Product Liability Insurance protects a business from lawsuits alleging negligence associated with the manufacturing, selling, or redistribution of marijuana-related products. If your company markets any product, even if the product is manufactured or resold by another business, your business should make sure to have this important insurance coverage, and discuss with an insurance advisor how much coverage your business may need based on the type of product your business sells and the estimated annual sales volume.
In many states, lawsuits will incorporate the legal standard known as the “stream of commerce”, which means that any company that participates in the workflow of bringing a product to market can be held directly or vicariously liable for that product’s defect and the subsequent liability. Because of this standard, businesses that are engaged in product sales or distribution must consider how even one product liability lawsuit could result in severe economic harm and potential bankruptcy, especially within the unexplored cannabis industry.
Product Liability lawsuits typically result from either a design defect, production flaw, or error in the products warnings or instructions. In recent cases, US based marijuana firms and dispensaries have been sued for redistributing products that were tainted with pesticides, causing allergic reactions. Other product liability suits arise out of the insufficient warnings on a products packaging, or an unsuitable guarantee. In any event, even businesses that sell or distribute legitimate cannabis products are exposed to frivolous lawsuits that can cost hundreds of thousands of dollars in defense costs.