One of our insurance carriers increased the price by 15% for a cannabis manufacturing company. The increase in premium will also mean underwriting by insurance companies is about to become even more cumbersome.
Insurance carrier removes coverage for vitamin e acetate
Even more interesting, the insurance carrier has added vitamin e acetate to the list of ingredients now being excluded or not covered if a claim or lawsuit was to be filed. This ingredient has been identified by the New York State Department of Health as being linked to those individuals experiencing illness.
A recent product recall by Medicine Man identified vitamin e acetate as a ingredient they did not want their customers consuming.
Vitamin E Acetate Product Liability Coverage Removal
Voluntary Product Recall for Vape Pens by Colorado Cannabis Licensee
Medicine Man Pulls Vape Products with Propylene Glycol or Vitamin E Acetate Off Shelves
Colorado based Medicine Man issues press release removing vape pens off their shelf if ingredients include propylene glycol or vitamin E acetate
Voluntary recalls might be a covered loss on certain product liability insurance policies.
Recalling a product will not typically jeopardize the indemnification provision in most product liability policies.
In a press release, Colorado based cannabis licensee Medicine Man is removing all vape products containing the ingredients propylene glycol or vitamin E acetate. Vitamin E acetate has been identified by the New York State Department of Health as being linked in their investigation with victims suffering health consequences.
Product recall covered by insurance?
From a insurance and risk perspective, Medicine Man is taking the prudent step to reduce their potential liability exposure by removing product for sale, if indeed these ingredients are linked to the national health risks associated with vaping.
A “product recall” is typically defined in most product liability insurance policies. This definition will help determine the type of recall being performed and how the policy may respond. For example, some policies define product recall based on notification from an authorized government entity versus a voluntary recall.
Depending on the cannabis product liability insurance company, the costs covered for a recall may include notification, transportation, and disposal of product depending on the policy wording.
Does a product recall jeopardize my liability protection?
Not typically. A product recall demonstrates being proactive and reducing liability for the licensee and insurance company. Most reasonable insurance companies will view these actions as mitigating your risk exposure.
If it is determined vitamin e acetate is responsible for the health problems, then cannabis licensees should begin analyzing the many risk factors such as any potential legal basis of the claim or lawsuit, types of damages, other parties involved, and how their insurance carrier might respond based on the policy wording.
Deaths and Respiratory Issues from Vaping Devices will cause Insurance Carriers to Contemplate Product Liability Coverage
Could the Use of Cannabis Vaping Devices be the Next Wave of Insurance Claims?
Today, the California’s Cannabis Industry Association (CCIA) issued a statement responding to recent respiratory issues caused by vaping devices. There have been 60 reported cases in California, but no cases have been associated with products purchased from California cannabis licensees. There has been one death in California according to SF Gate.
The CCIA may be responding to a recent death that occurred in Oregon connected to a cannabis device purchased from an Oregon cannabis licensee. The Oregon Health Authority issued a statement on September 3, 2019 indicating the following:
Investigators at the OHA Public Health Division say they received reports that the individual, who died in July, had recently used an e-cigarette or vaping device containing cannabis purchased from a cannabis dispensary.
This investigation is ongoing, but may be the first death linked to a cannabis vaping device purchased from a licensee in the history of the United States.
Source: New York Department of Health
The State of New York has also insured a warning to the public. Their focus is on unregulated cannabis devices bought in New York illegally with preliminary indications of high levels of vitamin E acetate.
Laboratory test results showed very high levels of vitamin E acetate in nearly all cannabis-containing samples analyzed by the Wadsworth Center as part of this investigation. At least one vitamin E acetate containing vape product has been linked to each patient who submitted a product for testing. Vitamin E acetate is not an approved additive for New York State Medical Marijuana Program-authorized vape products and was not seen in the nicotine-based products that were tested.
The State of New York has provided product images from black market devices that can be viewed here.
Expect Product Liability Insurance Carriers to Take Immediate Action through Policy Modifications
The cannabis insurance industry will likely evaluate the potential impact of these events on products being offered and bought by licensees. At this stage it would appear vitamin E acetate has been isolated with illegal cannabis vaping devices. If the product purchased in Oregon has the same ingredient, then insurance carriers might not react as quickly.
The type of insurance most likely to pay for claims and lawsuits is product liability coverage. These policies were designed to provide liability protection for cannabis products like vaping devices when they enter the stream of commerce and consumed by a third party.
If a respiratory illness or death was to occur using a cannabis vaping device, then insurance of this nature will respond to any claims or lawsuits that could arise. These policies offer starting limits of $1,000,000 with legal defense included for bodily injury damages. The respiratory illness or death would fall under the category of bodily injury as defined by the policy terms.
