Cannabis businesses have a lot to consider when setting up shop, and insurance is a critical component. Businesses in this industry have specific risks and needs, so it is important to have the right blend of coverage to help protect against a broad range of exposures.
Errors and omissions insurance is coverage designed to offer protection to businesses that give advice to customers. It helps to protect against claims of negligence and inadequate work from dissatisfied customers or customers who suffer a financial loss due to inadequate or negligent advice.
Read more to learn about why errors and omissions insurance coverage is important for cannabis businesses and how to purchase this insurance.
The Highs and Lows of E&O Insurance for Cannabis Businesses
Errors and Omissions insurance coverage is important for many different types of businesses in the cannabis industry.
Dispensaries
Dispensaries talk with patients, customers, and members of the public; and they give information about their products. They may share expected outcomes and the benefits the customer may experience. They often give their opinions about their favorite (and least favorite) products, how to use them, and the effects they feel from the products they recommend.
Regardless of the industry, giving advice always runs the risk of failing. In this case, the patient or customer could be upset the product did not work for them as they expected or as they were advised by the dispensary worker. Since cannabis is a natural product with variations that may affect every individual differently, this can pose a high risk for workers within the cannabis industry.
Purchasing E&O coverage can help protect dispensary workers from lawsuits alleging negligent or inadequate work when they give advice about their products to customers and patients.
Laboratories
When things go wrong at the lab with a regulated and controlled product like cannabis, it can mean the product has to be destroyed, which comes at a high cost. If the lab makes a mistake and it incorrectly asserts issues during testing that cause the product to be destroyed or held back, the lab could be responsible for the resulting financial loss to the owner of the product.
Labs can make mistakes and falsely report metrics about the product they test, such as its potency or strain. These could be critical errors when it comes to a medical product that patients depend on, so having errors and omissions coverage is important for labs working with cannabis products.
E&O insurance can help in these types of situations when lab errors cause financial loss to the lab’s customer, which is often the dispensary or grower.
Consultants and Attorneys
Other professionals who work in the cannabis industry could include attorneys and consultants. These individuals should also consider purchasing errors and omissions insurance to have additional protection from risks.
There are other commercial insurance policies likely already owned by attorneys and consultants which may provide some protection, but since cannabis exposures are specific, an attorney working often in this industry might consider adding specific E&O coverage for cannabis exposures.
Outlook on Legislation and the Cannabis Industry
Legislative efforts to legalize cannabis in the US continue on a federal level, where cannabis remains on the Schedule I list of narcotics, which includes other drugs like ecstasy and heroin.
However, there are only three states in which no legal use law is on the books now – Idaho, Kansas, and Nebraska – it appears the slow creep toward national legalization will continue.
Social views on cannabis use are changing, as well. Many patients find relief with medical marijuana use and its prescriptions are becoming more widely accepted. Younger generations, who are often more liberal in their views overall, are turning into adult voters. These young voters grew up not in the Nancy Reagan “Just Say No” generation, but in a more casual and discussion-based internet world where they learned about safe recreational drug use over forced abstinence.
The cannabis insurance industry, and many others, continue to face a hard market with low capacity and higher premiums. This makes it difficult to place coverage across lines, but as federal legalization efforts continue this could change.
Purchasing E&O Insurance
Making the decision to purchase Errors and Omissions insurance is a smart one – the coverage afforded by the policy is specific and helps to provide protection against risks that are not covered under your commercial general liability policy or another business owner’s policy you may already have.
Because it is specialized coverage, be sure to do your research before you purchase your policy. Terms, conditions, and rates can vary between carriers so comparing your options with a trusted advisor is helpful.
Final Thoughts
Operating a cannabis business can be full of rewards but make sure you are protecting yourself from the risks. Having the right insurance coverages in place is a great start.
Errors and Omissions coverage is important for anyone in the business of giving advice, and dispensaries, laboratories, consultants, and others in the cannabis industry may find it helpful coverage to have in place.
How do I Learn More?
The American Agents Alliance has lots of E&O resources for your review – check out our blog and member resources for more information!
Register today to attend our national conference in Palm Desert, CA, September 23-25, and learn more about trending E&O issues from industry experts.
