Hazard Exclusion Endorsement—Is Your Cannabis Business Covered?

If your cannabis business cultivates, sells and/or distributes products and finds itself facing a product liability lawsuit, you may be surprised to learn that coverage under your basic liability policy isn’t enough.

In fact, most traditional liability policies specifically exclude coverage for these types of injury claims arising from the products your business produces under a “products-completed operations hazard” exclusion endorsement.

Nearly every state that allows the legal sale of cannabis products requires that cultivators, manufacturers and distributors undergo testing by a state-accredited third-party lab.

In addition to measuring the potency of strains and levels of Tetrahydrocannabinol (THC) and Cannabidiol (CBD), tests also screen for contaminants, pesticide levels, mold & mildew, etc.

The purpose of third-party or independent lab testing is to provide an unbiased analysis of cannabis products, and indicate the quality, purity and potency of samples. However, despite rigorous testing, health hazards from completed products can still exist.

Simply put, the health hazard exclusion, as it relates to product liability, excludes any products sold by a cannabis business that have allegedly caused a health hazard.

Therefore, health claims from respiratory diseases and other ailments that are brought against your business because of the use of your products are not considered a covered loss under your commercial general liability policy.

Not sure if the products your cannabis business cultivates, sells and/or distributes are putting you at risk?

Under the health hazard exclusion, cannabis products are defined as: Any product or good containing any amount of THC or any other cannabinoid, regardless of whether the THC is natural or synthetic. This includes but is not limited to: a. Plants of the genus Cannabis L. including roots, stems, stalks, leaves, flowers, buds, seeds; b. Compounds, by-products, extracts, derivatives, mixtures, combinations, resins, oils, tinctures, waxes, lotions, infused liquids, or ingestibles; c. Hashish or hash oil.

It’s critical to understand the product liability exposure your cannabis business may be up against and any exclusions in your policy.

Product liability insurance (also known as products-complete operations) helps pay for damage or injury caused by a product manufactured or sold by your business, as well as legal fees.

As a cannabis industry specialist, I can help you stay informed on key liability coverages to protect your business, including comprehensive coverage for product liability.

Please contact me, Corey Tobin, at ctobin@boltonco.com or 626-703-1556.

Follow along on Instagram and LinkedIn for more information.


About Corey Tobin

With close to a decade of industry experience, Corey has worked with a number of small and medium-sized businesses and is knowledgeable about property and casualty, life and health insurance. Corey specializes in working with elevator contractors, manufacturing, distributing, healthcare and construction. Additionally, he is focused on the unique needs and challenges facing cannabis related business, including dispensaries, cultivators, extractors, developers and much more.

Subscribe to the Bolton Blog