Required or Not-Required? Washington Cannabis Law for Product Liability Insurance
Cannabis licensees in the State of Washington continue to question if they must by law purchase product liability insurance to be considered compliant. Let’s be honest, the process of reading and understanding marijuana laws can be complicated and arduous process. Just like reading an insurance policy.
It is important to know the majority of cannabis oriented commercial general liability insurance policies exclude what is known as Products and Completed Operations. Or, basically product liability coverage for your cannabis product. To be more accurate, the coverage basically provides liability coverage for your work or your product occurring away from your premise. As an example, if you’re a cannabis licensee selling flower to a retail store who then sells to a consumer, the original product is no longer located at the original licensee. The products and completed operations is likely to provide coverage should a claim arise because of the product.
The Washington law is codified under WAC 314-5-082 Insurance Requirements.
Marijuana licensees shall provide insurance coverage as set out in this section. The intent of the required insurance is to protect the consumer should there be any claims, suits, actions, costs, damages or expenses arising from any negligent or intentional act or omission of the marijuana licensees. Marijuana licensees shall furnish evidence in the form of a certificate of insurance satisfactory to the WSLCB that insurance, in the following kinds and minimum amounts, has been secured. Failure to provide proof of insurance, as required, may result in license cancellation.
(1) Commercial general liability insurance: The licensee shall at all times carry and maintain commercial general liability insurance and if necessary, commercial umbrella insurance for bodily injury and property damage arising out of licensed activities. This insurance shall cover such claims as may be caused by any act, omission, or negligence of the licensee or its officers, agents, representatives, assigns, or servants. The insurance shall also cover bodily injury, including disease, illness and death, and property damage arising out of the licensee’s premises/operations, products, and personal injury. The limits of liability insurance shall not be less than one million dollars.
(2) Insurance carrier rating: The insurance required in subsection (1) of this section shall be issued by an insurance company authorized to do business within the state of Washington. Insurance is to be placed with a carrier that has a rating of A – Class VII or better in the most recently published edition of Best’s Reports. If an insurer is not admitted, all insurance policies and procedures for issuing the insurance policies must comply with chapters 48.15 RCW and 284-15 WAC.
(3) Additional insured. The state and its employees, agents, and volunteers shall be named as an additional insured on all general liability, umbrella, and excess insurance policies. All policies shall be primary over any other valid and collectable insurance.
While it is clear, the statute states commercial general liability insurance or commercial umbrella insurance, it fails to express product liability insurance must be procured. I wonder if the writers of this law recognized “products and completed operations” is excluded and must be purchased separately. Probably not. Most interestingly, the law does imply through Section 1 “bodily injury, including disease, illness and death…. arising out of the licensee’s premises, operations, products, and personal injury.” The keywords “arising out of” and “products” would lead some to believe product liability insurance would be required.
As a result of the lack of clarity, we contacted the Washington Cannabis and Liquor Control Board seeking a statutory interpretation through email of WAC 314-5-082. Below is the screen shot from the email response we received on August 15, 2016:
The Washington State Liquor and Cannabis Control Board indicated “The statutes do not require a marijuana business to have product liability insurance.”