This article was produced in partnership with Amwins Group.
Gia Snape, of Insurance Business America, sat down with Norman Ives, broker and life sciences specialist with Amwins Brokerage in Los Angeles, about cannabis intoxication liability, an emerging risk for businesses spurred by the expanding availability of THC products in consumer markets.
From edibles and vapes to marijuana-infused colas and cocktails, the cannabis industry is seeing a surge of innovation as legalization broadens and more US consumers embrace cannabis. The passage of the Farm Bill in 2018, which legalized the regulated production of hemp, has also helped accelerate the market’s growth.
Cannabinoid-based products, such as those made with THC and CBD, are increasingly consumed outside traditional venues. While the growing availability of these products bodes well for the industry, businesses that serve cannabis products are increasingly exposed to liability from cannabis intoxication.
“We’re seeing a proliferation of low-dosage THC drinks being available to the general public outside of a dispensary environment,” said Norman Ives (pictured), broker and life sciences specialist with Amwins brokerage in Los Angeles.
“As little as three to five years ago, the opportunity to consume cannabis in a commercial space was limited to dispensaries. It was primarily seen as a way to give tourists and those who cannot consume at their residences legal options to consume. Today, with broadening social acceptance of cannabis, we are seeing these products available in a wider variety of places and social settings.”
Cannabis intoxication liability mirrors the well-known concept of liquor liability. Businesses with the highest exposure to cannabis intoxication liability include bars, taverns, and entertainment venues.
“If a venue over-serves cannabis products to an individual, and it is deemed to be the reason that a loss happened, that business owner could be held liable for those losses,” Ives said.
The liability could even extend to cannabis industry events, such as conventions.
“During afterparties at conventions and events, you might give out free products and allow sample consumption,” Ives continued. “There is a very real impairment liability exposure that people aren’t aware of, and there is potential for a promoter or a venue owner to get pulled into some claims activity that they may not be prepared for.”
The nature of THC consumption varies from person to person; what might be a mild dose for one person could have significant effects on another. This variability in tolerance levels underscores the complexity of managing cannabis intoxication risk for businesses.
So, where does this leave business owners in terms of risk management? Awareness is the first step in mitigating potential exposures. Ives urged businesses serving THC products to be aware of the coverage gaps in their current insurance policies and be proactive about understanding and addressing cannabis liability.
“Chances are your event insurance does not cover cannabis intoxication. It probably has some fairly stiff rules around liquor impairment as well,” he said. “Cannabis intoxication needs to be another consideration, particularly in states that allow on-site consumption at venues.”
In terms of coverage options for cannabis intoxication liability, the market is still evolving. While some carriers are willing to consider this risk, participation remains limited.
However, Ives anticipates more carriers entering the market and providing a broader range of options for businesses seeking coverage.
“It really depends on the nature of the risk,” he said. “But carriers are getting more comfortable with the cannabis industry segment and looking for opportunities to expand their coverage offerings.”
The limited coverage options for cannabis intoxication liability mean it’s imperative to work with experienced wholesale brokers who can navigate the market. Ives noted that carriers want to know about an insured’s risk control processes for serving cannabis products.
“It’s a complex submission process,” he said. “Finding good options will require some work with a skilled broker.
“Because it’s an emerging segment, there are not many good supplemental applications. So, you need to research the risk and understand your client’s operations.”
A number of carriers are open to monoline coverage or coverage extension from an existing policy for dispensary operations or a licensed cannabis lounge, according to Ives. Partnering with wholesale specialists like Amwins can help retail agents add value in placing cannabis impairment liability coverage.
