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Cannabis Business Risks and Liability

Table of Contents

man looking at cannabis field
Running any type of business is a big risk. You never really know what your day will bring and need to be prepared for just about anything. The need to prepare multiplies further when running a cannabis business. Cannabis businesses need even more insurance protection due to the nature of what they’re dealing with and you need a Cannabis Insurance policy that could help protect against the financial fallout associated with a lawsuit. A woman holds ground cannabis in a rolling paper To give you some insight into the types of risks you face when running a cannabis business, we’re going to go over some of the liability risks that the coverages in your policy could help cover you against. This won’t be all of them, since you may opt for additional coverage in your policy, but you’ll get a good idea of what your business could potentially deal with. First, you might be wondering…


Short answer: all of them. Long answer: still of all of them, but we’ll help name a few. If you’re doing business within any of the following categories then you likely need a cannabis business insurance policy. If you don’t see your business type on the list but it’s still something that involves cannabis or providing services for cannabis businesses, then an agent may still be able to place coverage. Do you do business within any of the following?
  • Bakeries & Manufacturers of Cannabis-Infused Products
  • Cannabis Consultants
  • Marijuana Cultivation Contractors
  • Delivery & Distributors of Cannabis Products
  • Marijuana Dispensaries
  • Indoor, Outdoor, & Greenhouse Cannabis Cultivators
  • Laboratories
  • Medical Offices
  • Private Chef/Instructors of Cannabis-Infused Cooking Classes
  • Cannabis Processing Operations
  • Retail CBD Stores
  • Cannabis Warehouses
Just like any business, your cannabis business needs to be insured and we’ll tell you what you’re being insured against.


Cannabis insurance, which is just another name for the combination of coverages that make up your policy, is designed to protect you against first and third-party claims that your business operations or product caused bodily harm, property damage, or other damage. The coverages associated with a cannabis insurance policy insure you against different specific liabilities. We won’t go over every single risk you face since there is a myriad of them, but we’ll give you a general overview of some of the more common liabilities that bring in claims.


General Liability, or Commercial General Liability (CGL), offers protection against bodily damage, property damage, and personal and advertising claims. Say a customer walks into a dispensary you own or the location you produce goods at. They slip on some liquid that wasn’t cleaned up and injure themselves. They sue you for medical costs. Your general liability insurance could help cover these costs. Another example could be the possibility of property damage. Say you’re renting a building where you test new products. Something goes haywire and a fire starts. The landlord sues you as a result. Your insurance would come into play here as well.


This coverage is designed to protect you against claims that arise out of the use of your products. Cannabis products are monitored differently from state to state but still require much of the same testing. You’ll need to ensure you’re in compliance with your state regulations which you can find here. With all products, your cannabis product needs insurance. It doesn’t matter if you’re selling a topical or ingestible product or if you’re primarily using CBD or THC, you face liability all the same. If you sell a product that is improperly labeled or designed and it causes someone damage, you could be on the hook for the associated bills. Take this example, say you’re producing CBD pain-relief cream. You distribute the cream to your retailers and after some sales, you hear complaints of rashes in customers. Turns out the product wasn’t labeled with every ingredient and you now have a lawsuit from a customer who needed medical attention to their rash. Product liability insurance could help cover this claim.


Commercial property insurance is the part of your policy that protects your physical property. If your property were to be damaged by fire, natural disasters, vandalism, or theft, this coverage would come into play. Here’s an example where you’d need this coverage. After heavy rain and hail fall, you notice leaks in the roof of your building caused by hail. You file a claim to get our roof fixed.


If you do business as a grower or cultivator then you’re going to need insurance for your crops. Most crop coverage is usually designed to insure cannabis plants grown indoors in a greenhouse. Your facility will also likely need to meet certain requirements. Crop coverage is just that, insurance for your cannabis crops. It refers to protection from damage or loss of growing cannabis crops. This coverage could cover your insured crop against theft, fire, vandalism, and more.


When your equipment or products are in transit, they need to be insured with inland marine insurance. This coverage can protect your transportable items from damage while in transit. If you ever had to transport testing tools, retail equipment, or cannabis goods over land to another facility or location, inland marine insurance would insure them from possible accidents. The road is a dangerous place and you want your stuff protected.


When you’re aware of all the worst-case “what ifs?” you have a leg up to continue doing business with peace of mind. Knowing what could possibly go wrong means you’re likely more careful and thoughtful in how you work. When you run a cannabis business, you need a business plan that includes cannabis insurance that is going to offer you the coverage you need to protect against any possible liability claims. To learn more about Cannabis Insuranceand the other types of coverages Insurance Canopy has to offer, visit us. Download the free eBook, Beginner's Guide to the Cannabis Industry

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