Insurance Coverage for Hemp, CBD and Vaping Far from monolithic, the “cannabis industry” comprises many different products in addition to those containing tetrahydrocannabinol (“THC”). Today, it CBD Insurance: Why CBD Businesses Need It for Product Liability Companies in the cannabis and hemp space that don’t take out CBD insurance coverage could face serious financial and legal CBD Product Liability Insurance – Product Liability Insurance for CBD Rated #1 in the US. CBD Product Liability Premiums Start under $2,400 a year.
Insurance Coverage for Hemp, CBD and Vaping
Far from monolithic, the “cannabis industry” comprises many different products in addition to those containing tetrahydrocannabinol (“THC”). Today, it also includes “hemp,” which is no longer a Schedule I controlled substance in the United States, as well as products containing hemp-derived cannabidiol (“CBD”). CBD vape oils, pens, and cartridges are particularly popular. Companies doing business in these three markets (collectively, the “Hemp/ CBD Market”) face many challenges – some of which are unique to this space, and others of which are no different than those faced by any business in any industry. Regardless, insurance can help mitigate those risks.
While not always as difficult as obtaining insurance coverage for state-compliant but federally illegal “marijuana” operations, securing insurance for a hemp-, CBD-, and/or vaping-related business is not without unique challenges. To start, these businesses too must fully appreciate the particular risks and potential liabilities they face. Moreover, not every commercial insurer will insure such businesses. And, those that will cover them may offer policies containing exclusions that negate or limit the desired coverage. If and when a first-party loss or a third-party claim occurs, an insurer may then refuse to provide the coverage for which the policyholder already paid.
With a deep understanding of insurance coverage law; the cannabis industry broadly; hemp; CBD; and the differences between marijuana, hemp, and CBD, Leech Tishman’s attorneys are uniquely situated to help policyholders of all sizes navigate and overcome these industry-specific challenges.
Marijuana, Hemp, and CBD in the United States: A Brief Legal Overview
The U.S. Agriculture Improvement Act of 2018, also known as the “2018 Farm Bill,” expressly removed “hemp” from the definition of “marihuana” in the U.S. Controlled Substances Act. That definition no longer includes not only “hemp” but also no longer includes “the mature stalks of such plant, fiber produced from such stalks, oil or cake made from the seeds of such plant, any other compound, manufacture, salt, derivative, mixture, or preparation of such mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of such plant which is incapable of germination.”
According to federal law, “[t]he term ‘hemp’ means the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.”
Although no longer a Schedule I controlled substance, hemp and hemp-derived CBD products are still subject to federal and state regulation. For example, pursuant to the U.S. Federal Food, Drug, and Cosmetic Act, it still is not legal to include CBD in food and beverages.
Insurance Policy Review, Placement, and Counseling
When reviewing, purchasing, or renewing an insurance policy, a deep understanding of insurance coverage law as well as of the Hemp/CBD Market is critical. Depending on the nature of one’s CBD-containing products, issues attendant to federal illegality can still arise, limit the available insurance market, and complicate the process. Even when it comes to entirely federally legal products, education is often required to explain the nature of the policyholder’s business and/or the legal and scientific difference between “hemp” and “marijuana.”
Moreover, like any business, a policyholder doing business in the CBD/Hemp Market must first consider its business model, related risks, potential liabilities, and applicable state regulations. Once it has identified those risks, potential liabilities, and legal requirements, the policyholder can then determine the specific coverages it needs.
Those coverages may include, but are not necessarily limited to, one or more of the following:
- Builder’s Risk
- Commercial Auto
- Commercial General Liability
- Cyber Liability
- Directors and Officers’
- Employment Practices Liability
- Environmental/Pollution Liability
- Product Liability
- Product Recall
- Professional Liability/Errors and Omissions
- Property/Business Interruption
- Workers’ Compensation
Leech Tishman’s attorneys can help identify a business’ coverage needs. We can also perform policy reviews to determine whether there are any gaps in existing coverage and, if so, how best to fill them. Further, we can work with policyholders (and their insurance brokers) to vet policy proposals and quotes and to review specimen insurance policies and proposed policy language.
