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MMJ Product Recall

MMJ Product Recall

Since cannabis transactions are still only performed in about half of the United States, it seemed that the industry was immune to what other U.S. businesses are facing on a near daily basis: product recall.

That is changing.  In Colorado there were 16 product recalls from September through December 2015 covering hundreds of products including candies, concentrates and oils. Most of these product recalls were due to pesticides.  This looks to be just the tip of the iceberg.

While products liability insurance will often cover claims and lawsuits for bodily injury and property damage due to faulty products, there is still the matter of all of the other products that were manufactured at the same time or in the same way.

Because these products have the potential to cause similar bodily injury or property damage, they would trigger a product recall. Product recall is not covered under products liability insurance, so a separate product recall insurance policy is required.

What Is Product Recall Insurance?

The cost to businesses to recall or repair faulty product can add up quickly. Consider the costs to do the following:

  1. Notify distributors and retailers about the faulty product.
  2. Remove the product from store shelves.
  3. Reimburse the distributor and/or retailer for the product.
  4. Reimburse consumers who purchased the product prior to recall.
  5. Transport the product back to the manufacturer.
  6. Repair the faulty product or destroy it.
  7. Current and future lost revenues due to damaged reputation.

From first notification to recall to regaining consumer trust, product recall insurance is designed to protect your business in the event of a faulty or hazardous product.

Do You Have Product Recall Insurance?

Unless your business has specifically purchased product recall insurance, it is unlikely that you have it. The coverage is usually excluded from General Liability and Business Owners Package policies.

How To Protect Your Business

Independent third-party testing labs can reduce the likelihood of consumer bodily injury or property damage for most products. There are many specialty labs in the US that offer testing for cannabis products. However, mistakes happen and having the proper insurance coverage can help ease the financial burden of recalling products.

Contact your Hayes Broker today to schedule a free, no-obligation risk management analysis to discuss product recall insurance for your business.

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