Canadian Underwriter

What’s new with cannabis insurance regulations?

May 18, 2023   by Jason Contant

Purchasing cannabis with a credit card

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One MGA is questioning a regulatory change in Ontario that dropped a mandatory requirement for licensed producers (LPs) of cannabis to hold $15 million in product recall insurance and instead raised the commercial general liability requirement to that amount.

In the fall of 2022, the Ontario Cannabis Store — the regulatory body for the sale of cannabis in the province — fully dropped the recall limit and raised the CGL requirement from $10 million to $15 million, explained Marc-Anthony Manion, a commercial insurance underwriter with Burns & Wilcox Canada.

British Columbia followed suit on May 15 of this year, also dropping their mandatory product recall insurance requirement, Manion told Canadian Underwriter in an interview. It’s not clear if the CGL limit was affected, but most companies selling in B.C. also sell in Ontario and already likely have the $15 million CGL in place. (Ontario and B.C. are the two provinces with the largest cannabis sales).

“We were not notified by the B.C. province of these requirement changes — it was discovered by way of our broker partners requesting endorsements and limit changes,” Manion reported.

“This was a big change for all LPs as many readjusted their insurance to no longer carry recall insurance at all,” Manion said of Ontario and B.C.’s move. Following Ontario’s announcement, some clients dropped the coverage completely while others lowered the amount to $2 million or $5 million, for example.

Other smaller provinces still require smaller recall insurance limits of $1 million or $2 million, Manion noted. As well, many provinces have dropped the requirement to hold product liability insurance to sell cannabis (Ontario still requires $5 million).

“We still recommend to all our broker clients to advise their clients to hold at least some sort of recall policy, even if the limit is much lower at $2 million or $5 million,” Manion said. “We certainly believe that having a policy in place mitigates the potential of financial loss in the event of a recall.”

CU asked if the government provided a rationale for removing the mandatory recall insurance requirement. Manion said it’s believed it was essentially a premium-saving measure for LPs — “an effort to try and save the LP some money and make their operating costs a little bit less.”

Manion acknowledged LPs faced a “very expensive minimum premium” for recall insurance, but said Burns & Wilcox still recommends to its broker partners that they have an open conversation with their insured to let them know a recall risk is still there. “Maybe you don’t need $15 million in coverage, but it’s still pretty smart to have some sort of recall policy in place just in case in the event of a claim.”

Tyson Peel, vice president and director of commercial insurance at Burns & Wilcox, agreed. “All we can do is argue that, ‘Okay, there’s an upfront cost savings for the insured.’ But at the end of the day, if they do have an incident and they’ve declined or lapsed their recall product, they’re on the hook… and the [CGL policy] is not going to pick up that coverage.”


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