The first cannabis product liability class action in Canada gets certified

A Canadian medical cannabis producer, Organigram Inc., is facing a class action lawsuit after voluntarily recalling numerous products after some were found to contain traces of pesticides not authorized for use on cannabis plants. Headquartered in Moncton, New Brunswick, the producer became aware of the situation after a wholesaler had the protect tested by a third-party laboratory and alerted Organigram. The representative plaintiff is alleging that she suffered adverse health consequences as a result of consuming the recalled cannabis product and is claiming various remedies, including general and punitive damages. The Supreme Court of Nova Scotia certified the lawsuit as a class action proceeding on 18 January 2019.

Both medical cannabis producers and licensed cannabis producers under the recreational cannabis regime face the risk of litigation should a product be recalled. Directors’ and officers’ (D&O) liability insurance can provide valuable protection for board members and executives when faced with management liability claims. A D&O policy can also provide protection to the corporate entity when named in various lawsuits; this protection is typically limited to securities lawsuits for public companies, with non-public companies enjoying broader entity coverage. While most D&O policies exclude product liability lawsuits from entity coverage, it is possible, depending on the specific wording of the policy at issue, for a director or officer, should they be named in such an action, to receive valuable coverage for legal expenses, settlement and/or judgment amounts. Moreover, if a public company faces a downstream securities lawsuit following a product liability claim, such as can be the case if a product recall results in a stock price drop, a D&O policy may respond to provide coverage.