Cannabis Tracking Systems Add Power to Product Liability Prevention

Tech Tools Help with Compliance Monitoring, Claims Handling, and Product Liability in the Marijuana and Cannabis Industry

“Tracking systems can be an invaluable tool for everyone involved in the cannabis industry. Agents should inquire about a cannabis insurance applicant’s use of tracking systems and its policy for collecting, accessing, and monitoring the tracking data for the products it processes or sells. Insurers should review pertinent tracking records and reports in connection with product loss or liability claims.” – Phillip Skaggs, AAIS

Moving right along in our coverage of Mr. Phillip Skaggs’ invaluable article concerning insurance agents assisting their cannabis clients in understanding the risks involved in their business – as published on the insurance agency-consultative Rough Notes website – we’re now getting to the subject of product tracking as a means of helping to prevent product liability issues with cannabis and its related crops and by-products.

Quoting Mr. Skaggs from his article, Understanding Issues Lets Agents Help Clients Address Risks:

“Cannabis tracking systems are quickly becoming crucial to the success of the industry and likely will have a tremendous impact on compliance monitoring, claims handling, and product liability. Thanks to recent developments in statewide tracking systems, regulators and insurers soon will see a significant increase in useful data about cannabis industry distribution claims and losses. Similarly, cannabis businesses can use tracking systems to monitor production and distribution for health, safety, and quality control. The utility of cannabis tracking in product liability lawsuits, however, may be double-edged.”


On the one hand, product liability tends to flow throughout the chain of distribution. In most states, anyone along the chain can be held strictly liable, even when he or she had nothing to do with the defect. It is then the burden of the businesses in the chain to sort out liability through subrogation actions.

California, among other states, subscribes to what is known as the “market share theory,” in which all manufacturers and suppliers of a particular product (e.g., a generic medication or a common strain of cannabis) can be held liable if the actual manufacturer and supplier of the product that caused the consumer injury cannot be specifically identified. With access to statewide tracking information, plaintiffs’ attorneys and regulatory agencies can identify the entire chain of distribution and sometimes even reach across parallel lines of distribution to name defendants in class action litigation.

On the other hand, seed-to-sale tracking of cannabis products and activity provides valuable insight into the chain of distribution and can be used to narrow the field of liable parties—and maybe even pinpoint occurrences of contamination or loss. A scrupulous cannabis business operator named in a lawsuit should be able to access tracking data and quickly identify which distribution chains are implicated, potentially shrinking the pool of liability and subrogation significantly before submitting a claim and responding to a complaint.”

NCIS – National Cannabis Insurance Services – understands the vast and subtle nuances concerning insurance coverages for the burgeoning cannabis growing and dispensing industries.

We’re committed to assisting members of the cannabis industry with cannabis insurance solutions and the myriad legalities therein – including product liability insurance for cannabis operations. You can learn a bit more about National Cannabis Insurance Services here.

If you or your associates are interested in getting started in the cannabis industry and want to understand insurance coverages, or if you’re already in the business and want coverage for your operations, please don’t hesitate to contact us here. We’ll get back to you shortly.

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