The Washington State Liquor and Cannabis Control Board (“LCCB”) seems to be reversing their initial opinion on if product Liability Insurance was a requirement by statute for its licensees.  Internal communication by the department and notified to us on July 17, 2018 seems to indicate product liability insurance must be understood as a statutory obligation.

We have consulted with internal staff, and would like to take this opportunity to clarify that commercial general liability insurance is required for all licensees under WAC 314-55-082. This coverage would cover instances of product liability claims. More information is also available at the Office of Insurance Commissioner’s website, here: https://www.insurance.wa.gov/your-insurance/business-insurance/marijuana/. If you have questions about that, please reach out to OIC.

Source:  Washington State LCCB Amanda Smith, Forms and Records Analyst 07-17-2018

While not clearly stated in the statute, this communication does indicate “This coverage would cover instances of product liability claims.” (emphasis added)

This appears to reverse or conflict with a prior statutory opinion made on August 15, 2016, when the  LCCB clearly stated product liability was not required by statute as publicized in our article entitled Required or Not Required?  Washington Cannabis for Product Liability Insurance.

Why the change? 

In our opinion, the lack of any pesticide testing required by the LCCB could be a strong reason the statutory opinion was astutely reversed to transfer this potential risk from the use of pesticides to the insurance industry as future product liability claims.  If you’re the LCCB not mandating pesticide testing, then protecting the regulatory agency from potential lawsuits would be prudent.  Furthermore, the statutes require the Washington State Liquor and Cannabis Control Board to be named as an additional insured, primary and non-contributory, and waiver of subrogration. 

Product liability insurance is available in the marketplace by a small number of insurance carriers making it expensive for many licensees particularly those just starting up.  This additional expense is compounded by the fact the market price for cannabis is low in the State of Washington.  Many 502 producers are hanging by thread and additional insurance is not affordable. 

Essentially, the LCCB has shrewdly protected themselves through their licensees insurance policies in the event of a product liability lawsuit by this communication and subsequent enforcement actions despite the conflicting opinions.