Policy language matters, especially in this space. For example, consider the following definition of “cannabis” in a policy form that purports to exclude coverage for “cannabis” but not for “goods or products containing or derived from hemp”:
“Any good or product that consists of or contains any amount of Tetrahydrocannabinol (THC) or any other cannabinoid, regardless of whether any such THC or cannabinoid is natural or synthetic.”
Of course, CBD is a “cannabinoid.” Worse still, that policy also defines “cannabis” specifically to include, in relevant part, “[a]ny compound, byproduct, extract, derivative, mixture or combination, such as … [h]ash or hemp.” As such, the definition of “cannabis” could be read to swallow the exception for “hemp.” Such imprecise language – that may lead to ambiguity or at least to unnecessary confusion – should be avoided, if at all possible.
Additionally, insurance policies should be carefully reviewed to make sure that they do not contain problematic exclusions, or at least so the policyholder understands the extent and effect of any such exclusion. For example, there are different types of vaping exclusions. One exclusion may preclude coverage for any vaping-related loss or claim, while other exclusions may be tied only to vaping products from certain countries or certain suppliers. Even if it is not possible to negotiate or manuscript policy language, it is still important to purchase insurance with “eyes wide open.”
Any policyholder doing business in the Hemp/CBD Market must proceed with caution. Today, more and more businesses are entering this market. Hemp growers are sprouting up across the country. Retailers are selling all sorts of CBD products. Even beverage companies are considering including CBD in their products (for sale domestically and/or internationally). As businesses move into this new space, they cannot and should not just assume that the insurance coverage they already have in place will protect them in the event of a hemp-, CBD-, and/or vaping-related loss or claim. They must carefully review the policies they already have in place and that they plan to purchase or renew to make sure that there is no problematic exclusions or other coverage-defeating policy language.
Like any other business in any other industry, businesses in the Hemp/CBD Market are not immune from first-party losses or third-party claims. Fires, exploding vape pens, mislabeling claims, product recalls, a pandemic, and more have already negatively affected businesses in this market.
When any business experiences such a loss or claim, it is important that the business be prepared and know what to do. Leech Tishman’s experienced insurance coverage and cannabis counsel can help. We can assist a business review its insurance policies to determine which one(s) should respond, provide notice to its relevant insurer(s), and comply with other contractual obligations. We also can assist the business document, quantify, and mitigate its losses and/or damages.
Unfortunately, regardless of a policyholder’s business, insurance companies may deny coverage or issue complicated reservation of rights letters. They may ask continual questions or seek endless documentation. When the affected policyholder does business in or with the Hemp/CBD Market, the insurer’s coverage position(s) and/or information requests may be more complicated or fraught with additional peril. Our attorneys are skilled in understanding and responding to insurers’ coverage correspondence and coverage positions. We know when and how to push back to make sure that every policyholder gets the full benefit of the coverage it purchased.
Coverage Litigation & Other Dispute Resolution
Although we work diligently with our clients to resolve disputes with insurers out of court, sometimes that is not possible. As such, to secure the insurance coverage they purchased and expected, policyholders, at times, must pursue litigation, arbitration, mediation, or some other form of alternative dispute resolution. Our attorneys have experience litigating complex insurance coverage claims against many different insurance companies in federal and state, as well as trial and appellate, courts across the country.
Although the outcome of such litigation may turn in large part on traditional insurance coverage-law principles, it is important to retain counsel who not only understands insurance coverage law but who also understands the nuances of the Hemp/CBD Market. To achieve the best results for the policyholder, it is imperative that counsel be able to apply those general legal principles to specific industries and businesses. Leech Tishman’s attorneys are uniquely familiar with both insurance coverage and this market, including relevant federal and state law and public policy.
Risk Mitigation, Transfer, and Allocation
In addition to procuring insurance, there are other ways that businesses in the hemp, CBD, and/or vaping space can work to mitigate their risk. For example, as part of a supply agreement, lease, or other contract, a business can include certain indemnification provisions. It can also require the other party to the contract to maintain certain types and amounts of insurance. Leech Tishman’s attorneys are well-versed in drafting and analyzing such contractual provisions, and we routinely counsel clients – including ones in the Hemp/CBD Market – about various risk mitigation, transfer, and allocation mechanisms.
