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July 6, 2022

New Insurance Risks as Cannabis Lounges Open Across the US

By Jason Scheurle

In a growing number of communities around the U.S., new cannabis lounges are offering a social setting where guests can openly use cannabis products. Colorado and New Mexico both saw their first cannabis lounges open in April, Michigan’s first cannabis lounge is set to open this summer, and officials in Nevada are currently discussing how the recently approved class of businesses should be regulated. In West Hollywood, California, where the state’s first cannabis lounge opened in 2019, multiple new lounges are now in the works after two years of slowdown due to the pandemic.

The bar-like establishments add a new dimension of potential revenue — and risk — to an industry that is expected to add almost $100 billion to the U.S. economy this year. This new and emerging segment within cannabis isn’t happening in every legal state, but more are starting to enact regulations to provide for some type of on-site consumption.

These new ventures need insurance policies tailored to address the risks of serving cannabis products, which could be looked at similarly to liquor liability for bars and restaurants.

Whether it’s alcohol or cannabis, these products impair people’s judgment, meaning everyone reacts differently to them. But how do you know when to cut someone off?

Cannabis lounges could be held liable & run risk of being sued for overserving

If a cannabis lounge faced a lawsuit alleging that it overserved a patron, leading to a third-party bodily injury, the business’ Commercial General Liability (CGL) Insurance and Products Liability Insurance could potentially cover costs such as legal defense, medical expenses and settlement amounts. Until such a case occurs, it is not yet known how exactly these lawsuits would be covered by insurance.

Because of the short history of cannabis lounges in the U.S., something like this is largely untested, making it hard to speak to exactly how a scenario would play out. Many of the existing cannabis insurance policies are highly exclusionary, meaning it could exclude a loss that is deemed to have arisen out of the use of cannabis.

Recent liquor liability lawsuits have shown the potential for a significant loss is clear. In early April 2022, a $20 million lawsuit was filed against a nightclub in Houston, Texas, alleging it overserved customers and allowed underage drinking, contributing to a drunk driving crash that killed a teenager.

In December 2021, a jury in Texas awarded the family of two drunk driving victims over $301 billion after a lawsuit alleged the driver was overserved at a bar before the accident; though largely symbolic, the settlement marked the largest personal injury award in U.S. history.

With these cannabis lounge establishments more or less encouraging intoxication of patrons on their premises, it’s very similar to a liquor liability type situation. If someone overindulges at a lounge, leaves and causes a crash resulting in injury or death, that could come back to the establishment.

While it remains to be seen how cannabis overserving lawsuits could play out in American courts, it’s worth noting Canada forbids on-site consumption of cannabis products and any loss or damage will not be covered by their insurance policies – despite it being legal country-wide.

Lawsuits possible over product issues, budtender advice

Even cannabis operations that do not allow on-site consumption can face liability related to the products they sell, making Products Liability Insurance and Product Recall Insurance necessary for growers and retailers. They should also consider Employment Practices Liability (EPL) Insurance to cover staffing-related allegations such as discrimination and ask their insurance broker whether budtender liability is included in their CGL Insurance policy.

Budtenders must walk a fine line between giving advice versus general information on products.

Budtenders, or individuals who work at cannabis retailers, are not allowed to offer medical advice to consumers. They must walk a fine line between giving advice versus general information on products. Although we are not aware of lawsuits that have been filed over a budtender’s advice, it would ultimately be up to the courts and lawyers as to how those proceedings would play out.

Budtender liability is not very different from professional liability insurance, and it’s more like an incidental coverage based off the budtender’s informal advice. There are, indeed, insurance carrier partners today that offer that service.

CGL Insurance can also cover in-store slip-and-falls and other third-party injuries and property damage. Because most cannabis retail stores are fairly small, these incidents have been rare, but GCL cannot be overlooked. Businesses must be prepared for anything to happen – and need to know that no risk is too small.

Theft, vandalism among top threats to cannabis businesses

Whether or not a cannabis business includes a lounge for cannabis use, any business in this industry may be more vulnerable to certain risks, including theft and vandalism.

In the U.S., where many cannabis companies operate on a cash-only basis because of banking difficulties tied to recreational products being federally illegal, a recent surge in cannabis shop robberies has led to calls for a new banking bill. Some of these incidents have even turned deadly, including an April 30 dispensary robbery in Los Angeles, California, during which one man was reportedly shot and killed.

Many insurance carriers require retailers to install alarm systems, video monitoring equipment or safes

Large amounts of cash are on-hand daily at these premises, and workers might have to make multiple bank runs throughout the day, leaving a heightened exposure and risk for robberies.

From robberies and vandalism to fires and flooding, Commercial Property Insurance is a key protection for cannabis retailers. Equipment Breakdown Insurance may also be needed, particularly when the stores contain expensive refrigeration equipment. The potential loss is large in this industry, especially at growing facilities, and there’s a lot at stake with such high-value equipment.

Security systems, employee training can help reduce risks

Many insurance carriers require business owners to install alarm systems, video monitoring equipment or safes to help reduce potential property losses, and employees should be trained to use the alarm systems consistently. Policyholders and business owners should also know there is a lot they can do to curb some of the risks, such as businesses doing background checks on every hire and taking steps to ensure they are hiring individuals they can trust.

