The acceptance of cannabis use is on the rise across the country. Each year a few more states choose to legalize the Schedule 1 illegal substance, and support for legalization on the federal level is also on the rise. Not only are state and federal legislators taking a deeper look at cannabis but also investors. Besides venture capitalists and angel investors for startups, large corporations are beginning to stake a claim in the cannabis market. Constellation Brands is investing a record (for cannabis companies) $4 billion US into Ontario-based Canopy Growth Corp in a deal to produce non-alcoholic cannabis based beverages. This massive investment by Constellation Brands set off a wave of investments into marijuana related stocks. While this explosion of investment is good for the cannabis industry, the inevitable result will be a rise in product liability litigation.
You may be thinking, how can more investment in the cannabis industry be a bad thing that leads to product liability litigation? The equation is simple, more consumers using more products plus the law of averages. With increased medical and recreational marijuana use and sales there will in turn be an increase in potential litigation. Issues like negligence, breach-of-contract, intentional misrepresentation, marketing to youth, design defect claims all increase in their probability of occurrence every time the market, use and demand increase. As the market grows there will be fewer customers with a full knowledge of what they are consuming, which could lead to over dosing and other bad reactions. Customers may potentially sue for negligence or failure to warn in that instance.
Constellation, among the first big alcohol makers to invest in the marijuana industry, pumped almost US$200mln in Ontario-based Canopy Growth Corp (NYSE:CGC), last year in a deal to produce a non-alcoholic cannabis-based beverage. It recently upped its investment in cannabis with a record US$4bn investment in Canopy, spurring a buying frenzy in marijuana stocks.
“Fundamentally, we believe cannabis is going to be a big business worldwide … not going to be limited to Canada. This will be undoubtedly a market that develops in the United States, it’s already done so on a state-by-state basis here,” Newlands told the Barclays Global Consumer Staples Conference in Boston. “It’s developing around the world, in places like Germany and Australia and other markets. So the whole combination of things is shaping up in a way that this is going to be a big business.”
If there is increased investment in the cannabis industry, that should translate to growth and that’s good. With said growth comes an increase in potential for product liability claims, and that’s bad. Cannabis related companies can protect themselves with a cannabis product liability policy. A standard commercial general liability insurance policy isn’t adequate protection for the cannabis business owner. General liability polices contain Schedule 1 substance exclusions which would make the policies useless for cannabis/marijuana businesses whose businesses are centered around a federally illegal substance. Cannabis business owners should be working with experienced cannabis specific insurance companies and agents. At S2S Insurance Eric Rahn provides his clients with the experience and expertise to ensure they have a risk management portfolio that makes sense. “As your business grows, has your insurance coverage grown with it?” -Eric Rahn. Don’t find out the hard way that you don’t have the right coverage or the right amount of coverage.