By Max Meade, for Elevated Nation
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 recommended 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? 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 is when everything went downhill. His wife called 911 claiming that her husband was hallucinating after eating the edibles 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 allegedly 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 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. Back in 2015 they were sued by two medicinal marijuana patients because they claimed that LivWell used Eagle 20, a pesticide that is not an 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 in place then they would have to pay for the court and legal fees out of their company’s own budget along with suffer 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!
Max Meade is an insurance advisor with Brown & Brown who specializes in assisting cannabis ventures across the United States in procuring proper insurance coverage and starting their businesses. Seeing cannabis help a close family friend inspired Max to want to help cannabis venture’s succeed and help patients. He may be reached at MMeade@bbdvins.com or 856-552-6358.