We continue to follow the discussion on the risks associated with the legal marijuana industry. These risks include motor vehicle accidents, theft, and consumption-related bodily injury and property damage.
The insurance industry is aware of the potential rise in the quantity and value of cannabis-related Product Liability claims and lawsuits. Many of these will result from the growth in the manufacture, distribution and sale of edible marijuana products. Most of the problems will have to do with edible products with psychoactive effects and issues regarding labeling and marketing.
Marijuana-infused edibles are the risk likely to make up the majority of cannabis-related Product Liability lawsuits. Many consumers are unaware that edible cannabis can take significantly longer to affect them than other methods of consumption. As a result, many consume too much of it. Just one bite of some edible products can contain a standard 10mg dose of THC. THC is the primary psychoactive element in marijuana.
Some states where marijuana is legal are proposing that cannabis industry participants be required to have Product Liability insurance. Such regulation would certainly provide stability to these businesses.
A standard commercial General Liability (CGL) insurance policy isn’t adequate protection for the cannabis business owner. These policies contain exclusions for Schedule 1 substances, banned substances and other ingredients considered a health hazard. However, there are currently four insurance carriers writing CGL policies that will provide adequate Product Completed Operations coverage for the cannabis industry.
Society holds all product manufacturers liable for placing unreasonably dangerous products on the market. But we’ve yet to determine what is “unreasonably dangerous” within the cannabis industry. This is because federal law still bans all forms of marijuana, which prevents long-term studies being conducted on safe and effective uses of cannabis.
No clear warning or labeling regulations to prevent consuming overly large doses currently exist to protect the consumer. But some in the industry are slowly adopting strict dosage limits in understandable language. The concept of “microdosing” edible products in quantities as small as 1mg THC is also being considered.
We also stay abreast on other Product Liability risks in this industry. Many of these arise from the use of pesticides, vaping batteries, mold/fungus contamination, breach-of-warranty claims, misrepresentation, label and failure-to-warn claims. And, of course, we’ll see if consumer complaints alleging bodily injury claims resulting from intoxication will parallel those in the alcohol industry.
In 1994, the Dietary Supplement Health and Education Act was passed. Prior to 1994, manufacturers of dietary supplements weren’t required to obtain FDA approval for their products. This enabled potentially dangerous supplements to be sold with little if any consequence. The new regulation put many supplement manufacturers out of business.
The cannabis industry is currently sitting in the same unregulated position but can learn a lesson from the supplement industry. Cannabis recalls in Colorado alone currently number 66 since September 2015. With so many states legalizing marijuana, the lack of regulations leaves the growing market ripe for recalls and Product Liability claims.
Fortunately, the cannabis industry is making strides in self-regulation. Steps in risk management include a licensure process, thorough product testing, track and trace programs, and establishing of standards by organizations such as the American Society for Testing and Materials (ASTM).
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