Processing Edibles Is Complex: Insurance for Edible Processors

Legalizing cannabis: a brief history

Let’s briefly talk about the history of the cannabis industry in Canada. Using cannabis for medicinal purposes was permitted in 2001 due to its therapeutic benefits. In April 2017, the government created Bill C-45, the Cannabis Act. In other words, the idea of legalizing and regulating cannabis production and sale was up for discussion. The cannabis industry is growing in popularity with the government permitting the legalization on October 17, 2018 for recreational use and for individuals prescribed cannabis for medicinal purposes.

Canada began preparation in Summer 2018 by drafting licenses for cannabis retail. Municipal bylaws were announced and were communicated to the public. Regulations for cannabis allowed consumption of recreational cannabis on private property and designated cannabis consumption areas. It can be expected to see licensed smoking lounges, cafes and bars in the future.

It wasn’t until a year later when cannabis edibles, extracts and topicals were legalized in Canada. Retail access to this new variety of marijuana products was scheduled to begin in December 2019.

Prior to the growth in the cannabis industry, Canada developed their Cannabis Framework and introduced this new approach to the legislation.

This information was sourced from Government of Alberta.

Where is Canada’s stance on cannabis now?

If you recently started a cannabis business, you came in the industry at the right time. A survey done in U.S., Weedmaps found that cannabis users increased their consumption by 50 per cent since the global pandemic of COVID-19. Since Canada legalized the use of cannabis, medically and recreationally, the growth of businesses in cannabis are adapting to new and better technology. People are finding ways to get creative within Canada’s regulated market with their innovative products, package, process and marketing. The industry is interesting because of its complex structure. Several individuals can open cannabis stores and work in the retail realm, while others may produce or process the products sold through dispensaries. Various aspects of this industry exist, but today we will focus on consumable processing (cannabis-infused beverages and edibles).

Edible processing

Edibles are made from extracting a cannabis plant by using heat as a catalyst to produce a concentrated oil-based liquid. This oil can be used in food to produce various styles of edibles: chocolate, candy, brownies, gummies and many more. It might seem like a lot of fun working in the cannabis industry, but there are also many regulations, procedures and licenses that must be followed.

As an edible processor, the work associated with your job is more tedious and rather intricate. Since you are dealing with food and drinks that contain cannabis, there are a couple things to keep in mind in order to avoid any distress to your business – especially lawsuits.

1. Contamination

The chances of contaminating cannabis products are apparent in the many steps of processing edibles. With that, there is bacterial contamination. Failing to clean the equipment used to extract and manufacture edibles can cause your products to spoil and in return limit the ability to distribute and generate profit. Contamination can also occur due to chemical exposure from extracting. Working with food increases the risk of bacterial contamination caused from the ingredients you use to make your edible products. If you are not careful, you will get many people sick and many angry customers!

2. Inaccuracy and Production Errors

The potency of THC or Tetrahydrocannabinol can be easy to influence. Cannabis plants can vary in quality by various factors that include genetics, growing conditions, harvest time, drying, storing and processing. A common risk that can be made with processing edibles is inaccurately labeling the products with the correct amount of THC. As a result, there is a chance consumers can have an overconsumption of cannabis. Production errors can occur through the process of extracting from the cannabis plant.

It is important that you and everyone else in your business is sufficiently trained to handle processing edibles. However, accidents happen and our brokers at Fuse Insurance specialize in cannabis risks to help you find the best coverage for your business.

Insurance policies

Fuse Insurance has a lot of information on the insurance policies needed to work in the cannabis industry. If your business handles both sides of processing edibles and cannabis retail, you can click on the following resources to learn more about the insurance policies and requirements you need to run your cannabis business.

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How can your business be protected from claims made from your customers?

As mentioned above, there are risks associated with processing edibles. From contamination to production errors, here are a few insurance policies you need to mitigate those risks:

Errors and Omissions Insurance

Among other insurance policies, E&O (Errors and Omissions) insurance will cover the gaps of general liability, product liability, public and professional liability insurance policies.

E&O will protect your cannabis business from allegations of error or oversight in your work. It can help cover the costs associated with court fees, administrative expenses and settlement costs. Errors and Omissions protects you from allegations of misconduct, negligence, errors, omissions and failure to deliver services as promised.

E&O claim examples:

Employees fail to follow proper procedures that alters how the product is delivered
Errors in communication due to false and misleading statements
Falsely reported metrics during product testing
Failure to have a product done in time for a set deadline on a contract, causing financial loss to your client

Commercial General Liability

Commercial General Liability (CGL) protects you from everyday risks that happen in your studio such as a customer slipping and falling over equipment resulting in an injury. CGL covers claims of third-party property damage, bodily harm or advertising injury that occur on or around your business premises.

CGL is one of the most common business insurance policies. However, some insurance providers will note that that their coverage excludes all acts of bodily injury or property damage associated with the manufacture, sale, distribution, consumption or exposure to cannabis. For this reason, it is best to work with an insurance broker who specializes in cannabis risks and can review your entire policy with you.

CGL insurance policies can be specially made for the cannabis industry and enhanced to ensure your risks are covered by including the following policies:

Limited Pollution Liability Endorsement
Limited Fungi and Fungal Derivatives Coverage
Products Recall Expense Extension Endorsement

CGL claim examples:

An inspector visiting your lab slips on a piece of equipment that was left out and sustains an injury
Extracting cannabis caused occupational health hazard due to an air-borne fungi disease
Loss of profit from products recall (e.g. cost to ship and to dispose products)

With the increasing popularity in edibles, now is a good time to start your own business in the cannabis industry. A report conducted by Eaze found that edibles were ranked the number one purchase for individuals age 25 and older.

Whether you process edibles or own a cannabis retail store, the experienced brokers at Fuse Insurance are here to provide custom insurance programs for those in the Canadian cannabis industry. Our online quote application is quick and easy and provides the information we need to get your insurance policy in your hands as soon as possible. To start your quote now, fill out our form online or call 1-866-387-FUSE (3873).