Use of Liability Waivers By Cannabis Consumption Lounges

Use of Liability Waivers By Cannabis Consumption Lounges

Twelve (12) states have now legalized adult use retail consumption lounges, however, applications are not yet being accepted in all states where the laws permitting them have been adopted. The industry expects to see lounges open in several states in 2025 (including possibly New York).

New business models and risk management strategies are evolving for this new industry. Some marijuana consumption lounges have started to have patrons sign waivers of liability, adopting such practice from other “high risk” business industries such as extreme sports, amusement parks and other amusement activities (e.g. boating, swimming, surfing, biking, skiing, skating, and horseback riding to name a few). But are they effective?

By signing a waiver, patrons typically acknowledge the inherent risks associated with the activity and agree not to hold the business liable for harm that might result from those inherent risks. However, such waivers generally apply only to the participants themselves and not to third parties who are harmed by the participants after leaving the lounge. The participant cannot waive claims by other people, only claims from themselves and their representatives. For example, if an impaired patron leaves the lounge and causes harm to another person in an auto accident or physical altercation, the lounge owner could potentially still be held partially liable based on claims of negligence by the lounge in failing to prevent overconsumption or not adequately monitoring the patron’s behavior.

A waiver for a cannabis consumption lounge may cover risks related to overconsumption, adverse reactions or accidents that occur at the consumption lounge because of impairment. To ensure enforceability, waivers should be clear, unambiguous and specific about the risks patrons are waiving. However, the laws regarding liability vary state to state. Some states might find such waivers unenforceable as against public policy because they don’t protect public health and safety. Other states deem waivers unenforceable because of the federal illegality of cannabis.

Despite the use of waivers, cannabis-lounge operators still have a duty of care to ensure the safety of their patrons and others by monitoring patron consumption and taking reasonable steps to implement a protocol for intoxicated individuals leaving the premises without posing a risk to others. The most common approach is to call for a ride by a family or friend of the patron or a rideshare service such as Uber.

Liability insurance is an important component of a risk mitigation strategy for a consumption lounge, including coverages such as general liability coverage for injuries and property damage at the lounge premises, liquor liability and product liability coverage to protect against claims related to adverse reactions or unexpected effects from cannabis products, dram shop coverage to cover third-party claims arising from the actions of impaired patrons and errors and omissions coverage if a cannabis lounge provides guidance or advice about product usage.

Consulting with an experienced attorney can help business owners identify specific risks associated with cannabis consumption and explore strategies that can offer protection and mitigate risk for the business.