Flower, edibles, oils, topicals, beverages, vapes, and extracts. The Cannabis industry products have come a long way in a relatively short period of time. If you’re a cannabis business owner involved in the cultivation, manufacturing, or sale of cannabis products, it’s important to protect yourself from the risk of loss and liability that, unfortunately, is a part of such a highly scrutinized and regulated industry.
What is Cannabis Product Contamination Insurance?
Cannabis product contamination insurance is a specialized form of Product Recall Insurance. Product recall insurance is typically available as additional coverage in addition to a Commercial General Liability Insurance (CGL) policy which is more concerned with the liability risks of the day-to-day operations of a business.
This cannabis insurance coverage is specifically designed to address the risks that contamination poses for cannabis cultivators, harvesters, processors, manufacturers, distributors, retailers, cannabis industry product brands, and others who face losses due to contamination and recall.
Some of the losses that a cannabis product contamination insurance policy can cover include:
- Pre-recall expenses like cannabis operations for product testing and the hiring of consultants.
- Recall expenses such as pulling products off shelves, public safety announcements, disposal costs, third-party losses & liability, and extra wages that result from a recall.
- Replacement costs including labor, materials, distribution costs, and other expenses incurred to replace recalled cannabis products.
- Profits lost that would have been earned on the recalled and wasted product.
- Brand rehabilitation expenses like PR costs, marketing, promotions, and other costs needed to restore your company’s image.
Situations that cannabis product contamination insurance can protect you from include:
- Accidental and intentional/malicious contamination
- Government imposed recalls and shutdowns
- Publicized allegations of the above
- Product extortion i.e. ransom demands based on the threat of intentional contamination of your cannabis production
Is Cannabis Product Contamination Insurance Enough?
Another coverage that goes hand-in-hand with cannabis product contamination insurance is Product Liability Coverage. Also an optional extension of a CGL policy, cannabis Product Liability Insurance coverage can protect your company if consumers are harmed by contaminated cannabis products that contamination insurance alone can’t cover you for.
Even if you are not involved in the cultivation of cannabis, harvesting, processing, or manufacturing of cannabis products, if you sell contaminated cannabis products, you may not be fully protected in a lawsuit.
Product liability insurance can provide cover for:
- Medical expenses for injuries to consumers, lost wages, and other liability costs
- Lawyer’s fees and defense costs
- Out-of-court settlements
- Awards for damages
It’s important to keep in mind that even if you’re ultimately cleared of liability, being named in a lawsuit alone triggers a cascade of expenses, stress, and inconveniences.
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