsuit of this magnitude?
E&O insurance is designed for when these scenarios occur. Professionals make mistakes, but with this type of cover the resulting damages do not have to be paid out-of-pocket.
In the cannabis business, an employee error can lead to disaster. If an employee affixes the wrong labels to different cannabis strains, customers may inadvertently smoke stronger cannabis than they are used to.
Errors made by a business’s employees can easily lead to lawsuits by a litigious customer. Not only does E&O insurance cover employee error, but this protection also extends to independent contractors and temporary staff.
Professional Misconduct Proceedings
Cannabis is a highly regulated industry kept on a tight leash. Surprise inspections are more common than cannabis entrepreneurs might think, with the Environmental Protection Agency (EPA), the Occupational Safety and Health Administration (OSHA) and state licensing bodies all involved in ensuring cannabis businesses comply with all rules and regulations. As recently as 2019, the Colorado Department of Public Health and Environment performed inspections at 25 random dispensaries for contaminants.
This is why cannabis businesses are strongly recommended to follow a similar quality systems approach to that outlined by the Food and Drug Administration (FDA).
If your business is facing professional misconduct proceedings, an E&O policy can help to protect the business from any fines and legal costs it must pay.
Acquiring This Coverage
E&O cover should never be considered an optional add-on for cannabis entrepreneurs. This type of insurance represents a prime form of protection for any business in the cannabis industry.
To acquire E&O insurance, contact a professional insurer with experience in helping cannabis businesses. Although most scenario outlines tend to impact dispensaries and laboratories, no cannabis business should go without protection. An experienced insurer will be able to tailor an E&O policy according to your business’s needs.
Reach Out to the E&O Insurance Coverage Experts
Errors and omissions can be a confusing subject for business owners. If you need help understanding how it protects you and whether you really need it at all, contact the experts at MFE Insurance. No business providing services should take the risk of proceeding without a valid E&O policy. A single incident could derail your business and ensure that you never open your doors again. Get in touch with MFE Insurance to start acquiring the right E&O policy for your business.