The Oregon death related to a cannabis vaping device could trigger the few product liability carriers to immediately modify their policy terms through an exclusion to eliminate this threat or cause certain insurance carriers to exit the industry. That exclusion may be a simple removal of vitamin E acetate also known as alpha-Tocopherol acetate or Tocopherol acetate to an outright ban on any type of vaping device.
Cannabis licensees should review their product liability insurance coverage
Determine if you have product liability insurance. Most commercial general liability policies will remove the coverage. The insurance term to indicate coverage is typically “Products & Completed Operations.”
If you have product liability insurance review if vape pens or vaporizing devices are excluded on your policy or included on your list of products to be covered. This modification is most likely to show up as a separate page and might require a review from your attorney.
Cannabis Product Liability Policy Comparison Includes Coverage for RICO, MOLD, and Asbestos
Source Stephen Jones Twitter @CannabisBroker1
Cannabis Product Liability Policy Comparison Includes and Excludes Significant Coverage Issues
A tweet posted by a California insurance broker (Stephen Jones@CannabisBroker1) caught our attention due the level of detail being advertised from a Product Liability Policy Comparison. The graphic provides specific contrast of possible product liability coverage due to a specific cause from six different cannabis insurance companies.
The product liability policy comparison included insurance companies Continental Heritage, CannGen, Golden Bear, James River, Kinsale, and Conifer. With the exception of Continental Heritage, we are aware of the remaining insurance companies offering product liability insurance to the cannabis industry.
One Insurance Carrier Breaks Away from the Pack
Continental Heritage appears from the graphic to include coverage for claims related to Racketeer Influenced and Corrupt Organizations Act (“RICO”), Mold, Fungi, Bacteria, Asbestos, Silica, and Lead. Furthermore, Continental Heritage includes coverage for Mental Illness, Cancer, Birth Defects, Heart Disease, Communicable Disease, Respiratory Disease, and Cannabis Intoxication.
Admitted monoline Products Liability Insurance specifically for the cannabis industries in CA & NV.
Coverage Highlights – Scheduled Cannabis, Hemp and CBD Products – Defense outside of limits – Covers injuries stemming from intoxication, impairment – Includes vapor cartridges pic.twitter.com/08ywZA7qBt
Outdoor Cannabis and CBD Crop Insurance Becomes Available
Insurance Company Offering Protection for Outdoor Plants
In the history of cannabis insurance there has never been a insurance company willing to offer coverage for cannabis plants growing outside. Think about it, the chances of something going wrong due to weather or criminals seeking an easy target had scared off most insurance companies. Indoor crop insurance has been available from approximately two companies knowing those plants are protected by four walls, video, alarms, and gated windows.
However, the thought of offering outdoor crop insurance was unheard of until now.
The insurance industry is conservative my nature. The availability of outdoor crop insurance is considered a giant leap forward for both the cannabis and insurance industry. There are many variables analyzed by actuaries attempting to quantify if a program of this nature will be viable long term. Those variables include understanding the numerous hail storms that occur in Colorado. That California is subjected to many wild fires. Washington State can experience flooding and wind damage. Knowing an insurance company analyzed these types of risk was the last frontier in cannabis insurance to be conquered.
Of course, there are coverage limitations meaning how much the insurance carrier is willing to cover along with underwriting requirements particularly focused on the security of those living plants, water availability to combat a fire, and brush clearance surrounding the property. These are reasonable expectations every outdoor cannabis farmer should be incorporating even if insurance wasn’t involved.
The coverage limits offered by the insurance company are more generous on cannabis (THC) as opposed to Hemp (CBD). The reason seems to point toward the lack of regulations within CBD industry. The types of covered losses such as fire, theft, and hail should be carefully reviewed along with specific exclusions with a licensed insurance broker specializing in the industry.
How will the insurance carrier determine the value of my outdoor plants?
The application has a designated area to determine values based on the stage of the plant. These stages such as seedlings, vegetative, flowering, and harvested can be insured in “layers” of coverage amounts.
For example, the number of flowering plants multiplied by the wholesale value will equal total plant value. If a cannabis grower had 1,000 flowering plants valued at wholesale at $500 per plant, then the insurance coverage amount would be $500,000. The value of seedlings is less than the value of harvested plant material.
Knowing the wholesale value of those plants will fluctuate, it will be important for the cannabis grower to be certain their limits will sufficiently protect them from a loss.
Need a quote for your outdoor crop insurance?
Outdoor crop insurance is now available! For more information, please complete this online inquiry if you have interest in obtaining further information.