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for the Insurance Industry

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In the last post I discussed how the end of prohibition produced new risks and new policies for the insurance industry: like Dram Shop. So the issue is: “With the advent of cannabis as a major industry what will the need for new insurance coverages be?”

We are not fortune tellers here, but certainly Product Liability will need some revisions to current policy forms: there are exposures from seed to sale. And while the FDA is still sitting on the sidelines, and there are not many liability suits being filed, a solid prediction is that plaintiff lawyers will be creative and start chasing the newly emerging large and small cannabis businesses.

Most of the current cases filed against the canna industry have been on contamination (we discussed this earlier) but few actions have proposed bodily injury from :”duty to warn” or a flaw in the product. The legal profession is behind on these causes of action, but our sources tell us they are silently working on researching reasons to file suit.

We as a society hold ALL product manufacturers exposed to lawsuits for selling dangerous products to the public. The definition is noticeably clear: but not to the cannabis industry because until recently there has been a paucity of studies on medically damaged causation to individuals related to ingestion of the product. This is changing now with cannabis becoming legal, consumption increasing, and concomitant newly-developed research components and studies. Thus, product liability coverages by the carriers will need to include these issues for proper protections to the industry. Who will be first?. Some of the conditions and public claims for the use of cannabis, THC infused or CBD neutral, include reduced pain, anxiety, arthritic conditions and even changes in sperm composition.

Currently, California has put the danger to consumers for reproductive issues in Proposition 65, found in THC cannabis. That statute reports that any trace of THC without proper product signals will cause the laws to respond: just the thing plaintiff bar wants to see. Will current product liability policies respond to that??

The nutraceutical industry bears examining for cannabis. In 1994 the Federal Dietary Supplement Health and Education Act allowed these companies to sell and not be supervised by the FDA. This permitted some really poor and maybe dangerous products to be sold and eventually many of the bad actors were driven out of the industry. We believe that the cannabis industry is in a similar space to the supplement business. Cannabis, while more regulated by states still has a long way to go for self-regulation. Just go into a dispensary and see what is being sold. The packaging descriptions are weak and internal inserts are missing. Is the insurance industry planning on stepping in to make the consumer more well-advised? We do not know. Will the insurance industry respond? That issue remains to be seen.

I will be back next issue with more on this topic … be safe …

Michael B