CBD Insurance: Why CBD Businesses Need It for Product Liability
Companies in the cannabis and hemp space that don’t take out CBD insurance coverage could face serious financial and legal repercussions.
Unforeseen events and circumstances, such as the hail storm that recently caused $25 million in damage to hemp crops across Central Oregon and the unexpected rise in insurance prescription claims that ate into 21% of Progressive Care’s net gross margins reported for 2019, can seriously impact a business.
With this in mind, don’t ignore the importance of seeking out a reliable provider of CBD insurance.
CBD — or ‘cannabidiol’ as scientists like to call it — is cropping up everywhere as of late, from pharmaceutical shelves and beauty cabinets to organic restaurants and even pet stores.
CBD is one of at least 113 cannabinoids that have been isolated from the cannabis plant.
The CBD industry is on track to earn the global economy $2.3 billion by 2025.
Interestingly, CBD can also be extracted from the hemp plant in copious quantities; a fact that has stirred up quite a predicament amongst business owners who want to abide by the law, but feel perplexed by CBD’s hazy legal status.
As demand for CBD-containing products continues to flourish, so too does the need for CBD product liability insurance coverage.
The complexities surrounding CBD legalities have left business owners in the dark about how to navigate the industry’s murky waters.
‘Cannapreneurs’ who advertise and sell CBD-based products, whether it is online, offline or both, simply must obtain CBD product liability insurance in order to shield their company from legal and financial pitfalls.
The FDA Will Not Tolerate CBD Health Claims
Nowadays, CBD is just as well known as its psychoactive cousin THC (tetrahydrocannabinol). After all, the naturally-occurring chemical compound has emerged as a therapeutic powerhouse, minus the mind-altering effects associated with THC.
In June 2018, the Food & Drug Administration (FDA) even went as far as to approve Epidiolex — the first ever cannabinoid-based epilepsy medicine to be approved by the FDA.
However, there is a serious lack of studies and clinical trials on humans to support the emerging forcefield of health claims being used by CBD marketers in an attempt to lure in customers.
CBD companies are forbidden from claiming that CBD can “diagnose,” “cure,” “treat,” “mitigate,” or “prevent” medical conditions like Alzheimer’s disease, anxiety, cancer, Parkinson’s disease and schizophrenia.
“Science forms the basis for decisions at the U.S. Food and Drug Administration (FDA) and is paramount when it comes to making decisions that will impact the health and safety of the American public,” reads an official statement published on the FDA’s website.
In spite of the Agency’s warning, many companies have not been discouraged from making claims that they are unable to prove. Take leading medical cannabis health and wellness operator Curaleaf, for example. The company was recently warned to remove all CBD health claims from their website and social media by the FDA.
A proactive compliance strategy will help protect you from FDA enforcement. So let us guide you through the legalities associated with selling cannabinoid-enriched products and enlighten you on the sheer importance of taking out a CBD liability insurance policy.
Why CBD Insurance Is a Necessity for Product Liability Claims
A long list of businesses fall into the high-risk category, including:
- online gaming services,
- vaping/e-cigarette companies,
- and the adult toy industry, to name a few.
Since CBD is a compound that is produced in abundance by marijuana and hemp, it is inevitable that product claims may surface in the nascent CBD industry. This is a direct effect of the confusion that ensued following the passage of the Agricultural Improvement Act of 2018, better known as the 2018 Farm Bill.
In December of last year, President Donald Trump’s signature effectuated the law, which removed hemp from the definition of marijuana under the Controlled Substances Act of 1970 and officially recognized the non-psychoactive plant as an agricultural crop.
This meant that instead of putting the Drug Enforcement Agency (DEA) in charge of overseeing crop regulation, the duty was instead bestowed upon the U.S. Department of Agriculture (USDA). The Farm Bill however preserved FDA’s authority.
Ultimately, this led some lawyers to make claims about CBD’s legal status, with many falsely claiming that products containing the non-psychotropic cannabinoid could be shipped to any state without legal repercussions. According to the FDA, those attorneys stand to be corrected. A recent statement published by the FDA clarified this by informing the people of America that the agency maintains the right to regulate all CBD products, even those derived from hemp.