Installing bars on glass windows and doors is another loss prevention measure that is strongly encouraged because it adds an additional layer of security to get through – it won’t be an easy or quick process to break-in and will trigger the alarm system.

The importance of working with an insurance broker

Working with an insurance broker who is specialized in the cannabis industry can help business owners better explore available coverage options. With cannabis or any type of risk, you should always work with someone who has knowledge and expertise in that area. When you work with someone who knows the ins-and-outs of the regulations, you can have more peace of mind.

You might have a risk warranty that always requires two drivers in that vehicle, or GPS monitoring on the vehicle.

Understanding your policy in its entirety is also essential, as these policies have any number of different limitations and exclusionary forms that could preclude you from collecting if you had not understood and followed the language of the policy.

In a transportation situation, for example, you might have a risk warranty that always requires two drivers in that vehicle, or GPS monitoring on the vehicle. In the event of a claim, if the investigation determines the business did not have those items present at the time of loss, that claim will not be covered.

In a rapidly growing and changing industry, business owners should not underestimate the value of working with a team of insurance experts who keep a close pulse on the quickly evolving industry. Brokers are aware of the different legal environments in each state or even each city or county. Cities and counties can add different levels of compliance matters, so as a buyer, you can be confident that you have the most recent information and are in compliance with state law and any insurance requirements that may be present. Being able to explain the differences between the markets and the coverage options is beneficial to any business owner in this ever-changing industry.

February 15, 2022

Cannabis Dispensary Displays: What’s Trending in 2022

By Ray Ko

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As additional states around the country legalize cannabis – New Jersey, Arizona, South Dakota and Montana, to name a few– more and more medical and adult use dispensaries are popping up. Business owners are looking for ways to stand out from their competition. Enter dispensary displays, cost-effective hot commodities and a trending topic in 2022. Cannabis displays have become the vehicle to not only house merchandise but can also be a customized branding tool unique to the company’s aesthetic and marketing messaging.

Before we delve into the dispensary display trends disrupting the cannabis industry, let’s start at the very beginning: the basics. The basics include retail space, dispensary layout, cannabis inventory, complementary accessories and of course, budget. Decorating a unique space with a signature aesthetic can be as easy as mixing-and-matching the displays and ideas discussed in this article.

A Well-Lighted, Clean and Simple Space is In

Whether your dispensary is for medical or adult use, a clean design aesthetic is always a good choice. This never-fail approach to decorating conveys a crisp, modern, hygienic feel and a neutral palette like clear, white and black cannabis display cases support this look.

Store lighting plays heavily in dispensary décor, too. According to the lighting experts at Stanpro Lighting Systems, there are three basic types of lighting: ambient, task, and accent and all play a unique role. In short, ambient lighting lights up an entire room or space – outdoor too – to safely facilitate traffic. Task lighting, as the name suggests, is used for a given task such as reading and the like. Directional recessed fixtures, pendant and desk lamps all fall into this category. Light is directed to a focal point and shouldn’t be too bright or harsh. Accent lighting directs attention to a point of interest. Think track lighting, undercabinet or recessed lighting – perfect for dispensaries. When mapping your lighting layout, consider pod holder placement. Place a multi-shelf locking cannabis cabinet under bright lights so customers can see and smell, if appropriate, the merchandise. Alternatively, if lighting is an issue, use a lighted display riser to showcase your pod assortment. A pop of color via custom color pod picks like these from shopPOPdisplays, placed inside a clear cannabis display pod holder on the lighted display riser grabs attention and can be easily switched out depending on the product promotion. It’s versatile, cost-efficient and eye catching.

Make It Marketable

Cannabis displays come in all shapes, sizes, styles and colors. Organize your cannabis, CBD, vape and other merchandise like nitro tins to keep clutter at bay, but make it work for your brand as well. Double-duty dispensary displays like tube holders provide the functionality of neatly presenting products with the bonus of brand recognition through a customization option. If decorating your dispensary business and building your brand on a budget – and who isn’t – customizing key pieces like locking displays and cabinets, may be the solution. Placing products in and on customized cannabis dispensary displays with your logo, brand and/or company color scheme brings instant recognition as well as consumer confidence that your dispensary is not a fly-by-night company. Strategic customization might be the savvy investment option in the long run.

Protecting Your Employees: Health and Otherwise

Security means different things to different people. Physical, financial – you name it – people want to feel safe and protection of others, oneself and properties is at the forefront. Like all business owners, dispensary entrepreneurs invest time, money and sweat equity to get their business up and running. According to cannabis software specialist TRYM, by the year 2025, the cannabis industry is estimated to reach $30 billion dollars. Ensuring the safety and security of staff and inventory investment is a top priority. Cameras, security personnel and alarm systems are all factors, plus practically shatter-resistant plexiglass counters and displays are the new must-have trend. Acrylic sheets don’t end at the counter either. The health of staff members, especially during these times mean plexiglass sheets, clear acrylic barriers and sneezeguards are being implemented in dispensaries across the country. In compact or limited retail space these protective panels ensure social distancing and help ease customer anxiety.

