Cannabis Law Myths, Part I — Retailers Are Not Liable For Bad Product

Many myths surround cannabis laws and this is the first post we will be doing as part of an intermittent series of posts examining some of the more prevalent ones. This post focuses on the myth that cannabis retailers cannot be held liable for the defective cannabis products they sell — only the grower or processor can be.

Not true.   

Though the product liability laws in all states generally favor those not involved in manufacturing a defective product, there are circumstances when retailers can be held liable for having sold a defective product, even if they did not know about any defect. Contrary to popular belief, just because a retailer has no part in making the defective product it sold, the retailer can still be held liable for having sold it.

In about half of all states, a retailer that sells a defective product can be subject to liability for harm caused to a consumer from a defect. What this can mean for cannabis dispensaries is that they can be held liable if someone falls ill from anything sold at retail, including edibles or tinctures or whatever.

Many state laws set forth exceptions for retail sellers of products, but they do not absolve retailers of all liability. These laws typically provide that a product seller can be liable for damages caused to a consumer if the consumer’s harm was caused by the product seller’s own negligence, if the product seller made a warranty about the product and then breached that warranty, or if the product seller intentionally misrepresented the product it was selling

Beyond these affirmative acts that can inflict liability, most states also have laws rendering product sellers liable for defective products if the court deems it unlikely that the injured consumer be able to enforce a judgment against any manufacturer. In real life terms, this means that if someone is injured by a defective medible and the manufacturer of that medible cannot pay damages to the injured consumer, the retailer will be required to pay those damages, even though it did nothing wrong.

In an industry as new as cannabis it is certain that some manufacturers will succumb to insolvency, so the possibility of product liability attaching to retailers is not remote.

Bottom Line: If you are a cannabis retailer, you are wrong to assume that you cannot be held liable for defects in the products that you sell and for the injuries that result from those defects. This means that you need to be careful in vetting the manufacturers from whom you buy and the products you sell. You also should have insurance to cover worst case scenarios.