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Why Cannabis Retailers Need Liability Insurance

Cannabis Insurance · July 12, 2021

fresh plant isolated on brown backgroundWith the U.S. cannabis industry projected to hit $146.4 billion by the year 2025, there are significant opportunities for businesses in this sector to grow and prosper. However, as the industry continues to expand and becomes subject to greater regulation, avoiding risk exposure will grow more challenging.

While ensuring compliance with licensing regulations and investing in good security systems can help protect your business and its assets, one of the most important ways to minimize potential losses is by getting the right type of insurance. One essential category for all types of cannabis retailers is liability insurance.

Top Reasons To Acquire Cannabis Liability Insurance

Here is a look at the top reasons cannabis retailers cannot afford to skip this important coverage.

Cannabis Retailers Are A Main Point Of Contact For Customers

The products that dispensaries sell do not usually come from widely known brands, so customers who are harmed by a product will typically pursue lawsuits against the dispensary first. Even if these lawsuits are unsuccessful, there will be expenses involved in legal defense.

Dispensaries May Be Held Liable For The Products Under Their Control

Although the owners of cannabis retailers might believe that the liability falls with a product manufacturer if something they sell injures a user, that is not always the case. Any time a retailer sells a product that is consumed – whether it is by eating, drinking, smoking or vaping – there is a possibility that changes could occur while the products are under the control of the retailer.

For example, it could be argued that the product was contaminated by handling, or that it grew bacteria or fungus due to improper storage on the part of the retailer.

Advice From Employees And Product Labeling Can Influence Product Liability

texture from cannabis plantThere are cases where products may be mislabeled by the processor, distributor or cultivator. In some cases, employees might provide a customer with improper advice and sell them a product that causes them to have an adverse reaction, whether it is due to the marijuana itself or the other ingredients that are combined with it that leads to an allergic reaction. In these cases, the retailer could be held liable.

What Types Of Liability Insurance Do Cannabis Retailers Need?

Extensive coverage can help cannabis retailers to thrive despite changes to regulations and the general business risks that are seen by all types of businesses. Workers’ compensation and general liability insurance are normally required under state regulations, but there are other types of coverage that this type of business also needs to protect its assets.

Product Liability Coverage

Product liability coverage is crucial for dispensaries and other cannabis retailers because if a product that you sell causes a customer unwanted side effects, illness or other types of harm, they could hold you liable. This could include anything from a defective vaporizer to food poisoning from edibles or product recalls related to illegal pesticide use.

Cyber Insurance Policies

Cyber insurance policies are also important. Cannabis retailers and distributors are often required by law to collect sensitive information from customers, making those operating in the cannabis industry prime targets for cybercrimes.

These days, cyber-attacks are growing increasingly sophisticated, with many of them involving threats to publish data that was stolen from victims if you fail to pay a requested ransom. The amount of money demanded by hackers can be out of reach for most retailers. Cyber liability insurance coverage, however, can help to manage this type of risk as part of a comprehensive insurance plan.

This type of policy will typically cover the cost of investigating and responding to suspected or actual security and privacy breaches. It also includes the fees related to retaining legal counsel and determining your notification obligations when it comes to informing customers of the breach.

Some cyber liability insurance will also cover losses incurred due to cyber extortion, such as ransom payments and expenses associated with data recovery and business interruption. It can also cover the costs of hiring forensic investigators to determine what caused a cyber attack and liability claims that arise from alleged failures to prevent privacy or security breaches.

california marijuana plant organic cannabis

Professional Liability

Professional liability is important for protection in situations where someone working for your business does not do something correctly and it results in physical damage or bodily injury to a customer. This type of policy aims to protect professional advice and service by covering the costs of defending your business against claims of negligence made by clients.

Get In Touch With The Cannabis Insurance Specialists

The cannabis industry is relatively new, and not all insurance providers are familiar with its unique concerns. It is essential to choose insurance brokers who have thorough knowledge of this constantly-evolving field. Reach out to the cannabis insurance specialists at MFE Insurance online or at 213-266-7990 to find out how their tailored solutions can ensure your business has covered all the bases.

Filed Under: Cannabis Insurance

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