The cannabis industry is fraught with liability for business owners: changing regulations, counterfeiting, compliance, and cyber security to name a few. One leading source warns: “a growing number of legal experts anticipate that the cannabis industry may soon face a surge of product liability suits as the market matures and the plaintiffs’ bar becomes more sophisticated. In particular, the industry should be prepared for an uptick in disputes alleging bodily injury due to some defect in the way a cannabis product was manufactured or marketed and disputes claiming cannabis products were inaccurately labeled.”


There are innovative forms of protection that transform product packaging with digital safeguards. First, we’ll look at two examples of companies that paid the price for breaking the rules, and then review three key safeguards found in what industry experts call connected packaging.

What Kind of Liability Risks Impact Cannabis Businesses?

You may have heard about the California cannabusiness that has been hit with a $128 Million penalty—the largest cannabis fine in California history. It seems the original owner had a state license to produce edibles in one town, but illegally produced millions of the same product in a nearby town under a different name. According to investigators, the original company was bringing “illegally manufactured product back into the regulated market.” A news release from the Department of Cannabis Control had this to say…”the judgment shows that the illegal cannabis market will not be tolerated in California.”

It’s worth noting that the newly named brand is still sold in California and other states under new ownership. However, the original owners took a big risk and paid for it. Anybody heard of track and trace? More on that to come.

Are Your Products More Potent Than Allowed? You’re At Risk.

One Minnesota-based cannabis retailer is being sued by The Minnesota Pharmaceutical Board for ”selling edibles containing THC ingredients that are 50 times higher than the state’s legal limit.” After adverse reactions were reported, the retailer now faces investigation by the US Food and Drug Administration. On the FDA’s website, there is content that identifies the same THC used in the retailer’s products and says that they “have not been evaluated or approved by the FDA for use in any context.” Ouch. 

Connected Packaging can be a Powerful Safeguard against Liability 

Connected packaging is just one outgrowth of digital technology. By pointing a cell phone at a QR code, hashtag, or barcode on consumer packaging, shoppers can open a wealth of online channels. Want to know how to put that IKEA bed together? Watch the video. Want to enter a contest, find a recipe, know if the product packaging you’re about to purchase is biodegradable? Just point and learn.

For high risk industries like cannabis, connected packaging enables businesses to engage with consumers and industry oversight agencies. For consumers, it vastly deepens brand experience and trust. To protect cannabusinesses, the opportunity to lower the risk of liability is also a big plus.

Know the 3 Key Connected Packaging Safeguards

  1. Serialized QR codes are a great way to verify product authenticity. You can apply an anti-counterfeit serialized code that can be easily scanned by any scanner or smartphone. A serialized QR code on the packaging can provide counterfeit protection and connect to a video or website and find vital information such as:
  • Certifications
  • Dosages
  • Potency levels
  • Testing history
  • Effects and side effects
  • Reviews

Even better, serialized QR codes discourage counterfeiters from stealing your product. The code allows for real-time monitoring and alerts for potential counterfeit cannabis products, as well as diversion of goods.

  1. Track and Trace ensures that you have visibility on your cannabis products throughout every touchpoint, from the manufacturer to the customer. Very recently, two technology companies, a start-up and a Radio Frequency ID (RFID) firm, partnered to offer authentication, supply chain management, and tamper-evident content for consumers who buy from dispensaries. Their solution is to enable ultra high frequency (UHF) and near field communication (NFC) tracking from a single product label. The benefits of their solution are impressive. Here are just a few:
  • Hand-held readers allow budtenders and their customers to access data and confirm products are authentic.
  • Regulators and producers get secure, accurate data on the product from seed to store.
  • Includes information about a product’s seed, how it was grown, treated, transported through the supply chain, and dispensed.
  • The built-in NFC and UHF chips are integrated into a safety and security seal that’s on every cannabis package. This confirms whether a product has been opened in the supply chain, protecting the cannabusiness owner and buyer, ensuring that a consumer doesn’t buy a product that has been altered or counterfeited.
  • The system is so sophisticated, customers can learn about products by simply tapping their phone against the label. 

Think about it. Liability risk can poke its way into your business anywhere throughout the supply chain via human error or intentional criminality. Tapping the latest digital technology just makes sense for a cannabis business.

  1. Solid environmental claims. In other words, avoid Greenwashing at all costs. Corporate America has been making environmental stewardship pledges for decades now. But when a company or brand fails to live up to its claim of “Net Zero Carbon” or “Sustainably sourced,” for instance, it can turn ugly. This is especially true when a large portion of a brand’s market includes the Millennial or Gen Z demographics.

In fact, Gen Z are true digital natives; they get almost all of their information at the touch of a device. Brand transparency is important to them, particularly around issues such as sustainability, healthy ingredients, and truth in your messaging. Remember, when these digital consumers suspect a brand of dishonesty, they will take instantly to social media platforms such as Instagram and TikTok to call out violators.

A Voice From The Packaging Industry

So, we sought the wisdom of packaging guru, Tom Newmaster of FORCEpkg. His advice to cannabis businesses? “Cannabis marketing and packaging possess a distinct advantage. Many cannabis brands want to be thought of as something more than a great high. The product itself integrates naturally with a whole host of causes.

“There are brands that support the fight against mass incarnation. Others support green farming practices. These causes are intrinsically related to the product; there’s nothing forced about making the connection. This lends cannabis a claim to authenticity, a trait treasured by the younger generation.”

Leading cannabis brands are using connected packaging to engage their customers with stories like the above. Everybody loves a good story, and younger consumers love a good cause.

How Can Cannabis Companies Insure Themselves Against Liability?

According to one leading voice, the stakes are still high as cannabusinesses sort out the evolving landscape of their industry—as regulations change, new players emerge, and technologies make it easier to protect your product through the supply chain. Insurance policies that rise to the top include:

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

Policies aside, as you strive to position your brand among so many new competitors and avoid the criminality that stalks this risk-filed category, keep packaging at the top of your list. It’s a communication tool that will serve as an important safeguard of every successful cannabis brand.

What Should Cannabis Businesses Look for In a Packaging Design Partner?

  • Choose a packaging design firm that is up to date on the regulations specific to your state.
  • With the advance of connected packaging and its many benefits in the areas of track and trace through the supply chain, it just makes sense to work with a firm that is fully schooled on this vital tool.

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. 

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