Concerned you may need cannabis product recall insurance for your startup? Chances are, you need it more than you think. In 2015 alone, federal agencies recalled 4217 products — the most ever. In the new and ever-changing cannabis startup arena, you’re likelihood of risk is substantial.

 

What is a product recall?

Product recall is “insurance coverage for the cost of getting a defective product back under the control of the manufacturer or merchandiser that would be responsible for possible bodily injury or property damage from its continued use or existence.”

Since global consumer standards are on the rise, product recalls are becoming a serious reality for many businesses. This includes those in the cannabis space.

In 2018, compliance is an everyday reality. Its importance can’t be overstated in light of recent statements made by the U.S. Department of Justice. But this is not confined only to the cannabis industry. Aside from rigorously testing to abide by state laws, product recall insurance is now a must for any company providing consumer goods.

 

Wait…isn’t product liability insurance the same as product recall insurance?!

Nope! Most product liability insurance doesn’t cover recalls unfortunately. In most product liability insurance policies, there’s an exclusionIt prohibits coverage for damages that arise from the “withdrawal, inspection, repair, replacement or loss of use of an insured’s product should it be recalled.”

 

Okay…but why should product recall insurance for cannabis companies matter to me?

Well, let’s start with the obvious: recalling a product is extremely expensive. Costs include reimbursements to first (you) and third (your customers) parties, extra warehouse and/or shipping fees, additional product testing, overtime for employees, regulatory or consumer protection investigations…the list goes on. 

Unfortunately, cannabis startups are forced to jump through even more regulatory hoops than Fortune 500 companies…and only the latter may be able to handle the legal expense. 

 

Yeah, but it won’t happen to me!

That’s probably what Chipotle thought, as well as a litany of other companies. Sure, they may be bigger than your little cannabis start-up but that doesn’t make you any less vulnerable.

Dixie Elixirs faced similar backlash in a cannabis specific recall. 

 

Okay, I need product recall insurance. Now what?

A cannabis company can readily customize their product recall policy based on their specific needs.

You can choose from three categories:

  • Consumable products (flower, edibles, food, beverages, pharmaceuticals, etc.)
  • Consumer goods (finished household goods)
  • Non-consumable merchandise (cars)

 

How can I get the most out of my current product recall insurance?

If you have existing product recall insurance:

  1. Check to see if your policy covers adverse PR. (You may sorely need this when its time to repair and rebuild your public reputation).
  2. Provide notice before a recall is necessary.
  3. Find out what isn’t covered by your general liability & all-risk property insurances and fill in the gaps.
  4. Document all cases and claims as they occur.

 

How to survive the (dreaded) recall

New and emerging cannabis startups face additional risks when starting out. They may not have their supply chain perfected. Here are some tips and tricks to move you forward in a recall situation:

Take control of your recall. Do not wait for the issue to multiply. (Good example: Fitbit. Bad example: Toyota).

Maintain a customer complaint file. It’s critical to take note of any patterns to the complaints as well as following-up immediately.

Create initiatives to take care of the customers affected.

When involving food: inform the FDA immediately.

 

Most importantly?

Get covered! If you’re looking to purchase, contact us and we’ll get right to work on product liability or product recall insurance for your cannabis company.

We also offer a wide range of insurance products for cannabis companies just like yours. 

 

 

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