The Liability Issues That Cannabis Companies Can Face 

Ask any experienced cannabis consumer, and they’ll tell you the same thing: the variety of products available today is unprecedented. But for cannabis manufacturers and retailers, the growing array of cannabis products creates more concerns about potential product liability.

How is cannabis liability different than alcohol?

For companies that sell alcoholic beverages, there are liability concerns regarding the production, storage, sale, and distribution of alcohol. Such companies can face civil and criminal consequences for harm done to patrons, or others served alcohol. 

It is more complicated for the cannabis industry because it remains illegal under federal law. This means that many insurance companies will not insure cannabis companies, though it's a common misconception that cannabis companies can’t access insurance services. 

Potential liability claims in cannabis 

For cannabis companies, insurance can cover a wide variety of needs. These include general liability, product liability, cyber liability, personal injury, and workers' compensation, to name a few.  

General liability covers bodily harm or property damage claims that occur at a cannabis establishment. A product liability case would involve claims that a product or various types of product defects harmed a consumer. 

Companies can face liability claims for product design or marketing defects. These include the failure to warn about potency or potential side effects adequately.

If a minor accesses cannabis products 

Even in states with fully legal cannabis, the penalties for selling or providing cannabis to minors can be severe unless they are registered, medical marijuana patients. 

Cannabis businesses can face liability claims from parents or legal guardians if a minor obtains products from their establishment. 

But the dispensary door and the cash register aren’t the only places where cannabis companies must practice vigilance. State cannabis regulations also require that companies place products in child-resistant packaging.

Liability and cannabis contaminants

In January, the California Department of Cannabis Control ordered a mandatory recall of a batch of cannabis flower contaminated with the mold known as aspergillus niger. No injuries were reported when the recall was issued. Still, such a contaminant can pose a severe health risk to people with weakened immune systems or respiratory diseases. 

This came just a few months after Michigan authorities issued a mandatory recall of more than $200 million of cannabis flower “due to inaccurate and/or unreliable” lab testing results. 

Cannabis companies can potentially be liable if a consumer suffers personal harm due to their consumption of a product. This does not only apply to the manufacturer - the dispensary that sells the product can also potentially be held responsible.

Workers' compensation liability in cannabis

In 2019, Bradley King of the National Institute for Occupational Safety and Health (NIOSH) said cannabis worker hazards fall under “three broad umbrellas”:

• Chemical exposures: Butane and carbon dioxide (from the extraction process and pesticides)
• Biological exposures: Mold, fungi, and indoor air quality
• Physical exposures: ergonomic issues from hand trimming or tending plants, ultraviolet light exposure, noise, slips, trips, and falls

Workplace accidents and bodily injury claims aren’t only limited to warehouses and extraction labs. They can also take place at a dispensary, and employers must take the necessary precautions to reduce the risk of harm.

Cyber threats and cannabis liability 

A simple ransomware attack can shut down production lines and all forms of daily operations and lead to data breaches that affect a company’s reputation and bottom line. 

For cannabis companies, cyberattacks can be truly ruinous. 

Under US law, the company that holds the data can be held liable in a data breach. Recent years have seen several consumer lawsuits over data breaches, including a $60 million settlement following a class action lawsuit against Morgan Stanley.

For countless cannabis companies, there would be no way back from such a settlement. 

Liability for problematic health recommendations

When consumed responsibly, cannabis is relatively safe compared to most prescription and over-the-counter medications, but that doesn't mean it's risk-free.

Cannabis products, particularly those containing Cannabidiol (CBD), can potentially have dangerous interactions with various forms of medication.

Several states require pharmacists to be on staff at medical dispensaries or involved in the provision of medical marijuana. In other states, budtenders at recreational dispensaries may serve as stand-ins for healthcare practitioners, even though they typically lack medical training.

Even with the best intentions, if a customer falls ill following a product recommendation, the dispensary could potentially be liable.

Avoid liability risk by adhering to cannabis compliance requirements 

Cannabis compliance regulations cover a wide range of safety issues ranging from packaging and labeling requirements to laboratory testing and the use of dangerous chemicals. 

Cannabis companies adhere to these guidelines through an extensive assortment of carefully written guidelines. Referred to as Standard Operating Procedures (SOPs), they cover a wide variety of subjects, including: 

• Workplace health and safety procedures 
• Cannabis facility cleaning and maintenance
• Cannabis security systems and procedures  
• Waste Disposal and Pest Removal 
• Inventory Management 
• Recall procedures
• Lifting 
• Fall prevention

But SOPs also serve to reinforce safety measures and make them a regular part of daily operations.

Companies with a strong safety culture are less likely to face liability issues and the ruin they can cause to their reputation and bottom line.

But meeting the regulatory requirements of the industry is by no means simple. The regulations can differ from state to state and even from one jurisdiction to another. 

Digital solutions like the Rootwurks Learning Experience Platform (LXP) can simplify things with sophisticated, automated tools that track, audit, and analyze compliance operations.

To see how the Rootwurks LXP can help safeguard your company from liability concerns, reach out for your complimentary demo.