Cannabinoid Hyperemesis Syndrome Illness Leaves Industry Wondering about Insurance Protection

Cannabis Customers Experience Abdominal Pain and Vomitting

We investigate the world of insurance to determine if product liability insurance would protect cannabis stores, growers, and manufacturers from Cannabinoid Hyperemesis Syndrome (“CHS”).   In case you’re unfamiliar with CHS, it apparently affects certain cannabis users causing nausea, repeated vomiting, abdominal pain, decreased appetite, and fluid loss. 

The people effected by this illness can end up in the hospital emergency room due to the vomiting. Does not sound like a fun illness to have especially if the person ends up with medical bills, out of work, and in rare cases seizures have apparently been reported.

Cannabis companies question if they have a potential liability 

We don’t have access to every insurance company offering product liability protection to the cannabis industry.  That is our disclaimer.  Therefore, we limit our review to insurance carriers typically represented by our office for these types of transactions. 

If you’re a cannabis licensee, the first task is to look at your current insurance policies to determine if you even have product liability. 

Why is this important? 

The insurance companies rely heavily on the policies they’ve produced when determining if a claim is covered. The adjusters in the majority of cannabis insurance claims will review the wording in the policy language to determine if coverage is available or not.

Most cannabis business insurance policies will exclude or remove coverage for “Products and Completed Operations.”  If you see this term excluded, then it means you have no coverage on that policy.   It might be prudent to determine if other policies exists because it may have been purchased separately.

 

Product Liability Exclusions on a PolicyThe insuring agreement is standard in every insurance policy. Its the insurance carrier’s acknowledgement of their agreement with an insured.  In this example, the insurance carriers are using standardized industry forms or policy language:

 

 

1. Insuring Agreement
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” included within the “products-completed operations hazard” to which this insurance applies.

The insured is the cannabis store, grower, or manufacturing company. 

The bodily injury in quotes means it has been defined or a specific definition exists within the policy.  For example:

2. “Bodily injury” means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.

It would be difficult for an insurance carrier to argue CHS is not a sickness.

Lastly we reviewed if the insurance policy excludes or removes coverage for CHS.  The word exclusion is a commonly used insurance industry term.  Many insurance claims are denied because of exclusions meaning no coverage.  Insurance companies will commonly specify their intention to exclude by creating a separate page from the main body of the insurance policy to indicate the level of importance.

Can I Expect Insurance Companies to Pay for CHS Claims?

Depending on the circumstances such as the claim and type of policy, CHS is likely to be covered on most product liability insurance policies.  The reason for our opinion is based on the insuring agreement, definition of bodily injury, and lack of any exclusions in the policies we reviewed.