Canada’s legal cannabis market is highly regulated, putting it under the microscope for any products that fall short of these regulations. Product recalls are issued when a license holder or Health Canada becomes aware that there may be a health or safety risk present in a cannabis product or if the product does not meet the regulation requirements. Product recalls and withdrawals make more and more headlines every year, leading to significant costs and reputational loss for affected producers. It is important to protect your cannabis company from these exposures by properly insuring your business.
While some companies may assume they have coverage for product recalls, this is not always the case. Product Liability Insurance (sometimes called Products & Completed Operations Liability) for cannabis companies provides protection for costs associated with lawsuits for Bodily Injury & Property Damage, but does not provide coverage for costs related to product recalls. Product Recall Insurance helps to fill this gap in your cannabis coverage.
Both Product Liability and Product Recall coverage typically fall as extensions under a Commercial General Liability (CGL) policy, but it is important to note a standard CGL policy excludes Product Recall by default. Therefore that coverage needs to be added back in order to protect the policy holder and be in compliance with Ontario and BC sales requirements.
The Ontario Cannabis Store (OCS) requires a minimum $15,000,000 Product Recall limit for licensed producers and processors. BC requires a minimum $10,000,000 Product Recall limit. It is important to note that these minimum limits are for both the occurrence (any one claim) and the aggregate (any one policy term) limits under the policy, and therefore the Product Recall policy needs to have both the occurrence and aggregate limits in place in order to satisfy the provincial requirements.
One defect, contamination or tampering of a product can result in thousands of items being removed from store shelves, which will then need to be refunded or replaced. Don’t let your money spent on cannabis production go to waste; add product recall to your cannabis insurance package today.
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On top of the profits lost from a product recall, businesses also need to deal with the potential negative press. This means spending more on marketing in order to maintain your brand’s reputation. Not every product recall results in a public relations nightmare, but without funding for well-planned damage control, your company’s reputation could be on the line. For guidelines on what to include in your communications plan, see Health Canada’s recall communications plan and content.
For complete guidelines on cannabis recall, see Health Canada’s Cannabis Voluntary Recall Guide.
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Fuse Insurance is one of the only insurance brokerages in Canada, and the only one in Alberta, to truly specialize in cannabis risks. We provide insurance and risk management for cannabis licensed producers, cultivators, processors, retailers, manufacturers, landlords and more. For further information or to get an online quote now, click here or call us at 1-866-387-FUSE (3873) for more details.
