By: Michael H. Sampson, Esq.
Many singers, athletes, and other celebrities, as well as other notable persons and/or entities, are licensing their names (and, often, related intellectual property) to other businesses for those other businesses to use in the cannabis industry. These cannabis “brands” – that is, businesses that themselves do not grow cannabis or manufacture or sell products containing cannabis – seemingly downplay the risks that their licensing and other arrangements create. Rather than discount those risks, however, these brands would be better served by proactively addressing and mitigating the risks via insurance coverage and other common risk-management mechanisms.
Anecdotally at least, it would seem, for example, that many cannabis brands do not think that they need to obtain and/or maintain product liability insurance – after all, in their minds, they are not responsible for a “product.” However, if someone suffers “bodily injury” or “property damage” as a result of using cannabis or a cannabis-related product then everyone (or virtually everyone) who had anything to do with that cannabis/product is likely to be sued in a product-liability lawsuit.
For example, if a celebrity licenses her name to a cannabis company and someone is allegedly hurt while using the celebrity-branded product then that celebrity and/or her brand is likely to be sued along with others. In fact, the celebrity/brand is likely to be a particularly attractive target for an injured party and/or plaintiffs’ counsel because the celebrity/brand likely will be perceived as a “deep pocket” capable of paying a large settlement or judgment.
Even if the celebrity/brand ultimately can extricate itself from such a lawsuit – by a motion to dismiss or otherwise – just the costs associated with defending such an action militate in favor of obtaining product liability insurance.
In addition to obtaining its own insurance, which can include a “duty to defend” and/or coverage for the brand’s defense, a cannabis brand can take other important steps to mitigate its risk. For example, it can and should carefully negotiate any branding/licensing agreement and can require that any counterparty agree to indemnify the brand in the event of a product-liability and/or other claim. Similarly, through such an agreement, the brand also can require the other party to obtain and maintain certain types of insurance with certain terms and conditions and certain per-claim and aggregate limits. And, by way of further example, the brand may require that it be named as an “additional insured” on the other party’s liability insurance policies.
Implementation of additional risk-mitigation techniques and risk-transfer mechanisms also may be warranted and available, depending on the relevant facts and circumstances.
Regardless, the bottom line is simple: Just because a brand does not grow cannabis or manufacture or sell products containing cannabis does not mean that that business is without risk. To the contrary, it faces unavoidable risk – risk that may in fact be heightened by the particular celebrity’s (or brand’s) popularity. Accordingly, the brand – like any other cannabis-related business – should proactively ensure that it has the right types and amounts of insurance in place at all times and that it has taken and takes all appropriate steps to mitigate and/or transfer its risk.
Leech Tishman provides an integrated, multi-disciplinary approach to advising the cannabis industry. As such, attorneys in its Cannabis, Corporate, Insurance Coverage and Litigation Practice Groups work together to provide routine, day-to-day legal advice and assist with numerous legal issues that any cannabis-related business may encounter.
For assistance, or more information, please contact Michael H. Sampson, Co-Leader of the firm’s Cannabis Industry Group. Mike also leads Leech Tishman’s Insurance Coverage Group. Mike is based in the Pittsburgh office and can be reached at 412.261.1600 or firstname.lastname@example.org.
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Leech Tishman Fuscaldo & Lampl is a full-service law firm dedicated to assisting individuals, businesses, and institutions. Leech Tishman offers legal services in business restructuring & insolvency, corporate matters, employment & labor, estates & trusts, intellectual property, litigation & alternative dispute resolution, and real estate. In addition, the firm offers a wide range of legal services to clients in the aviation & aerospace, cannabis, construction, energy & natural resources, healthcare, and hospitality industries. Headquartered in Pittsburgh, PA, Leech Tishman also has offices in Chicago, Los Angeles, New York, Philadelphia, Sarasota and Wilmington, DE.