The cost of dispensary inventory is significant, protecting it doesn’t have to be. Many states require cannabis, CBD and vape merchandise be stored in locking display cases and locking cabinets, behind counters, and more depending on the state. Sidestep specific regulations and instead opt for securing all cannabis and high-ticket items in both countertop and locking wall mount displays as well as wall pedestals, lighted pedestals (with acrylic cover or without) with the lock option. These display cases promote waist- and eye-level optimization without taking up valuable retail space.

Color Me Green This Year and Next

As mentioned, in 2022 clean is in, but so is green. In The Psychology of Design: The Color Green, Christi Wharton says, “Green evokes a feeling of abundance and is associated with refreshment and peace, rest and security.” Therefore, it only makes sense to include green when decorating your dispensary. Add planters with greenery to odd corners, break up a white space with a verdant splash of color to bring attention to products. Consider custom green acrylic display risers with company name, brand or logo to literally elevate merchandise or use a LED cannabis display and a showcase is born!

With these current and classic display trends; a well-designed dispensary doesn’t need tricks and a large budget to succeed. Quality merchandise, great customer service as well as classic in-stock and custom dispensary displays never go out of style.

October 31, 2018

Quality From Canada

Protecting Intellectual Property in Canada: A Practical Guide, Part 5

By Richard Naiberg

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Editor’s Note: This is the fifth article in a series by Richard Naiberg where he discusses how cannabis businesses can protect their intellectual property in Canada. Part 1 introduced the topic and examined the use of trade secrets in business and Part 2 went into how business owners can protect new technologies and inventions through applying for patents. Part 3 raised the issue of plant breeders’ rights and Part 4 discussed trademarks and protecting brand identity. Part 5, below, will detail copyright laws for cannabis companies and how they can protect works of creative expression.

Copyright: Protection for Works of Creative Expression

In the course of describing and marketing its products, the cannabis producer will prepare or have prepared any number of articles, instructions, write-ups, photographs, videos, drawings, web site designs, packaging, labeling and the like. Copyright protects all such literary and artistic works from being copied by another.

Copyright arises upon the creation of the work, although one can register the copyright under the Copyright Act for a minimal cost.Canada’s Copyright Act provides that the owner of copyright has the exclusive right to make copies of copyrighted work for the lifetime of its author, and for fifty years thereafter. The Court will enforce this copyright, stopping infringements and ordering infringers to compensate the owner in damages, accountings of profits and delivery up of infringing material for destruction. Intentional copying or renting out of a copyrighted work is also an offence that can attract imprisonment. The owner of a copyright can also request the seizure of infringing articles being imported or exported in Canada.

Copyright arises upon the creation of the work, although one can register the copyright under the Copyright Act for a minimal cost. Registration creates a presumption that copyright subsists in the work and that the registrant is the owner, presumptions that can simplify copyright proceedings. In litigation, the fact of registration also removes the ability of a defendant to argue that it did not have notice of the copyright, a factor relevant to the Court in awarding a remedy.Copyright protects all such literary and artistic works from being copied by another.

There are two aspects of copyright law that tend to cause confusion. The first involves the distinction between the right to use a copyrighted article and the copyright itself. To illustrate, consider the sale of a literary work, such as a book. The purchaser acquires the physical book but not the copyright. The purchaser can use the physical book and can sell that book to another. What the purchaser may not do is make and sell another copy of the book. Making copies is the exclusive right of the copyright holder.

The second involves the ownership of a commissioned work. The first owner of a copyright is either the author of the work or the employer of the author if the author creates the work in the course of his or her employment. Ownership of copyright can only be transferred by written assignment. Further, the author of a work is granted moral rights in the work, meaning the right to be associated with the work and the right to its integrity. These rights can be waived by the author but not assigned.

Ownership of copyright can only be transferred by written assignment.Therefore, if a company hires a third party supplier to prepare copyrightable work, such as brochures, artwork or web sites, and does not secure an assignment of the copyright and wavier of the author’s moral rights as part of the transaction, that supplier will own the copyright in the resulting work and the author of that work will have the right to insist on his or her moral rights. The hiring company will not have the right to make or authorize others to make copies of the work, to amend the work, to derive new works from what was delivered, or to use the work without reference to the name of the author or in a way so as to offend the author’s integrity. The supplier will also be free to sell the same brochures, artwork or web sites to other companies, or to derive other works from it. All of this is so even though the hiring company paid for the work to be done. This result is often surprising and disappointing to hiring companies.

Accordingly, cannabis producers contracting with the third parties for literature, photographs, web sites and the like will need to think about how they want to use the work in the future. It is simplest if the producer contracts to have the owner assign the copyright in the work to the producer upon creation, and deliver the author’s waiver of moral rights. While the third party will likely charge more for an assignment of the copyright and the waiver of moral rights, it may be worth avoiding negotiations over specific uses and how the author is to be credited, as well as avoiding the uncertainty inherent in trying to imagine how the producer will use the material in the future.

In the 6^thand final part, Naiberg will summarize the key takeaways from his series that cannabis companies can use to protect their intellectual property in Canada.