The commercial cannabis industry continues to expand day by day. With more states legalizing the use of cannabis, more people become interested in consuming these products. Of course, the growing demand for cannabis rises as these states continue to legalize cannabis for either recreational or medical usage. Regardless of the legalization, these places are going to need dispensaries operating in their locations to serve the people interested in cannabis.
As new upcoming entrepreneurs come into the market, they need to be aware of the importance of remaining compliant with their state laws. The amount of risk involved when it comes to opening a dispensary can be considerably high for most and require careful consideration when setting everything up. Dispensary operators without the appropriate insurance policies under their belt could have their business open to a wide range of risks and liabilities.
One of the many things you need to concern yourself about is the possibility of selling one of your customers a defective product. Product liability insurance is one of the many policies dispensary operators need to maintain to ensure that their cannabis dispensary remains protected against claims of personal injury or property damage caused by products that were sold or supplied.
Product liability cases are known for being among the most damaging lawsuits a business can face. The lawsuits usually involve a defective product that causes injury or death, and it can be costly and time-consuming. Worst of all, they could damage the reputation of your dispensary.
The unfortunate part is that most dispensary owners do not take this particular threat seriously enough as they should. Product liability claims have become increasingly burdensome, but fortunately, dispensary owners can protect against disastrous losses associated with these types of lawsuits. However, you need to keep in mind that not every standard product liability policy provides coverage.
That is why for this article, we are going to go over what you need to know about product liability and how it can impact your business.
Can you be liable for product defects?
The answer to these questions is yes. You will be upheld for the products you serve to your customers. If you are not frequently checking to see if the product you are receiving from your supplier or growing is not fit for consumption or usage, it could lead to some severe issues on your hand.
One significant issue is that most dispensaries are unaware of what they need to protect themselves or even aware of what they have after purchasing it. New dispensary owners usually hope for the best, with most of these newly opened businesses purchasing any policy or package that is available and within their budget. That leads to them praying that it protects them during their time of need. That results in most businesses being underinsured or even entirely uninsured, for potentially devastating loss or liability claims.
The legal theory of strict liability does apply when it comes to dispensary operators selling cannabis products. That means that everyone in the chain of distribution is liable, and if they are named in a lawsuit, every party involved needs to lawyer up and show up in court. One of the first steps a dispensary operator needs to take to deal with this is to acquire a solid policy providing the carrier’s Duty to Defend. These policies need to also be free from exclusions that would take away this necessary coverage.
Keep in mind that not every product liability policy offers the same level of coverage, even among the ones advertised particularly for the cannabis industry.
What is product liability?
If you are running a business that manufactures cannabis goods, product liability is necessary. As the owner of a cannabis dispensary, you are entirely responsible for every product that is produced and sold at your store. If any of the products you sell to your customers result in damage to someone’s property, causes injuries, or makes them ill, you are liable for any damages following the sale.
Product liability lawsuits are not a cheap endeavor to undertake either. Insurance Journal published an article stating that product liability claims can cost a business owner an average of $35,000. If you have not acquired product liability insurance as of yet, the expense for these lawsuits will come out of your wallet.
One of the many concerns associated with the cannabis dispensary business is the possibility of any adverse reactions to the products sold at the store. Marijuana is known for being a psychoactive drug and has the potential to alter mood and impact nearly every organ inside the human body. If a customer does experience an unfortunate reaction or has discovered that the product is defective in some manner, that person has the right to sue against your dispensary.
To ensure something like this does not lead to you being in financial ruin, you need to keep your business protected by having a safeguard in place, with that being product liability insurance.
What does product liability insurance typically cover?
As a dispensary operator, you need to understand what your product liability insurance policy covers can help you by securing against future incidents. While most cases of product liability claims begin due to design defects, other kinds of products are also to blame for product-related lawsuits, such as warnings, manufacturing, and use deficiencies.
Design defect usually concerns a product issue that was present before the product was even created. Claims relating to manufacturing defects refer to problems that could have happened during the creation or assembly of the product. If the seller fails to provide a decent enough warning or labels on proper usage and risks, a warning or defect claim can be made.
In some cases, a product liability claim could fall under strict liability. This claim is usually based on the absence of negligence in which the property damage or personal injury was caused because of improper use of the product. While product-related lawsuits are not something you can always prevent from heading your way, you can ensure that you are not financially responsible for any losses that happen.
Acquiring a robust product liability insurance policy not only secures you from damage caused by defective products or wrongful death cases but also ensures you can have peace of mind.
Should you get product liability insurance?
Unfortunately, too many business owners overlook how vital having product liability insurance can be until it’s far too late. Unlike any other kind of business, cannabis dispensary products make up the majority of their services, which means that any problems that occur are likely because of the goods they are selling. Most dispensary owners believe that any liability from cannabis products falls onto the manufacturer or grower. Unfortunately for those dispensary operators, that is not the truth.
Dispensary owners will be found responsible for any damage caused by the product they sold to a customer. For instance, if a dispensary sells a product that was contaminated due to the way it was handled or has been covered in mold, bacteria, or fungus because of improper storage, a product liability policy could cover any resulting lawsuits.
A good percentage of established growers test their products for any bacteria, herbicides, insecticides, and similar substances that could lead to harm during ingesting. Although, not every grower may provide that kind of quality assurance. If you are not aware of the practices and continue to purchase and sell those products that may contain these harmful substances, your dispensary could be found liable if the product causes harm to a person.
Having a product liability insurance policy will assist you in protecting your dispensary from liability claims from a customer that has been harmed by these products.
How much do they cost?
There are several things you need to factor in when it comes to determining the price for a product liability insurance policy. Although, as a general rule of thumb, the riskier the product is the more expensive the insurance policy. When it comes to businesses in the cannabis industry, you can expect to pay more for a product business than other lower-risk businesses. Insurance companies usually have a comprehensive risk analysis for a business with recommendations for liability coverage.
The insurance company you go to will also need to consider other things when they determine a policy price, including how many products are distributed and sold, what is the use for the products, and who the users of the products are. The insurance company could also consider the intended lifespan for a product, how the product was packaged, what material the product was made out of, and if there are any guarantees or warranties sold with the goods.
The instructions on the product can also offer an insurance company the information they need to determine the amount of risk exposure. Although no two businesses are the same, and it is up to the insurance company to compare and contrast.
As a dispensary operator, you will be liable for any product defects that are sold from your store. If you do not have a product liability insurance policy, your business will suffer financially from the resulting lawsuit. Furthermore, the damage caused by these defective products will tarnish your dispensary’s reputation, so make sure to check carefully for any issues concerning the products you have in stock.