“We recognize the potential opportunities that cannabinoids could offer and acknowledge the significant interest in these possibilities. We’re committed to pursuing an efficient regulatory framework for allowing product developers that meet the requirements under our authorities to lawfully market these types of products,” reads a statement from former FDA commissioner, Scott Gottlieb.
The importance of CBD product liability insurance cannot be ignored at such a fragile time. Although many industry analysts and a handful of pro-cannabis politicians remain hopeful that federal cannabis legalization will ensue in 2020, existing federal restrictions on cannabis are stirring up smoke clouds of confusion among buyers and sellers.
You can safeguard your business by browsing CBD insurance companies for a policy that suits you.
What Is CBD Product Liability?
Rapid expansion of the CBD and hemp industries is prompting an elevated need for product liability insurance.
Without the assistance of an agent who is well-versed on the ins and outs of the industry, you may fall victim to a claim that could seriously damage your reputation as an industry seller, not to mention cause you financial implications.
Just because CBD product liability insurance was created specifically for companies operating in the marijuana and hemp space, it is no different than regular product liability insurance. In basic terms, CBD product liability insurance comes in handy when a consumer feels as though he or she has been harmed by a faulty product. The insurance coverage can be used to shield suppliers, producers and/or manufacturers when a claim of this kind is made.
4 Product Claims that CBD Companies Should Be Prepared For
In June 2018, British company GW Pharmaceuticals went down in history as the first ever drug company to gain FDA approval for a CBD-containing product.
GW Pharma’s medicine Epidiolex was specially developed to aid patients two years and older who suffer from two rare types of epilepsy: Lennox-Gastaut and Dravet syndrome. The cannabinoid-based product is the only one to receive FDA approval so far.
Aside from Epidiolex, no other CBD medicines or treatments have been approved by the FDA. This means that any unsubstantiated health claims will be taken very seriously. Let’s find out what product claims should be avoided to sidestep legal backlash.
1. Ingestible products.
Although it is suitable for ingestion, CBD reacts differently for each person depending on their specific biochemistry, genetics, gender, weight and so on.
This puts certain individuals at risk of experiencing unwanted side effects or allergic reactions if they take the wrong dose. Claiming that “one-dose-fits-all” is not recommended and could land you in serious trouble with the FDA. Contaminants can also impact health, which is why CBD products must be produced in accordance with regulatory rules.
According to federal policy, adding CBD to ingestible food products is not allowed. Doing so without authorization is deemed to be just as serious as adding prescription drugs to food products. When health and/or therapeutic benefits are made about CBD, the CBD product could be subject to regulation as a drug.
2. Topical products.
Some of the biggest national retailers, like Walgreens, Rite-Aid and CVS, have recently announced that they will start stocking store shelves with a range of CBD-infused cosmetic products.
The global cosmetics market is expected to be worth $805.61 billion by 2023 and, by adding an ingredient like CBD to the mix, the market is predicted to reach new realms of success.
However, insurance claims have surfaced in the past pertaining to contaminants and allergic reactions caused by topical CBD products, which may be applied directly to the skin for localized relief from pain. Once again, it is against the law to make unproven health claims due to the fact that the FDA has not yet given cannabis-derived compounds like CBD the go-ahead for use in animals, let alone humans.
Until the safety and effectiveness of topical CBD solutions are confirmed with clinical trials on humans, CBD business owners should not claim that their products can be used to relieve the symptoms of specific ailments, such as psoriasis, arthritis or chronic pain.
3. Medical claims.
Don’t do a disservice to your company by making medical claims about CBD products that could essentially prevent individuals from visiting a licensed doctor for professional treatments.
Although scientific research has spotlighted CBD’s potential benefits as a therapeutic aid in recent times, making such claims could get you penalized by the FDA.
4. Legal disputes.
Don’t fall into the trap of having to attend court to fight your case in the instance that a CBD product was shipped from your company in one state to a state with different laws.
