Insurance for Cannabis Testing & Laboratories

Cannabis testing is easily one of the most scrutinized parts of hemp, cannabis, and CBD production. The entire industry is guided by regulations, but  cultivation and testing get even more stringent measures. A lot can go wrong in a cannabis testing laboratory, ranging from falls to errors and omissions claims.  To put it simply, insurance is a no-brainer for laboratories that test hemp products.

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A cannabis testing laboratory tests CBD products to ensure compliance with health standards. Cannabis and hemp testing laboratories are typically independent and not owned by hemp manufacturing companies. According to hemp regulations, a third-party laboratory must test cannabis and hemp products produced by a company. This approach ensures transparency and no bias of any nature.

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Testing laboratories work under strict rules because the products are typically ingested. Additionally, professionals are the primary workers in this field because mistakes can endanger lives. Hemp testing laboratories must use mandatory equipment, they must follow facility guidelines, employ certified professionals, and most importantly follow laws guiding the production of cannabis, hemp, and CBD.

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Things to put in place for a testing laboratory to function fully may include:

• Test Equipment: Test equipment checks for the correct THC levels and the purity of the oil or edible. The testing process will certify that the formula is safe for consumption and in line with health standards.

• Safety Tools: Safety tools required in a lab are important. The lab must contain traditional lab safety measures for employee protection.

• Employees: Employees are the backbone of every activity in the lab. A testing facility hires professionals to carry out tests appropriately.

• Laboratory Building: A Laboratory building houses equipment and serves as a workplace for employees. It's the base of operations and must be fitted with the appropriate equipment.

• Automobile: Vehicles are needed to carry out a wide range of activities within and outside a laboratory. Overall, the cannabis and hemp laboratories have a fully equipped facility to test from manufacturing companies. Products that pass the test are certified as safe to consume.

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Cannabis testing companies can experience liability and property claims, most of which are out of operators control. Here are some of the most common claims:

• Property liability can cause loss to a testing company if the building, equipment, or automobiles is damaged or destroyed.
• Claims of errors and omissions by consumers who develop illnesses, allergies, or died from consuming products can lead to losses for the laboratory that tested the ingested product.
• An affected consumer can sue the laboratory claiming it made an error while testing cannabis, hemp, or CBD products.
• Employees may sue for bodily injury, employee benefits, and other forms of claims.  

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If one or multiple claims such as cited above hit a testing company,  the loss can adversely affect its financial power or lead to a complete shutdown.

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Looking at the ever-changing nature of cannabis, hemp, and CBD laws alongside the various susceptibility of the testing process, multiple coverages are required to fully protect against losses. Beyond the common policies many companies in the hemp industry purchase, hemp laboratories need a little more. Coverages to have include:

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General Liability Coverage

General liability coverage is standard insurance obtained by many businesses to protect a wide range of incidents. It covers bodily injury and property damage for third parties. It's the first shield a business uses to protect against claims and other forms of expenses resulting from accidents.

For example: say your business has a meeting with a new vendor. During the meeting, an individual slips and falls on your wet floor and incurs medical bill. This policy will defend your business.

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Product Liability Coverage

Product liability insurance protects a business from losses that could result if a product causes injury, health problems, or death. As in any industry, just one claim of bodily injury or health problem due to a product can cause a business to liquidate its assets. For a hemp laboratory, any claim of allergy or illness after consuming a product it tested may cause it to lose all its net worth if found guilty. However, with product liability coverage that can be prevented.

For example: say your lab tests a product that goes into the consumer marketplace. Months later a class action lawsuit is filed after hundreds of consumers became ill. This will legally protect you from the class action.

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Equipment Coverage

Equipment breakdown or damage leads to extra expenses that a business may not be prepared for. While repair is bearable, replacement may be impossible. With equipment coverage, a laboratory can confidently deal with equipment breakdown or damage seamlessly.

For example: say your business purchases thousands, or millions, of dollars of equipment to test product. Overnight, there's a building fire and the equipment is damaged. This coverage will pay to replace the property.

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Employee Coverage

Employees working in a laboratory are prone to slips and falls. Other types of bodily injury or death may require medical costs or compensation. An hemp testing company can use employee coverage to cater to such needs. A fiduciary policy can also work if a business offers certain benefits to employees.

For example: say your worker leaves the water running and a puddle accumulates on the floor. An hour later, another worker slips, falls, and breaks their arms. This insurance covers medical bills and legal fees.

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Auto Insurance

Auto insurance covers expenses relating to auto repair or auto replacement. If an accident occurs ( bodily injury), medical bills of individuals or claims by a victim are covered by the policy.

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Many insurance companies often steer clear of hemp coverages. The volatility of the industry makes it difficult to properly prepare for possible claims and accurately estimate the cost of a premium. However, expert insurers can assess a hemp/ cannabis company and decide the type and cost of coverage needed. Often, evaluations are based on the following:

• Employee Size: A CBD testing company with fair employee size is likely to experience lower claims compared to a large-sized company with hundreds of employees.

• Property Value: The value and number of equipment in a facility influences the price of a premium. The higher the value, the higher the premium.

• Income: The amount a business generates or is projected to generate( for startups) affects the premium cost. Usually, higher income means a costlier premium.

• Risk Management: A business with the ideal safety measures and disclaimers gets a favorable premium cost while a company without tends to pay higher. The bigger risk, the higher the premium.  

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To estimate, full coverage for a cannabis, hemp, or CBD testing laboratory may cost between $3,000 to $5,000 per year.

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To get an accurate price, an experienced advisor is the right person to speak to. Get in touch with a Fullsteam advisor today and learn more about how to protect your cannabis, hemp, or CBD testing lab. Our team is always on hand to walk you through the process and give you the right coverage.