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Calco Commercial Insurance Services

CA DOI License #0G67945

Your Liability In The Vape Industry

Strict Liability: 

The law states that the importer, manufacturer, distributor, and the retailer are all liable for the products which they sell.Although the final judgement against the defendants is split accordingly by a judge, this does not relieve a defendant from having to bear the cost of defense until the close of the lawsuit.

Health Hazards:

 

It’s only a matter of time before the chemicals, and the metals found in the aerosol which are known to cause a long list of diseases are linked to someone’s health condition and a legal precedent is set.  At this time, the only health related injury we are aware of has been for Lipid Pneumonia.  In our opinion, this was a misdiagnosis due to the fact that a “Lipid” is an oil.  PG and VG are technically types of alcohols.  Flavorings may contain oils but this is rare and should not be used in the vape industry, and obviously nicotine is not an oil.  Having said that, the doctors’ misdiagnosis can be used in court as an expert opinion and the burden of proof rests on the defendant.  If you are selling e-liquids or e-juices make sure to secure a policy with Health Hazard protection - the CALCO policy will provide e-liquid insurance coverage on the best form available.

 

Product Defects/Product Liability:  

Products which were not intended to be defective or hazardous sometimes end up that way because of misuse, lack of instructions and warnings from the manufacturers, and/or defective design.  Vape Product Liability Insurance coverage from CALCO will provide the right coverage for your business.

Marketing Liability:

The majority of Class Action law suits are aimed at how a company markets their products.According to the US Food and Drug Laws: .If you have warnings on your products yet fail to include them on social media posts, you may be in violation of a number of consumer remedies and business practices laws.Responsible companies have started to add the “Nicotine is an Addictive Chemical” to their social media posts, finally!

Premises Liability:

 

Slip and Fall claims do occur but they can be avoided by making sure that your premise is not cluttered and no objects are left unattended for someone to slip and fall.  If you are a B&M owner make sure to have vape shop insurance which would provide General Liability. 

Additional Insured:

This is the most misunderstood term by consumers.  For example, if a E-liquid MFG lists you on their policy as an Additional Insured this does not make you “Named Insured” like the manufacturer who owns the policy.  The Additional Insured endorsement only extends the Product Liability section of the policy but with many limitations.  The other issue with relying on the manufacturer is that as an Additional Insured you are sharing policy limits with them and all of their other vendors.  This results in the dilution of the policy limits, which would have been otherwise available to you.

 

Exclusions:

Every General Liability policy includes Products/Completed Operations coverage AKA Product Liability.  In some cases, the insurer may choose to offer coverage but will exclude Vape Product Liability.  There are also a number of standard exclusions which include exposures such as asbestos, terrorism, mold/fungus, just to name a few.

 

Flavoring Issues:

 

Some flavoring companies have capitalized on the opportunity to market and sell products which they claim are free of Diacetyl, 2,3 Pentanedione and structurally related substitutes.In most cases, those test results are not published or are not provided on a MSDS document.  Further, the lack of testing standards means that a flavoring company can test for Diketones at 1 part per 100,000 and obtain a non-detectible measure of Diacetyl.However, if the same product is tested at 1 part per million the Diketones would be detectible.  This creates liability not only for the E-Liquid manufacturer but for the entire chain of commerce.  A lawsuit can still be brought against a company with an absence of a physical injury.  The notable lawsuits against Five Pawns, Cuttwood, and Molecule Labs demonstrate just that. They allege that their client would not have purchased the products had they known of the harmful toxicants in the aerosol.

 

 

 

How to secure the right policy?

 

When offered a proposal of insurance which confirm that Health Hazards are not excluded, you should confirm the details of the endorsement form. Keep in mind that the term “Exclusion” and “Endorsement” actually have the same meaning in a commercial insurance policy.With that said, if you are reviewing a document which states “Electronic Cigarettes Endorsement” this does not mean that you are necessarily obtaining coverage.Certain underwriters create what we call “get out of jail free cards”.  An example of this is when the endorsement contains language which reads:

 

 

To conclude, the above-mentioned is not intended to substitute legal advice from your attorney.  This is merely a generalization of some of the exposures facing the vape industry.  At CALCO, we focus on providing the best available policy, with the least amount of exclusions, to our clients, the members of the Smoke-Free Alternatives Trade Association and other Trade Associations.  We also take part in lobbying for the vape industry and do our best to ensure that vaping remains a viable business for you and us.  Feel free to learn more About Us or to Contact Us.