Challenges with cannabis product liability capacity: Panel

Increases in product liability capacity for the cannabis industry and related companies remain elusive amid a patchwork of regulation, speakers said at the Business Insurance cannabis webinar on product liability Wednesday.

As cannabis companies and their suppliers adopt more traditional and stringent risk management techniques, the hope is that the insurance industry will respond, they say.

“The simple fact that our products come into contact with THC and CBD products adds an additional layer of risk,” said Arun Kurichety, executive vice president, general counsel for KushCo Holdings Inc.

KushCo supplies companies with packaging and other products and says adequate product liability insurance capacity is “a problem now and for the foreseeable future.”

The patchwork of state and local regulations adds further uncertainty and makes securing product liability coverage for the cannabis industry supply chain all the more complicated, he said.

Federal legislation would introduce uniformity and add a level of certainty, he added.

“As we understand the laws and get more certainty, I think that certainty will lead to carriers being more comfortable,” he said.

More robust risk management techniques could also bolster the cannabis industry’s position with insurers.

Rocco Petrilli, chairman of the National Cannabis Risk Management Association, spent decades in risk management in the automotive supply chain industry.

“I certainly believe one of the reasons I entered cannabis is that cannabis can learn a lot from the risk management and SOPs (standard operational procedures) that automotive companies use,” he said, such as track and trace, which documents the origin and details of every part of the supply chain.

Controlling both incoming and outgoing information is imperative to product liability. “Being able to as specifically as possible tie down the source of the variability” is absolutely vital to protecting yourself in product liability, he said.

Mr. Petrilli is also a strong advocate for the use of both in-house and third-party testing in quality-control procedures, using one to verify the other.

One aspect of risk mitigation, according to Tom Lewandowski, principal and toxicologist, Gradient Corp., is that manufacturers should not assume that consumers will follow product guidances.

Most CBD and THC products have what he called “modest” or “reasonable” concentrations of the active ingredients, but the potential for “misuse” is where the problem may lie.

“It’s really people needing to follow the directions and manufacturers understanding people don’t always do that,” Mr. Lewandowski said.

He added that amid the “explosion” of THC and CBD products ranging from skin creams to edibles, it may be logical for manufacturers to assume that a consumer may be using more than one such product at a time, increasing the potential for misuse.