New Trend: Cannabis Consumption Lounges

By Matt Engle | May 22, 2023

The cannabis industry continues to evolve, with 39 states and the District of Columbia having legalized cannabis on a medicinal level, and 21 states and D.C. allowing cannabis for recreational use.

While the market has become increasingly saturated, this is not predicted to result in an industry slowdown. Additional states are expected to advance the U.S. market and pass some measure of cannabis reform by the end of 2023, according to Cannabis Business Times.

Looking into the near future, we know at least four states — Minnesota, Ohio, Oklahoma, and Pennsylvania — have a good chance of legalizing recreational cannabis this year.

Cannabis Insurance Landscape

As medicinal and recreational use of cannabis continues to become legalized throughout the U.S., more insurers are entering the market, making it easier for cannabis business owners to obtain coverage at an affordable rate.

Insurers that have served the cannabis industry for a long time have watched the market go from a limited line of insurance products for cannabis companies to a more competitive space — and this evolution will only continue. While this is good news for operators, agents need to keep a close eye on emerging industry trends so they can best advise their clients.

The Rise of Cannabis Consumption Lounges

A new trend to note is the development of cannabis consumption lounges. Also referred to as social consumption lounges, these up-and-coming retail spaces allow on-site cannabis use, including smoking, vaping and ingesting edibles.

While some states may allow cannabis sales legally, there are a scarce number of public areas for people to go and legally use the products they’ve purchased.

Currently, cannabis consumption lounges are legal in California, Colorado, Illinois, Nevada, New Jersey and New York — some of these states still are giving out licenses to their recreational market or waiting for municipalities to approve consumption lounges.

Las Vegas is the most recent entity to approve regulations for consumption lounges. The city council chose to keep a 1,000-foot buffer between the lounges, but it included an option for businesses to receive a waiver allowing them to cluster near one another.

While cannabis consumption lounges continue to move through the legalization process, they must continue to follow the rules and regulations specific to their state and municipality. Although a great opportunity to compete in a high-demand market, cannabis operators should be aware that there are unique risks associated with these establishments.

What to Know

While a prime business opportunity for cannabis operators, agents need to help clients realize that consumption lounges come loaded with risks, including the potential for crime, drugged driving and health issues associated with cannabis smoke exposure.

Just as dram shop laws protect businesses from civil liability for serving or selling alcohol to minors or intoxicated people, the cannabis industry has “gram shop” laws that aim to provide the same protections for cannabis lounges. Gram shop laws also will prevent a cannabis consumption lounge from being liable if someone leaves and injures someone else after consuming cannabis.

Agents also should familiarize business owners with other liability risks that consumption lounges face. Exposure risks (such as product recalls), exclusions and limitations (health hazards or product withdrawal expenses), and loss control and mitigation are all examples of liability risks that cannabis businesses face. Assault and battery is another key coverage agents should recommend.

For example, if a patron is assaulted in the parking lot by unknown assailants, an injury claim can be brought against the consumption lounge.

As the industry continues to evolve, it’s crucial that agents keep up with emerging trends and legislation to best guide their cannabis business clients. Agents should start with talking through liability risks, assault and battery coverage, and the benefits of gram shop laws to best protect their clients.

With proper risk management solutions, agents can help business owners in the cannabis industry secure the right protection for whatever lies ahead.

Topics Trends Cannabis

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