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MMJ Growing Pains

MMJ Growing Pains

Since California led the way in 1996, medical marijuana has been legalized in 23 states and the District of Columbia.  Fourteen other states recently had medical marijuana decisions on the ballot last year or plan to in the coming year.  Even Congress has now put its support towards medical marijuana and hemp growers in the latest Omnibus bill.

As the medical marijuana industry grows beyond infancy, so does the scrutiny of its business liabilities.  It seems as though every day there is a new growing pain for the industry exposed in a major publication. Today we’re focused on two important liability concerns.

The Products Liability Concern

Because MMJ dispensaries operate like pharmacies, it is generally assumed that they should be insured like pharmacies.  However, products from pharmacies and dispensaries are tested, approved and labeled very differently from one another. This difference requires a unique type of insurance coverage specifically for MMJ business owners that a pharmacy owner could more or less do without. The coverage is called products liability.

Products liability insurance is usually excluded from general liability insurance policies for medical marijuana dispensaries.  This is an essential coverage as it protects dispensaries in the event of claims due to illness or injury from cannabis products.  These claims are on the rise as more individuals are exposed to MMJ, particularly when those individuals experiment with various ways of consuming THC.

A class action lawsuit filed in Colorado last year (Coombs v. Beyond Broadway) alleges that many people became ill after eating THC-infused chocolate samples at an event.  The class action is open to all attendees who may have been served chocolate samples at the event, so the demand and settlement could be dramatic.

This is an example of a claim that would be handled under products liability coverage.  Coverage can be purchased separately, but can typically packaged back in with the commercial general liability policy and rated separately.

The Professional Liability Concern

When dispensing medical cannabis, the dispensary takes on the responsibility of a highly regulated pharmacy.  While your dispensary may be compliant with all state and local rules and regulations, mistakes do occur, which can lead to costly legal claims.

The most common examples of mistakes are:

  • Failing to give the prescription to the patient or an authorized caregiver
  • Dispensing the incorrect product
  • Failing to confirm the identity of the patient or caregiver before dispensing
  • Failing to protect patient privacy

Professional liability or Errors & Omissions insurance is designed to handle the above types of claims.  While it is always in the best interest of the dispensary to keep meticulous records and a highly trained staff, an E&O policy will protect the business when mistakes occur.

These varieties of claims are NOT contemplated under a business liability or products liability policy, so coverage should be considered to protect your business against claims of this nature.  Mistakes like these can be costly and even put you out of business.

There are many other insurance coverages available to medical marijuana dispensaries that should be considered when creating a comprehensive insurance plan.  Commercial general liability, automobile coverage, crop and stock coverage and many other policies are available to make sure that an MMJ business is adequately protected. There’s enough liability as it is with the federal government’s unpredictable response to the growing industry – businesses shouldn’t add product and professional liability to the list.

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