Product Liability. To most, this is just another insurance term that some may be familiar with and others might just know it from discussions with fellow colleagues or have just heard the term thrown around before. So what exactly is Product Liability? For the Cannabis Industry, it may be the most important coverage that any business can obtain and if you’re not sure if your business has it in place then I recommend that you stop reading this right now (but come back after to finish reading!) and go review your Insurance Program.
What Product Liability can provide is coverage against bodily injury and property damage that arise out of a defect in the product that you’re selling, manufacturing, or distributing. It can also provide coverage for any damages from mislabeling or failing to implement the proper warning labels on the products.
So why is this coverage so important? Here are two everyday scenarios that could translate into a major lawsuit:
Imagine that you are the owner of an Edible Manufacturing Company and you just distributed your newest infused-cookie to your contracted dispensaries. During the day, a customer comes into one of those dispensaries’ and they purchase one of your new cookies. The customer gets home, hey unwrap your cookie and eat it. BUT the cookie turns out to have far more THC than the customer anticipated and they get ill because of it. The first thing they are doing (after they recover) is suing, claiming that your cookie caused them bodily injury and you, as the manufacturer, will be included in that lawsuit.
Another scenario and one that is, unfortunately, popping up more and more is the same scenario above but this time instead of the customer eating the cookie, they put it on their table and run upstairs to change. While they are gone, their 4-year-old child sees the cookie on the table and grabs it and eats it.
The THC is far too strong for the child and they have to be rushed to the hospital. This is another example of a Product Liability claim and without this coverage implemented correctly in your Insurance Program, the associated costs of this lawsuit will be on YOU and YOUR BUSINESS. Do you have money set aside for something like this?
Still not convinced about the importance of this coverage? Below are two actual lawsuits that have taken place:
In April of 2014, a man named Richard Kirk strolled into a dispensary and purchased edibles like tens of thousands of individuals do on a daily basis. However, after he ingested the edibles, his wife called 911 claiming that her husband was hallucinating and she told the police that her husband was going to get his gun. Moments later, he ended up shooting and killing his own wife due to hallucinating from the edibles.
Two marijuana businesses, Jaia’s Garden LLC who made the candy along with Nutritional Elements who distributed the candy, were brought into the nation’s first wrongful-death lawsuit against a recreational cannabis company as the family claims that they failed to warn Rick about the potency of the candy and the potential side effects.
This case was just recently settled this past April, meaning that for the past 3 years the court costs and legal fees have been culminating and without the proper coverage in place, these marijuana businesses may have had to pay out of their company’s budget.
For anyone in the Industry, I’m sure that you have heard of Livwell, who is one of the biggest names in the Industry today. Back in 2015, they were sued by two medicinal marijuana patients because they claimed that LivWell was using Eagle 20, a pesticide that is not one of the approved pesticides determined by the State of Colorado. Because of this lawsuit, LivWell had 60,000 plants confiscated to check for Eagle 20 residue, which resulted in low levels of the chemical being found.
However, the hold of these plants was lifted due to the levels found being too low and in 2016 this case was dropped as the two plaintiffs couldn’t show that they sustained any injuries due to this contamination. However, LivWell had to fight this in court for the entire year leading up the trial being dropped along with having their plants confiscated which could have interrupted their normal business operations due to the large quantity that was taken.
Along with this, a Coalition Group protested outside of one of their locations which subsequently hurt the revenue generated from that store. Just like above, if they didn’t have the proper Insurance coverage’s in place, then they would have to pay for the court and legal fees out of their company’s own budget along with suffering the loss of revenue from the protest.
However, with the proper Insurance Program in place not only could they have been reimbursed for both the legal and court fees associated with the Product Liability portion but they could have also recouped for their loss of revenue from the confiscated plants and protest.
For most people reading this, you are probably thinking “this will never happen to me” but in reality, this threat is very real and some of you will experience an event of this nature. Without properly preparing for events like this, many business owners will be ill-prepared to handle the financial consequences of a claim or event of this nature.
Wouldn’t you rather be able to protect yourself and your business before something like this occurs? Reach out today and we can discuss the proper steps to take in order to mitigate these types of events along with making sure that your Insurance Program is designed to protect you and your business from any events like this in the future!
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