Since CBD can be derived from the marijuana, which is still federally illegal, it is important to clearly stated that your product is derived from legal hemp.
According to the Controlled Substances Act (CSA), marijuana is still classified as a Schedule I drug and is said “to have no currently accepted medical use in treatment in the United States”.
Many scientists, consumers and advocates would beg to differ, but it doesn’t change the fact that cannabis is still a controlled substance and, until federal law changes, legal disputes will inevitably arise.
Ready to take the next step toward CBD ecommerce success?
CBD merchants face unique challenges when it comes to ecommerce. Download our guide to see how you can overcome them and begin to grow your CBD business online.
Areas of Expertise Focused on by CBD Product Liability Insurance Providers
“There are many unanswered questions about the science, safety, effectiveness, and quality of unapproved products containing CBD,” says the FDA’s new Commissioner Dr. Ned Sharpless.
CBD companies should take Sharpless’ comments into account and prepare for the possibility of product liability claims arising. Being involved in this industry puts one at risk of general liability, product liability and theft.
With that being said, let’s delve into the ways CBD insurance can help you to mitigate risk:
1. Risk management/aversion.
Cannabinoid-containing products are deemed to be a high risk due to their strict regulation by the FDA.
The changing winds of the CBD industry makes it tricky to stay abreast of the ever-changing legal landscape, which is where a CBD insurance company comes in handy. With guidance from advisors who possess industry knowledge, you can avoid publishing misleading information pertaining to the products your business sells.
2. Legal fees.
Nobody wants to be sued as a result of conducting unlawful business practices, but it’s all too easy to slip up in the CBD industry and often, many business owners do it without even realizing that they’ve made a mistake!
This is why you need hemp/CBD insurance coverage, which will usually cover the costs of legal fees and damages.
Consider it a shield that will protect you from the potentially devastating legal costs incurred by an unexpected claim. CBD insurance companies will provide compensation for lawsuits, whether the lawsuit is related to injuries sustained by employees in the workplace or issues that have arisen as a result of the products manufactured, distributed or sold in your ecommerce store.
In the unfortunate event that you are held liable in an unexpected court case, ask yourself if you would be capable of settling the case outright.
Of course, the answer to this question depends entirely on the situation at hand and the legal costs incurred.
Nonetheless, it is a risk that is definitely not worth taking. When you take out general liability insurance for your CBD business, you can rest assured that the legal costs will be covered by your insurance provider.
Keep in mind that the level of coverage depends on the provider and the type of policy you choose.
For the best level of protection, seek out a policy that covers the cost of claim adjustment expenses, court costs, compensation — however much is awarded to the plaintiff by the court — and the all-important lawyer fees.
The Two Main Types of CBD Insurance
Taking out CBD insurance coverage from a trusted provider is a necessity for business owners who want to avoid paying excessive costs to cover legal damages, should they be taken to court, have a claim filed against them or endure damages to company assets/stock.
Highlighted below are two of the main types of CBD insurance available:
1. Product liability coverage.
No matter how safe you are when conducting business practices, there is a chance you may unknowingly hurt consumers.
CBD consumers could suffer as a result of false health claims and/or defective products. In turn, the company that has a claim filed against them will also suffer, proving the importance of taking out adequate product liability coverage.
Product liability issues are a hot topic in the CBD industry right now, with an increasing number of claims being made against companies who have violated the terms of Proposition 65 – a law originally passed in 1986 that requires companies with 10 employees or more to clearly state what carcinogens and reproductive toxins (if any) are contained in their products
You can avoid being penalized for breaking the law if you integrate robust testing protocols into everyday business practices. This is especially important for product manufacturers, who could be faced with a lawsuit if they distribute CBD oils and related products that are contaminated or mislabeled.
Be extra prepared by taking out CBD product liability coverage. This type of CBD insurance will cover the costs incurred when a product claim is filed. Moreover, the insurance agents you work with will be able to point you in the right direction to ensure you don’t make the same mistake twice.
2. General liability coverage.
This type of CBD insurance is part of the typical insurance system, regardless of what the insurance is being taken out for.
Coverage from a provider who focuses primarily on CBD industry clients will safeguard you and your business from liability risks associated with angry claims and lawsuits.
