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Product Liability insurance is very important for a Hemp business owner.
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Why do I need Products Liability insurance?

Cannabis plants behind a small dropper of CBD oil. Product liability insurance protects businesses from lawsuits in the event that a product causes bodily injury or property damage. This insurance typically covers product-related defects for manufacturers, distributors, and retailers. It’s so important, that business partners throughout your supply chain may not work with you unless you can provide proof of adequate product liability insurance and you should do the same. The most common types of claims fall under three categories: Design defects, Manufacturing flaws, and Improper Labeling/failure to warn

Your potential exposures

Product liability is just as important as any other insurance coverage in the Hemp/CBD industry. What happens if one of the products manufactured by a grower ends up being contaminated either in all of the products that are in the public or has a pesticide? What happens when a cultivator purchased additional Hemp from a wholesale grower to meet the 2,500 pounds he was short? A client complained of a strong sulfur taste, and soon it was discovered that the grower had applied a pesticide concentration (not on approved pesticide list), rendering the Hemp unusable and unsalable. The cultivator had to pull contaminated Hemp product from the shelves, a move that cost the company $2.5 million.

This story is not unique. When running short on product, Hemp businesses will often turn to other suppliers and partners to help them fulfill their orders. Unfortunately, improper vetting and a lack of understanding and compliance with state regulations and other requirements may lead to a loss of product integrity and costly product liabilities. Product liability can include more than just the Hemp itself, such as the equipment – vape cartridges, batteries, and lighters. This can quickly inflate the risk and, of course, the cost of a product liability claim.

How does it work?

Dispensary with an open sign in the window with a cannabis leaf Product liability insurance, offered either as part of a commercial general liability (CGL) policy or as a standalone policy, is designed to protect a company from first-party and third-party claims of bodily injury, property damage, and other damages related to the products and services that the company sells.

First-party claims refer to any type of claim arising from an accident, injury, or loss caused by manufacturing defects, improper labeling, and failure to warn consumers about a wide variety of potential hazards ranging from inaccurate THC measurements to mold or the presence of carcinogens.

Third-party claims refer to any type of claim that could see a business held liable for damages that result from the use of a product. This may include property damage, loss of wages, DUIs, medical expenses, and bodily injury.

For Hemp companies, this can include incidences such as:

  • Defective vaporizers that cause bodily injury due to exploding
  • Life-threatening illnesses allegedly caused by defective vaporizer cartridges
  • Contaminated hemp purchased from a third-party vendor and resold to retail customers.
  • Selling edibles that cause food poisoning or some other type of illness due to poor food quality standards.
  • Any form of harm that occurs due to false advertising or misleading claims made through a company’s marketing campaigns.
  • Product recalls stemming from the use of illegal pesticides—or even approved pesticides if applied in a manner that is off-label.
As a business owner, you know there are several different types of insurance you need in order to run your business safely and effectively. We have you covered.
To complete your coverage, here are a few additional coverages you may be interested in:

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