How Cannabis Beverages Create New Risks for Bars and Restaurants
Some bars or restaurants now offer cannabis-infused cocktails, seltzers or THC-enhanced mocktails. This once-niche category was reserved only for licensed cannabis stores, but the 2018 Farm Bill enabled the hemp-derived drinks category to evolve quickly.
Consumer curiosity and the widespread availability of these beverages that don’t fall under adult-use marijuana regulations have been driving growth. For food service businesses, offering these products can be a way to stay competitive, but for insurers, it introduces a range of new and unfamiliar risks.
Insurance policies in the hospitality space were largely written with alcohol in mind, not cannabis. Since these products were not widely available or outright illegal, cannabis was either excluded or not even contemplated.
These issues are top of mind, however. Some states permit bars and restaurants to serve regulated cannabis beverages, while in others, operators add hemp-derived THC drinks to the menu through standard suppliers. These businesses don’t see themselves as part of the cannabis industry, yet they are inadvertently carrying cannabis-related liability.
Cannabis vs. alcohol exposure
Cannabis-infused beverages are a complicated product, because they are packaged like consumer goods, but consumed like alcohol. The effects of THC drinks are delayed and variable from person to person, especially when combined with alcohol. In the event of an incident, it’s a complex equation to determine impairment, fault and liability.
Most general liability policies do not include cannabis, while liquor liability often stops at alcohol. Cannabis-specific coverage tends to be written for dispensaries and manufacturers, and not for food service businesses. This leaves a growing number of establishments operating in murky waters, unsure of whether their policies actually protect them in case of an incident.
There’s more to risk management in food services spaces than just having the right policy in place. Bars and restaurants that want to serve THC beverages need to think about balancing issues of compliance, customer safety and ensuring appropriate staff training.
Technology can help determine risk early
Insurers may not even know that restaurants and bars they write policies for are adding THC beverages to their menu options. In some cases, they may not even be aware that the drinks carry insurance implications or increase potential risk. For underwriters, this makes risk discovery difficult.
Digital tools can help close that gap, such as modern insurance platforms with smart application workflows that can flag relevant exposures early. Embedded data from point-of-sale systems and compliance checks can offer insight into potential red flag menu items. This makes it easier to build policies that are aligned with the current risk profile, and make the process much more accurate.
Cannabis beverages may require new kinds of coverage that combine elements of liquor liability, product liability, compliance checks and specialized cannabis endorsements. Some situations may call for language that addresses hemp-derived THC separately from regulated adult-use cannabis.
Digital underwriting tools can help companies stay on top of compliance as exposures change, allowing for streamlined policy adjustment. For example, a restaurant that offers THC beverages on weekends or for special events only could see temporary policy changes.
Rather than wait for clearer laws surrounding cannabis and hemp-derived THC, insurers can use digital compliance tools to stay up to date. Platforms that integrate with state-level regulatory data can help underwriters understand what is allowed in a given jurisdiction and where liability may be highest.
As the THC beverage market evolves, so must the insurance industry. Successful insurance of the hospitality industry will lie in the ability to build coverage that reflects what consumers really want and adapt coverage options to meet these changing needs.
Charles Pyfrom is chief marketing officer at CannGen Insurance Services, which provides coverage for cannabis, CBD and hemp risks.
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