Potency is a serious liability for the cannabis industry, especially if your product labeling is incorrect and the dosage turns out to be under – or over – inflated. 

Many of us remember the case of Miami Heat’s Dion Waiters. He suffered a panic attack (and reported seizure), which got a lot of media attention after he confessed to over-serving himself with THC-laced edibles on the team plane. In fact, his career suffered greatly as a result of this incident. Think about it: if this kind of potency could take down a football player, imagine what it could do to a toddler.

Potency That Underdelivers Can Also Be A Liability To Cannabusiness Owners

One California cannabis company was sued in 2022 for allegedly “lying about the potency of its products.” The brand was accused of misleading advertising that claimed a higher level of THC. In fact, the claim was quite entertaining, advertising a joint “that will get you to Mars faster than Elon Musk.” ”Not so fast; an independent laboratory found that the product labeled as having a THC level of 46% was actually between 23% and 27%. 

So on the question of potency, the cannabis world finds itself targeted on two fronts: products that either under- or over-deliver. This makes for a vulnerable industry, one that is projected to grow to nearly $53 Billion by 2026. For that to happen, a reliable infrastructure is a must.

For cannabis consumers, the potency risk becomes much higher when purchasing products off the street. In California alone, the size of the illegal (street) market is many times larger than the legal community. We all know that Fentynal and other opioids have become a pandemic in the US and that these drugs find their way into pot products. A word of caution: consumers are far better served paying a bit more for cannabis products at a legal dispensary. This is critical as the state regulators work to put foundational laws in place.

Cannabis Testing Labs Hit with Fines for Inaccurate Potency Claims

Speaking of regulations, two Florida-based testing labs ran afoul of regulators and were fined $5,000 and $6,000 respectively for mislabeling THC potency on certificates of analysis (COA). Here’s where it gets tricky: regulations mandate that “usable whole flower potency” must be reported at the same moisture content. In the case of one of the labs, the THC was calculated at dry weight and should have been reported at wet weight.

In the other Florida case, a marijuana company reported to the state that they had destroyed a batch of product that had failed testing. However, their testing lab did not report the failure to the state within the mandated time, which resulted in a fine.

Misconceptions about THC Potency

Americans are true believers when it comes to THC levels—the higher the better. Forbes disagrees. In a recent piece, the journal proclaims, “You’re buying weed wrong, and so is everybody else.”  It seems any product with THC levels of 25 and up are the hottest sellers on dispensary shelves, while lower percentage products “gather dust.”

But here’s the problem; the higher THC products give dispensaries the excuse to charge a higher price, and customers will pay it because they believe they’re getting a bigger bang for their buck. Not so. A recent study done at The University of Colorado found that THC is a poor indicator of potency. Two study groups were given cannabis; some received high levels of THC and others received low levels. The result? “Every participants’ highness was about the same – as were their levels of balance and cognitive impairment. All the same high!”

Put bluntly, the level of THC in a cannabis product does not mean you enjoy a better experience. In fact, THC percentage is a poor indicator of potency. Why does the industry allow this misconception to continue? Again, consumers will pay a higher price, and so brands and dispensaries can – and do – charge as much as 20% more for a higher THC level.

Who plays a key role in this deception? Testing labs. MJ Biz Daily reported, “Without state-run labs to keep tabs on their private counterparts, cannabis growers and manufacturers are likely to keep shopping around for private labs that deliver results showing high THC potency.”

The Explosion Of Corrupt Cannabis Testing Labs

Now that recreational and medicinal weed is being legalized across the nation, testing labs are springing up everywhere. Not all are squeaky clean. One key mission of these labs is to maintain tight scrutiny on product potency and the contaminants that can find their way into products.

If you follow the news, however, you’ll see that labs are constantly being caught for giving a passing grade to products that contain mold, pesticides, and dangerous microbials, as well as for falsely confirming THC levels. One lab in Arizona was fined $500K for these same things—and for doing it intentionally. In 2019, an audit of Oregon’s testing program found that the state’s entire system was “inadequate” and “inefficient.”

Until reliable testing systems are standardized, the cannabis industry risks liability.

Are any states getting it right? Yes. Oklahoma has the strictest lab regulations in the country. It took a whistleblower to expose manipulation of potency test results, and the development of rigorous data collection to turn the tables. Pot labs in the state now undergo regular proficiency tests, and labs are required to collect two samples for every test and hold a reserve sample, which is used to investigate complaints. Essentially, it’s a start but the question remains, are canna businesses still at risk. Yes.

How To Insure Your Cannabis Business Against Potency Liability

Work with a specialized cannabis insurance brokerage. With the recreational cannabis industry still at the starting gate, lawsuits for a whole range of issues are springing up throughout the US cannabis market. Until 2020, there were only 6 insurance brokerage firms serving this exploding industry. Today, that number has grown to about 30. 

Keep in mind; regulations that govern the cannabis industry are still in the development stage by agencies such as the USDA and FDA. An experienced brokerage firm that specializes in this category should know the regulations for your state—and for every state where you do business. 

According to the National Association of Cannabis Businesses (NACB), “It’s important to stay informed on the potential liabilities your establishment could face and ensure your products are regularly reviewed and appropriately labeled.” As we wrote in a recent post on connected packaging, [How Cannabis Packaging Impacts Your Liability] this digital innovation is a great way to ensure transparency and trust.

Other ways are to review the basic policies that can protect your business as the cannabis industry sorts itself out. These include:

• General Liability
• Property & Casualty Insurance
• Product Liability/Product Recall
• Cyber Defense / Data Breach Insurance
•  Directors & Officers Insurance

Protect Your Cannabis Business With Millers Insurance Group

 Whether your cannabis business needs general liability, product liability, protection against product recalls, or customized coverage, you can trust the experts at Millers Insurance Group to deliver. With over a decade of experience insuring the cannabis industry, our insurance professionals understand the unique risks and demands of protecting your cannabusiness. 

 For a free, zero-obligation quote, contact our team today and an agent will reach out directly.