MJBizMag February 2021 - 41

* Businesses that develop, make and
sell delivery devices, such as vape
pens or inhalers.
* Packaging companies.
* Testing laboratories.
* Retailers.
PRODUCTION STANDARDS
The easiest way to avoid product-liability
lawsuits, of course, is to design
and produce merchandise that meets or
exceeds your state's cannabis compliance
standards.
That means ensuring you've designed
and manufactured your products in
compliance with state or international
standards. And it means vetting
partners who supply inputs or delivery
devices-such as vaporizers-to ensure
their products comply with generally
accepted standards.
Examples include:
Cultivators: Growers should ensure
nutrient mixes, soils, pest-control
products and other supplies are safe for
their plants and products. Cultivators
also should make sure their cannabis
is contaminant-free-not only when it
leaves their facilities but also when it
arrives on retail shelves and is used by
consumers.
Manufacturers: Edibles makers
should regularly vet suppliers of biomass,
chocolate, emulsion formulas and other
ingredients to ensure they are safe. Manufacturers
also should test their products
to ensure they are contaminant-free,
their potencies are accurate and the
product is formulated in a way that
THC and other cannabinoids are evenly
distributed throughout.
Retailers: Store operators should vet
product suppliers and ensure that merchandise
such as vapes and edibles have
testing certificates. Vetting also should
involve reviewing a supplier's history
and checking its reputation with other
retailers.
While a number of cannabis
businesses continue to cut corners
when overseeing their supply chains,
the industry overall has improved in
this regard, Alderman
said. " As the industry
matures and consolidates,
as folks become more
sophisticated, I suspect
there will be a greater
level of diligence in
a company really
investigating its supply
chain, the practices of its
suppliers, the sourcing of
its raw materials and the
like, " he said.
Rachel Gillette
cannabis policies do have
pitfalls. Many insurers that
offer cannabis companies
policies provide subpar
service or often don't
pay out claims, thereby
undermining the trust
the marijuana industry
has in the insurance
industry, according to
Rachel Gillette, partner
and chair of the cannabis
law practice at Greenspoon
CLAIMS AND DISCLAIMERS
More common mistakes that expose
cannabis businesses to productliability
lawsuits have to do with false
or misleading statements or inaccurate
labeling. These include health claims
made on websites, in advertisements or
on labels. (See " Staying on the Right Side
of Regulators, " on page 42.)
A simple and relatively inexpensive
way to reduce your risk is to draft
disclaimers, which can be placed on
websites, labels and in advertisements.
The disclaimers can be as generic as,
" This product contains THC. " Common
disclaimers found on dispensary websites
and cannabis products include: " There
may be heath risks associated with
consumption of this product, " and " Not
safe for children. "
" It could go a long way for people to
acknowledge some of the inherent safety
risks and to disclaim them, " Alderman
said. " Disclaimers are an easy step to
take that give you lots of protection. It's a
common practice that in certain circumstances
can be helpful. "
INSURANCE AS A BACKSTOP
No matter the precautions that businesses
take against product-liability lawsuits,
it's impossible to guarantee they won't be
a defendant in one. For that reason, it's
imperative that marijuana businesses get
product-liability insurance, experts said.
Yet, while insurers offer more access
to marijuana businesses than banks
and other financial institutions provide,
Marder in Denver.
" Marijuana businesses feel like they
haven't been served right, " Gillette said.
" However, the quality of insurance
service providers has gone up exponentially. "
When
buying product-liability
insurance, don't skimp on coverage.
Get the most coverage that you can
afford, attorneys advised. If a company's
product-liability insurance policy covers
$1 million but the business is on the
losing side of a $2 million settlement,
the firm remains liable for the $1 million
shortfall.
And if an insurance company refuses
to pay a claim, should a cannabis company
challenge that refusal? Many cannabis
companies fear that insurers feel more
comfortable evading claims because of
marijuana's federally illegal status.
Whether a marijuana company
should challenge an insurer depends
on the individual case, Gillette said.
How big is the outstanding claim in
relation to the cost it would take to
recover the unpaid amount? Is the claim
so small that it's not worth the time
and resources? Or is it sufficiently big
enough that it's worth pursuing? And
what are the chances of success?
Unfortunately for cannabis companies,
the case history on such matters is
lacking.
" Insurance is still relatively new to
cannabis businesses. There's still not a
breadth of litigation to know on what
marijuana businesses can push back on, "
Gillette said.
February 2021 | mjbizdaily.com 41
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MJBizMag February 2021

Table of Contents for the Digital Edition of MJBizMag February 2021

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