There’s never been a more exciting time in the cannabis-centric eCommerce space. It’s also never been more important to secure insurance for your company before you take off flying.
Just the facts
In 2016 alone, global e-retail sales grew 24.6 percent (compared to the previous year) making up 8.7 percent of the total retail market worldwide. Combine that with the fact that legal marijuana sales hit over 10 billion in 2017. (Analysts also predict the market to hit $24.5 billion in sales by 2021, despite continued federal prohibition.) Wholesale platforms, marketplaces to transact with growers, processors, wholesalers and dispensaries are a driving force in the industry.
CBD & Hemp derived products are taking the market by storm, benefiting from more lax regulations than cannabis (for now).
This leaves plenty of cannabis, CBD and hemp eCommerce companies (just like yours) poised to carve out their niche and scale rapidly. Here’s a closer look at those risks and how eCommerce companies can mitigate them using commercial insurance products.
General liability insurance
Physical damage, bodily injury and property damage are a serious concern for just about any business. As long as employees interact with customers, vendors and bystanders, there’s always a chance for physical damage caused by the company.
A salesperson spills steaming hot coffee on a vendor rep. An office visitor slips and falls on a wet entryway. A careless employee irreparably harms critical hardware. The list goes on.
A general liability insurance policy covers claims for physical damage. However, general liability insurance extends beyond basic “slip and fall” scenarios and includes product liability coverage as well.
Product liability insurance
Product liability insurance covers physical damage caused by the company’s products: an infant ingesting your CBD edibles via faulty packaging, a vaporizer battery catching fire, or grow lights that cause damage to your valuable cultivation operation.
Any ancillary-cannabis eCommerce company that sells real, tangible product is at risk for a lawsuit of this nature. Even though the manufacturer or cultivator will most probably shoulder the blame for a defective product, the distributor and/or retailer will almost always be named in the lawsuit.
This could mean potentially hefty legal bills, even if the cannabis eCommerce company is completely innocent. A good general liability insurance policy will cover these costs.
The two (very important) takeaways?
General liability insurance protects eCommerce companies from physical damage.
Products liability insurance protects eCommerce companies from defective product lawsuits.
Cyber liability insurance
Most leaders in the cannabis eCommerce space agree that solid customer engagement leads to a vital brand and loyal customer base.
In order to build this personal relationship, eCommerce and marketplace companies need personal information about their customers…and the more the better. This kind of personal data collection creates a high risk for cannabis eCommerce companies in the form of a data breach or loss incident. Especially those canna-tech companies that have POS or in-store functionality can lead to an even great risk handling customers financial information.
Data breach claims can be astronomically expensive. Costs can include: lawsuits, data restoration, forensics, mandatory breach notification procedures, PCI fines and more. A sturdy cyber liability insurance policy will cover all of these costs and more.
With the amount of sensitive data at stake, cyber liability insurance for cannabis eCommerce companies is a simple no-brainer.
Errors & omissions insurance
Product service failures can come in many varieties:
- A glitch during the checkout procedure confirms and processes orders but never sends orders for fulfillments. Site-wide orders are backlogged for months and client demand their money back.
- Manufacturers and distributors of the site sue for lost profits when the site goes down for an unexpected amount of time.
- The cannabis eCommerce company fails to live up to its terms of service. Customers bring an action against the company for fraud or violation of consumer protection laws.
- Advertisers demand money back when their ads were not served as contracted.
Note: these product or service failures can stem from both the operations of the company or the tech that drives the platform. Either way you cut it, comprehensive errors and omissions insurance serves to protect companies from financials hits like these.
Remember: even if the failure is caused by a 3rd party provider, the customer will always look to the cannabis eCommerce company for recovery first.
Errors and omissions insurance protects eCommerce companies from financial losses based on failure to meet contract requirements. This applies to both vendors and customers alike.
Hopefully by now, you get the gist. This list doesn’t even cover it all (but contains the big points of guidance to consider). Reach out to us any time and we’ll get the ball rolling for your cannabis eCommerce company.