Ways to Prevent Liability as a Pennsylvania Cannabis Business
How to comply with state laws and regulations
on October 25, 2019
Updated on January 12, 2023
A successful business is one that takes proactive steps to limit its liability and reduce its general exposure to legal, financial and other risks. When proper precautions are not taken, unexpected events can leave a company facing significant financial liability. In some cases, liability can even be high enough to destroy a company.
For Pennsylvania businesses operating in the marijuana industry, there are some unique liability issues that must be addressed. Simply put, cannabis-related companies face additional risks. In this article, you will find an overview of the four major liability risks that face cannabis industry businesses in Pennsylvania.
Know the Risks: Potential Liability for Marijuana Industry Businesses in Pennsylvania
- Regulatory Violations
Operating within the marijuana industry is deeply complicated. As of October of 2019, Pennsylvania permits medical use of cannabis, but not recreational adult-use—although, there are currently efforts ongoing for full legalization. Companies that operate with the cannabis industry in the state must strictly comply with all state medical marijuana laws. Pennsylvania’s medical marijuana program has strict regulations in place. If you have any specific questions about these regulations, you should reach out to an experienced Pennsylvania cannabis law attorney for assistance.
- General Liability
Of course, business is business: Medical cannabis industry companies face many of the same general liability risks that all other companies in Pennsylvania also have to deal with. While these matters may sometimes seem a little mundane, they cannot be overlooked. Business owners need to be prepared to take on any issue that might arise—from a dispute over a commercial agreement to an employee industry in the workplace. It is imperative that cannabis industry firms have adequate insurance coverage to protect their businesses from basic commercial risks. Make sure that you know the terms of your insurance policies.
- Higher Rates of Theft
One of the big concerns for marijuana industry businesses—particularly in states like Pennsylvania where the industry is brand new—is that banking is still a challenge. As noted by the America Bankers Association, financial institutions face liability risks when they agree to offer accounts to marijuana-related businesses. As such, many banks simply decline to participate in this market at all. A consequence of this is that medical marijuana is largely a cash business. One of the unfortunate effects of this is that cannabis companies report that they face higher rates of theft. It is crucial that your company takes the proper security measures. Theft is a huge liability risk.
- Product Liability
Finally, it is important to remember that medical marijuana retailers and cultivators have a legal responsibility to put reasonably safe cannabis products onto the market. If contaminated medical marijuana is sold in Pennsylvania, the at-fault company may be held legally responsible through a product liability claim. Notably, defective product claims in Pennsylvania are brought under a strict liability standard.
For more information on this area of law, see our overview of cannabis law.