CBD general liability insurance will usually cover advertising damages, third-party personal injury and third-party property damage. Whatever role you assume as a CBD business owner, whether you are a retailer, wholesaler, extractor or cultivator, you will greatly benefit from this type of insurance policy.
Misconceptions and confusion enshroud the CBD industry, so general liability insurance is absolutely essential. It covers pretty much every risk faced by CBD business owners, so I guess you could consider it an all-in-one solution for mitigating risk!
4 Trusted Companies Offering CBD Insurance
Since it is relatively new to the mainstream, CBD carries certain risks that business owners must be aware of.
According to Trupanion, pet-related CBD and hemp product claims have climbed 300% from 2017-2018, with data from the medical pet insurance provider revealing how the majority of claims against CBD companies are pouring in from Florida, New Jersey, New York and Washington.
If your CBD products do not fall under the pet category but rather, are for human use/consumption, the following CBD insurance providers can assist:
1. Castle Rock Agency.
CBD product liability insurance options are available from Castle Rock Agency for as little as $3,000.
Whether you require premises liability for a manufacturing, distribution or retail facility, you can put your trust in this CBD insurance provider to shield the wellbeing of you and your business.
New, startup and established businesses operating in the industry can apply for coverage in the following target classes:
- CBD-infused vape liquids.
- CBD-rich dietary supplements and nutraceuticals.
- CBD skin care.
- CBD oils and tinctures.
- CBD isolate.
- CBD animal products.
- CBD cosmetics.
- CBD topical gels, lotions, salves and creams.
- Concentrated forms of CBD.
- Hemp oils and related products.
- CBD-enriched drinks and drink mixes.
- CBD hair care products.
- Hemp-derived CBD edibles.
Primary insurance limits from Castle Rock Agency are available up to a maximum of $5,000,000, with excess limits of up to $20,000,000. Additional services are as follows, per the insurance provider’s website:
- Primary and noncontributory endorsement.
- Hired and non-owned auto insurance.
- Employment practices liability insurance.
- Blanket vendors additional insured endorsement included.
- Waiver of subrogation endorsement.
- Damage to rented premises insurance.
Customers can also select from the many CBD insurance options pertaining to product recall expense coverages.
2. Veracity Insurance.
Companies operating in the CBD and or hemp industries can also obtain coverage from Veracity Insurance.
Veracity’s team of helpful staff can aid you in your quest to find coverage with affordable minimum premiums, inclusive of product liability insurance, property insurance and crop insurance.
The minimum premium for topical CBD products is $2,500 and covers the following target classes, as per the company’s website:
- Baby skincare products.
- Beauty accessories.
- Essential oils.
- Hair care products.
- Perfume and body fragrances.
- Pre-made bases and materials.
- Skin care products.
- Spa supplies.
- Topical ointments.
- Topical products for animals.
The minimum premium for ingestible CBD products is $3,500 and covers the following areas:
- Ingestible supplements, vitamins, herbal or related products.
- Compounded and non-compounded herbs.
- Energy, protein and bodybuilding supplements.
- Body cleansers.
- Topical balms, salves and lotions.
- Weight loss products.
- Pet supplements.
- Nutraceutical products.
3. Insurance Canopy.
No matter where you reside or where you operate your business, Insurance Canopy will not disappoint. The CBD product liability and general liability insurance provider aims to turn around all quotes within 24–48 hours.
Eligible policyholders must sell topical CBD and/or hemp products that do not contain more than 0.3% THC when applying for coverage from this CBD insurance company, which prides itself on providing the following:
- $1 million occurrence.
- $2 million product liability.
- $2 million aggregate limits.
- In-house underwriting.
- Limits up to $50 million.
- Inland marine coverage.
- Hired/non-owned auto coverage.
- Employee benefits liability.
- Trade show coverage.
- Product withdrawal coverage.
Low minimum premiums are guaranteed for all coverage holders. Additional insured vendors endorsements are also included in the CBD insurance coverage you take out from this provider. With worldwide coverage and low deductible options on offer, it is well worth booking a consultation with Insurance Canopy to learn more about their services.
