From THC-infused seltzers to CBD lemonades and teas, cannabis beverages are the latest fad in our evolving industry.
These drinks appeal to a broader demographic than traditional cannabis products. Wellness enthusiasts, casual users, and even those simply looking to replace their evening cocktail are reaching for cannabis beverages—and the market is booming as a result.
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These beverages generally fall into two categories:
- Marijuana-derived THC beverages are strictly regulated, sold through licensed dispensaries, and tested for safety and quality.
- Hemp-derived THC beverages are made from hemp plants with less than 0.3 percent Delta-9 THC, which are federally legal under the 2018 Farm Bill. These products are often sold in bars, boutique groceries, and convenience stores.
While both offer a psychoactive effect, hemp-derived options are especially popular due to their accessibility. However, the lack of consistent regulation across states creates serious challenges for businesses.
Risk/Reward
Unlike marijuana-based beverages, hemp-derived products operate in a regulatory gray zone. With no federal oversight and wildly varying state laws, the risks for contamination, mislabeling, and overconsumption are significant. Many of these products contain Delta-8 THC, a less-studied cannabinoid that may be synthesized using potentially harmful solvents.
Consumers may not fully understand what they’re ingesting, and adverse reactions could lead to lawsuits or costly recalls. These risks highlight the urgent need for specialized insurance solutions tailored to the cannabis beverage space.
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Insurance Solutions
Businesses in this space need to work with insurance carriers that understand cannabis products and the unique challenges of insuring them. They should find a broker who specializes in offering comprehensive coverage across the cannabis supply chain—from growers and manufacturers to testing labs and retailers.
Key coverages include:
- Product Liability – Cannabis beverages, edibles, tinctures, and concentrates face significant product liability exposure due to safety and labeling regulations. It’s vital in protecting manufacturers and retailers from claims due to contaminated or mislabeled products. It’s important to ensure policies have a carve-back to include hemp-derived products that comply with the 2018 Farm Bill.
- General Liability and Property Coverage: Dispensaries and retailers face risks from fire, theft, and vandalism. General liability and property coverage protect businesses from daily operational hazards that could otherwise derail their growth. Cultivators also need protection for living plants, goods in process, equipment breakdown, and business interruption.
- Product Recall – Recalls are a growing threat, particularly for hemp-derived beverages that lack regulatory testing. A strong recall policy can help brands respond swiftly and mitigate reputational damage.
- Management Liability – Due to cannabis’s federal classification, few markets offer this coverage. Cannabis-focused operators need adequate Directors & Operators Insurance (D&O), crime, and cyber limits in place. With limited markets willing to underwrite this space, it’s important to work with a broker with access key to stacking competitive limit towers.
- Workers’ Comp: Cannabis delivery and retail operations need customized workers’ compensation plans. These operations involve multiple roles—from drivers to inventory managers that require accurate classification.
- Professional Liability – Consultants and ancillary service providers are often excluded from traditional coverage simply due to their cannabis affiliation. It’s important to understand what’s being insured and what’s not.
- Commercial Property: Leasing to cannabis operations faces unique exposures, from tenant product risk to property compliance. It’s important to secure policies for a wide range of property types, including warehouses, strip malls, and greenhouses.
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One of the biggest hurdles for cannabis businesses, including those now selling these popular beverages, is the patchwork of state laws. What’s legal in one state may be restricted in another. Cannabis businesses should find coverage to help them stay compliant across state lines to avoid fines, seizures, or worse.
Sip happens—make sure you’re covered when it does.
*This article was submitted by a guest contributor. The author is solely responsible for the content.