Do You Need Cannabis Insurance?

Insurance for Colorado Dispensaries

Cannabis is big business in Colorado. In 2020, the state’s 572 licensed dispensaries generated $1.2 billion in revenue. About one third of those sales occurred in Denver alone, accounting for nearly 6 percent of the city’s overall fund revenue. 

Recreational marijuana sales are heavily taxed and strictly regulated. Dispensary owners are expected to be well versed in current cannabis laws, especially those related to security, public consumption, allowable amounts, and legal age. 

Unfortunately, adhering to these strict regulations does not always protect marijuana retailers from legal recourse, especially from their customers. For example, if a customer purchased a product from a dispensary and became ill, the retailer can be held liable. This is true even if the dispensary had no part in the manufacturing process and no prior knowledge of any defects. 

Dispensaries are also at risk of theft and vandalism. As cash-only businesses with consistently high sales volumes, they are a prime target for criminals. The product itself is also a high price tag item and very attractive to burglars. 

To say the least, dispensaries are in a unique position that requires specialized protection. Much of this protection falls under the category of “cannabis insurance.” 

What is Cannabis Insurance?

Cannabis insurance is a comprehensive insurance plan that incorporates various policies designed to protect those employed in the marijuana industry. Plans can be tailored to dispensaries, growers, manufacturers, labs, and more. 

In addition to general liability insurance and workers compensation, which are typically required for all businesses, cannabis insurance may include the following:

Product Liability

Product liability insurance protects businesses in the event that someone claims that one of your products caused property damage or personal injury. Product liability insurance covers:

• Design defects-issues that arose during the planning process before the product was even made
• Improper warning-dispensary owners are expected to educate their customers about proper dosing and usage of their products. If they failed to do so and a customer was injured or became ill, they can be liable. 
• Manufacturing defects-in the case of a dispensary, this might include product contamination or inconsistent strains
• Strict liability-protects the business owner when an injury occurred although the owner was not found negligent 

Cyber Liability

In general, small to medium-sized businesses are at greater risk of a cyber event. Cyber events may constitute data breaches in the form of stolen demographics information, payment information, or trade secrets related to the business. If a dispensary is also selling medical marijuana, a cyber event may also involve stealing private health information. 

Losses related to a cyber attack can be significant. Cyber liability insurance protects dispensaries from criminals looking to profit from malicious online activity. 

Employee Theft Protection

As a business owner, you would hope that your team is trustworthy. Unfortunately, there are instances where a jaded employee or employees might steal product, cash, or trade secrets that can result in major losses for a dispensary. 

General liability insurance typically excludes losses related to illegal conduct, such as stealing. Employee theft protection can offer a safety net in the event you are taken advantage of by a team member. 

Product Recall Insurance

When a product for sale has been recalled by a manufacturer, distributors of that product can see a significant impact on both their finances and reputation. Product recall insurance is designed to mitigate the costs associated with contaminated items, like shipping, disposal, and inventory loss. 

Professional Liability Insurance

Any time a business routinely offers professional advice regarding a service or product, they should consider professional liability insurance. If a customer claims that your advice on a certain product resulted in bodily harm or damage to personal property, you can be held responsible. Professional liability insurance covers legal fees, medical bills, and other costs associated with these types of claims. 

Choosing Cannabis Insurance

Selecting the right insurance for your dispensary can be a daunting task. With dozens of products to choose from, you may not know which is worth the expense. An experienced attorney can help you understand where and how your dispensary is legally vulnerable. He or she will advise you on the best policies for your needs and assist you in the event you are found negligent in any way. 

David Roth is a highly experienced insurance attorney in Colorado. He has helped hundreds of clients, including dispensary owners, navigate their policies and attain fair settlements. If you need assistance, contact our office or go online to schedule your free consultation today.