4. New Growth Insurance.
This well-respected CBD insurance company covers a wide range of scheduled cannabis, CBD and hemp products. It is their duty to defend and assist you in every way possible, from providing product withdrawal reimbursement of expenses, to making sure you don’t pay anything for waivers of subrogation or primary wording.
Multiple deduction options are available with New Growth Insurance, which provides commercial product withdrawal coverage approval for the following classifications:
- Cultivation (indoor and greenhouses).
- Management offices.
- Garden/hydroponic stores.
- $1,000 (only offered on $100,000 limits).
- $100,000 aggregate.
- $1,000,000 aggregate.
- $2,000,000 aggregate.
When it comes to running an online ecommerce business featuring an inventory that primarily consists of CBD products, it is imperative that you don’t step on the FDA’s toes.
Legislation enacted under the terms of the Agriculture Improvement Act of 2018 (Farm Bill) meant that the FDA maintains full responsibility over hemp derived products that are foods, dietary supplements, cosmetics, or drugs, among other products. The FDA’s stance on cannabis remain the same as is for any other substance.
Staying out of trouble in regards to advertising, marketing and selling ingestible or topical CBD products online is possible. CBD product liability insurance will be a valuable tool, but it does not prevent enforcement. Further, FDA warning letters are made public. Getting on the wrong side of the FDA can land you in serious trouble and tarnish all of your hard work. With some jurisdictions having outlawed CBD in its entirety, it really doesn’t hurt to be prepared.
Product liability insurance coverage could safeguard your finances and the livelihood of a business in this avenue, should a claim be filed regarding faulty design, manufacturing, instructions and warnings.
So, why not do something today that your future self will thank you for? We’ve provided the knowledge and tools you need to conduct safe ecommerce practices; now you just need to execute a CBD insurance strategy that begins with picking a provider.
Don’t be afraid to reach out for more information and, of course, share this post to enlighten fellow merchants of the rules!
This material does not constitute legal, professional or financial advice and BigCommerce disclaims any liability with respect to this material. Please consult your attorney or professional advisor on specific legal, professional or financial matters.
CBD Product Liability Insurance
The CBD business is a booming industry. With states passing legislation on the legalization of CBD products, in 2018 alone hundreds of new CBD products have come to market. To reach their full sales potential, they many need to appear in retail markets, pharmacies, and be added to web stores. Therefor, In order to do so or be properly protected from claims and suits CBD based companies need to have their CBD products protected. However, the best way to do so is with a CBD Product Liability Insurance policy.
Castle Rock Capacity Insurance Agency Currently offers Product Liability Insurance for the CBD industry including coverage for:
CBD Vape Liquids
Dietary Supplements & Nutraceuticals with CBD
Hemp Based CBD Foods, Snacks & Gummies
CBD Skincare Products
Oils & Tinctures with CBD
CBD Pet Treats & Animal Products
White Label Manufacturers of CBD Products
CBD Lip Balms & Cosmetics
CBD Topical Gels, Creams, Lotions, & Salves
Concentrated CBD Oils
Hemp Oils and Products
CBD Infused Drinks and Drink Mixes
Hair Care Products infused with CBD
CBD Contract Manufacturers
CBD Product Distributors
Is Product Liability Insurance for CBD Products Difficult to Obtain?
Not for us. Product Liability for several products are simple to obtain, however the CBD Hemp insurance market is much smaller and many insurance carriers will not entertain Product Insurance that for cannabinoids. Our list of carriers gives us access to Product Liability Markets many other brokers do not have access to.
Insuring your Cosmetic Products Insurance through us offers you optional benefits such as:
- Product Liability Coverage for new and start-up businesses
- Product Liability Coverage for oils, concentrates, skin salves, food products, topicals, and more.
- Premises Liability for your Retail, Distribution, and Manufacturing facility.
- Primary insurance limits are available up to $5,000,000, with excess limits up to $20,000,000
- Blanket Vendors Additional Insured Endorsement Included
- Waiver of Subrogation Endorsement Available
- Primary & Non-Contributory Endorsement Available
- Hired & Non-Owned Auto Insurance
- Employment Practices Liability Insurance
- Damage to Rented Premises Insurance
- Options available for product recall expense coverages
With Sales under $150,000 – General Liability Insurance Premiums may be as low as $1,000.00.
