The cannabis industry continues to infiltrate the market in sophisticated, new ways. The latest trend? Cannabis-infused beverages. Whether seltzer, lemonade, or tea, these drinks appeal to a wider audience, from wellness enthusiasts to casual consumers trying to replace their happy-hour cocktail. While these beverages are booming, hemp-derived THC products are largely unregulated products and create new obstacles when trying to offer comprehensive insurance solutions to these businesses. So let’s take a closer look at the different types of cannabis beverages, the safety and regulatory concerns surrounding them, and what agents need to know when advising clients.
Understanding Cannabis Beverages
What Are Cannabis Beverages?
Cannabis beverages come in various forms — seltzers, teas, lemonades, ciders, even soft drinks — and are infused with either THC, CBD, or both. While the traditional association with cannabis may evoke images of smoking or edibles, beverages offer a more approachable entry point, especially for those who may not feel comfortable visiting a dispensary. Many new consumers are opting for beverages as their first foray into cannabis because the experience feels familiar, similar to enjoying a craft beer or a glass of wine.
There are two main types of cannabis beverages:
- Hemp-derived THC beverages are made from hemp plants containing less than 0.3% Delta-9 THC, making them federally legal under the 2018 Farm Bill. They are intoxicating but can be sold outside of the regulated marijuana market.
- Traditional marijuana THC beverages are derived from marijuana plants, have higher levels of THC, and are subject to strict state regulations. They’re sold exclusively through licensed dispensaries and undergo rigorous testing for quality and safety.
While both types of beverages provide a similar psychoactive effect, hemp-derived THC products have gained popularity since they’re more accessible. Consumers can buy them in places as common as boutique grocery stores or even bars, making them a more approachable entry point into cannabis consumption.
The Risks of Hemp-Derived THC Beverages
While the popularity of hemp-derived THC beverages is soaring, the market is largely unregulated, which can be a bit like the Wild West. The 2018 Farm Bill legalized hemp-derived THC as long as the THC concentration remains under 0.3%. The lack of federal oversight spells trouble. Lee Woodruff, VP of Cannabis Insurance at Jencap, highlights the concern, “The loophole that exists with hemp beverages is where the real problem lies. Unlike traditional marijuana beverages, which are tightly regulated, hemp-derived THC products are not held to the same safety and quality standards.”
This regulatory gap not only means products might be mislabeled or contaminated but also creates confusion for consumers who may not fully understand the differences between hemp-derived and marijuana-derived THC products. Consumers could inadvertently ingest more THC than they intended, leading to adverse reactions. Worse still, the production of Delta-8 THC — a less regulated cannabinoid often found in hemp products — can involve dangerous chemicals and solvents. “Unlike Delta-9 THC,” Woodruff adds, “Delta-8 THC has not been extensively studied. Its long-term effects are unknown, which creates even more uncertainty in this unregulated market.”
Insurance Considerations for Cannabis Beverages
Given the regulatory gaps and safety concerns surrounding hemp-derived THC beverages, manufacturers, distributors, and retailers need to protect themselves with the right insurance coverage. Insurance agents play a very important role in guiding their clients through the complexities of insuring these high-risk products.
Product Liability Coverage
One of the biggest risks for businesses involved in the production or sale of cannabis beverages is product liability. The manufacturer or retailer could be in legal hot water if a consumer becomes ill or reacts adversely due to mislabeled or contaminated products. “Make sure your product liability coverage is written with an insurance carrier that fully understands the products being manufactured, distributed, and sold,” advises Woodruff. “You also need to review policy forms carefully. If there’s a THC exclusion, ensure that it includes a carve-back for products that comply with the 2018 Farm Bill, meaning THC concentrations are at or below 0.3%.” Agents are encouraged to work closely with clients to evaluate policy exclusions and ensure that coverage extends to potential liability from hemp-derived products, which may not be explicitly addressed in all insurance policies.
Product Recall Coverage
In a market as new and unregulated as cannabis beverages, product recalls are a real risk. Contaminated products, especially those made with Delta-8 THC, could lead to costly recalls, damaging a company’s reputation and bottom line. Woodruff underscores the importance by noting, “Every business in this space needs to have a product recall policy. The unregulated nature of hemp-derived THC products means that recalls could happen at any time, and businesses need to be prepared.” By ensuring that cannabis operations have adequate recall coverage, agents can help them protect against the financial fallout of a large-scale recall and ensure they can swiftly respond to any safety concerns.
Navigating State Regulations
Another challenge for businesses selling hemp-derived THC beverages is the patchwork of state regulations. While the 2018 Farm Bill legalized hemp products at the federal level, states have varying laws regarding their sale, distribution, and labeling. Some states treat hemp-derived THC products the same as marijuana products, while others allow them to be sold in convenience stores and gas stations. “Each state has varying regulations for intoxicating hemp products,” explains Woodruff, “so businesses need to stay updated on local laws to avoid potential legal issues.” Work with clients to help them understand the specific regulatory landscape in each state where they operate so they can sidestep fines, product seizures, or even criminal charges.
Jencap’s dedicated team of experts works exclusively on cannabis risks. With access to underwriters who know the ins and outs of the industry, we can help cover cannabis placement and all associated risks. Contact us today.