Resources & Insights

How Good is Your Cannabis Insurance Policy?

March 20, 2019

In the cannabis business, whether you’re a grower, a wholesaler, manufacturer or distributor, the fine print is ignored at your own peril.

For too many cannabis business owners, exclusions in their insurance policies are viewed as the fine print for which they have no time for a close read.
CCIG’s Spencer Mahoney.

You knew that, right? And yet we see it all of the time.

Let’s reach back to 2014 for an unfortunate example in the case of Richard Kirk, the Denver man who supposedly became psychotic and shot and killed his wife after consuming Karma Kandy Orange Ginger candy.

Denying that it had any obligation to defend candy maker Gaia’s Garden, the insurer in the case decided Gaia’s was on its own in defending itself against a wrongful death lawsuit filed by Kirk’s children.

“The policy specifically did not cover, and was not intended to cover, bodily injury arising out of one of Gaia’s products where the injury occurred after Gaia’s had ‘relinquished possession’ of the product — i.e., after the product was sold and distributed,” the insurer’s court papers said.

“Per the allegations of the lawsuit, the bodily injury (the death of Kirk’s wife, Kristine) occurred after the distribution and sale of the product. … Therefore, it was not a covered hazard under the policy.”

Moreover, the insurer said, the policy had a psychotropic substances exclusion, for “any bodily injury ‘which would not have occurred … but for the actual … ingestion of, contact with, exposure to … or presence of psychotropic substances.’

Was there more? Just this gem: “The psychotropic substances exclusion includes a (non-exclusive) list of psychotropic drugs. Included in the list are ‘marijuana’ and ‘cannabinoids.’”

LEARN MORECCIG’s Cannabis Practice

In other words, because of the fine print, including exclusions in its policy, the insurer felt just fine in leaving Gaia’s to defend itself.

Exclusions are actually supposed to be presented clearly in your policy in a section of their own. But for too many people, they’re unfortunately viewed as the fine print for which they have no time for a close read.

That’s never advisable, but especially not when product liability experts have concluded that the cannabis companies with perhaps the greatest vulnerability are those that produce edible products.

We’re talking about sodas, gummies, truffles, cookies, brownies, potato chips, wines and more. At the same time, the waters of cannabis product liability lawsuits aren’t at all well-tested.

Such lawsuits will assert that cannabis products are defective, dangerous, mislabeled and that the makers and distributors failed to issue adequate warnings about these risks.

Gaia’s and its insurer eventually settled their dispute, though the terms of their agreement are not known.

What is known is that the labeling requirements on cannabis products are constantly undergoing one revision or another.

Kirk today is serving a 30-year prison sentence. While it’s a couple of years old now, the dispute that arose between the maker of the candy he ingested and that company’s insurer illustrates as clearly as ever that cannabis companies are best off consulting with an experienced broker to ensure they’re getting the best insurance possible.

Spencer Mahoney is a CCIG insurance advisor and heads the firm’s Cannabis Practice. Reach him at 720-212-2051 or

CCIG is a Denver-area insurance and bond brokerage with the full-service capabilities of a national brokerage. We do more than make sure you have the right policy. We also help you manage your long-term cost of insurance with our risk and claims management expertise and a commitment to service excellence.

Also readFire Prevention Checklist for Cannabis Businesses


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