With sales under $1,000,000 Product Liability Insurance Premiums for Hemp Based CBD Products start as low as $2,000.
For Hemp & CBD based Cosmetics & Skincare products, Insurance premiums start under $2,100. click here for more info.
Who Should Have CBD Product Liability Insurance?
Anyone that is responsible for the design, manufacture, sale or distribution of a component or end user product. This applies to any business or individual that manufactures his own product. Even if the product’s manufacturing is subcontracted out to another operation, even if the operation is overseas. Keep in mind that in the event that your operation is not technically manufacturing the product, if you directly import the product, you are liable for it; if you designed the product, you are liable for it; if your name is on the product, you are liable for it.
What is the average cost of insurance for CBD, Hemp, or Cannabinoid Products?
Although we are typically asked this question, there is typically no “out of the box” price for the cost of insurance for a CBD products, so terms like typical, average, customary, standard, normal do not have any bearing. However, for Hemp Based CBD Products, Premium costs start under $2,400 per year for topical CBD products; and even under $2,500 a year for ingestible CBD products. Several factors come into play with regards to rating, such as; the nature of the product, the annual sales volume, your sales stream, the origin of the product. Also, your sales volume and limit of coverage also come into play. In the same way asking the average cost of a CBD product means little or nothing when looking at an oil or concentrate. Because no 2 products are the same, prices can vary greatly, the same applies to insurance, and the company purchasing it.
So… What Does CBD Product Liability Insurance Cost?
Product liability insurance costs for Cannabinoids are much like any other liability insurance product. So, no real “average” rate is applicable, because they are based on the specific type of product you manufacture, retail or market. Some products that pose very little potential to cause harm or damage. Others that have a higher propensity to be risky, and therefore carry higher premiums. We can tell you this, an entry level policy for a CBD can be as low as a few thousand dollars a year.
How is a Product Liability Insurance Policy Rated for CBD Companies?
A Product Liability Insurance Policy for CBD Companies is rated on several factors.
- If you are not manufacturing the product, does the manufacturer name you as an additional insured on their policy?
- What is the product you are insuring.
- How many of these products will be distributed into the market.
- What are they used for and who will be using them.
- How long are they intended to last.
- Who formulated them.
- What are the ingredients.
- Where are they manufactured.
- Who is manufacturing your product.
- How clearly defined are the usage instructions, directions and guarantees and or warranties.
- What claims does the manufacturer or distributor make about the product? Either in writing, demonstration or in media.
How much CBD Product Liability Insurance do I need for my CBD Company?
The amount of coverage required can vary, important factors to consider when shopping product liability insurance limits are: How much coverage do my vendors require me to have to stock my product? Also, What do I stand to lose if our company is sued? Because claims or allegations against cosmetic manufacturers can be severe or even more likely… FREQUENT. You may want to discuss your insurance requirements with vendors or an attorney before making any decisions.
In addition to product liability insurance for CBD companies, we also offer other coverages. Such as, Property Insurance, Directors & Officers, Workers Compensation, Inland Marine as well as a full suite of additional insurances.
See why we are rated #1 in the country by Big Commerce and Marijuana Business Daily.
Because every company’s offerings and operations are different, underwriting a products liability insurance policy for your product is complicated. If you need a quote for CBD / Hemp Product Liability Insurance Coverage, please complete a product liability quote request . Castle Rock Capacity Insurance Agency currently offers Product Liability Insurance Policy Coverage nationwide. Including but not limited to New York, NY. New Jersey, NJ. California, CA. Massachusetts, MA. Illinois, IL. Florida, FL. Connecticut, CT. Texas, TX. South Carolina, SC. Vermont, VT. Georgia, GA. Colorado, CO. New Mexico, NM. Oregon, OR. Washington, WA. Arizona, AZ. North Carolina, NC. Virginia, Nevada, NV. Colorado, CO. Oklahoma, OK, and Pennsylvania, PA in addition to all other states.
CBD Product Liability Insurance Coverage
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