Introduction – why product liability and recall are core risks
In the cannabis industry, the product is at the centre of everything. Patients and customers rely on accurate labelling, consistent potency and safe formulation. A small deviation in production, storage or labelling can quickly turn into a medical, regulatory and reputational event.
Cannabis product liability and recall insurance is therefore one of the central building blocks of any serious insurance program for cultivators, processors and brand owners.
The problem – why general liability cover is not enough
Many companies assume that a standard general liability policy will take care of product related claims. In reality there are several gaps:
- It is not always clear whether full product liability is included and at what limits.
- In most cases, the cost of a recall campaign is not covered at all under general liability.
- In cannabis, some policies exclude specific product types, formats or territories.
- Standard wordings are not designed for large batch events, class actions or regulatory driven withdrawals.
The result is that a company may have partial cover for bodily injury claims and almost no cover for the operational and communication costs of withdrawing a product from the market.
The solution – cannabis specific product liability and recall cover
A dedicated cannabis product liability and recall policy is built around two complementary pillars.
Product liability
This part of the cover responds when a third party claims that a cannabis product caused harm. It typically addresses:
- Bodily injury caused by ingestion, inhalation or topical use of a cannabis product.
- Property damage caused by the product.
- Defence costs, including lawyers, experts and other legal expenses.
Product recall
This part responds to the direct and indirect costs of removing a product from the market:
- Locating the affected batches and bringing them back from distributors, pharmacies or retail outlets.
- Destroying or otherwise treating the defective product in line with regulatory requirements.
- Communicating with customers, doctors and regulators.
- Public relations support and crisis management.
- Additional expenses linked to restarting operations and mitigating loss of revenue, where covered.
Illustrative scenarios
- Mold in flowers – After storage faults, mold is found in several batches of dried flowers. Some have already been shipped to pharmacies. Sales are stopped and a recall is initiated. Product liability responds to bodily injury claims, while recall cover funds the logistics and destruction.
- Mislabelled potency – A cannabis oil product is mislabelled with a lower THC content than the actual level. Patients unintentionally consume higher doses and some suffer adverse reactions. The company faces negligence claims. Product liability coverage pays for defence and settlement.
- Adverse reactions to a new product – A new topical cannabis cosmetic product reaches the market. Over time, a pattern of allergic reactions emerges. The company decides to withdraw certain batches and faces multiple claims. A properly structured policy helps the business navigate the financial impact.
Device incidents – A series of vape devices has a technical defect that raises safety concerns. The company decides to conduct a voluntary recall to avoid more serious incidents. Recall coverage supports the recall operation and communication
