5 Risks While Operating in the Psychedelics Industry in 2024

This post is brought to you by R&A Psy-Ins, an insurance broker operating at the forefront of the psychedelics industry.

General Liability Insurance is a linchpin for psychedelic businesses and the most essential coverage to protect from a variety of claims including personal injury, bodily harm, property damage, and other situations that may arise including slander, libel, copyright infringement and more.

Professional Liability/Errors & Omissions (E&O) is a type of specialized medical malpractice liability insurance that protects businesses against losses not covered by traditional / general liability insurance, in the event that a patient accuses your practice, business or retreat of making a mistake (an error) or failing to do something (an omission).

In an industry like psychedelic medicine, this type of insurance is critical. Many industry professionals provide their therapies either on-site or remote through telemedicine and assist their patients throughout the course of their therapy. Patients require precise dosing and treatment, and there is no room for error. Therapists, guides, and facilitators involved in psychedelic-assisted therapies must be equipped with insurance that shields them from legal actions arising from allegations of negligence, malpractice, or failure to meet the standard of care.

Product Liability is a type of specialized coverage designed to protect you and your business from claims that can happen anywhere along the supply chain, including product contamination, mislabeled products, false advertising, or defective products. With proper coverage, your insurance company will pay for damages and legal expenses if you are sued, up to your policy limits. Your Product Liability policy will also cover any medical expenses for those who are harmed by the psychedelic substance or treatment.

Directors and Officers (D&O) Liability Insurance protects corporate directors and officers, as well as their spouses and estates, from being personally liable in the event your company is sued by employees, vendors, competitors, customers, or other parties, for actual or alleged wrongful acts in managing the company.

This could include non-compliance with regulations or laws, employment practices and HR issues, theft of intellectual property, lack of corporate governance, underperforming company or stock performance, breach of fiduciary duty resulting in financial loss/bankruptcy, misrepresentation of company assets, misuse of company funds and fraud.

Litigation is becoming a more frequent occurrence, especially in a high-risk industry such as psychedelic medicine. In the event of a legal claim, this policy will cover fees, fines, settlements, and other substantial costs. If your business has outside investors, you cannot afford to pass over D&O Liability Insurance. In fact, many investors, officers and directors require a company to provide D&O insurance.

Cyber Defense Insurance. Cyber fraud is a very real and costly risk that requires its own specific policy. Many medicinal businesses and clinicians rely heavily on technology and software to provide their therapeutic treatments. VR/AR technologies and applications are extremely vulnerable to cyber-related crimes – lab data on drugs can be altered, personal records can be hacked and credit card and banking information can be stolen.

Cyber Defense Insurance goes together with General Liability and Professional Liability Insurance and is necessary to protect your psychedelic medicinal business against lawsuits, as well as penalties/fines from regulators.

This is an exciting time to be a part of a cutting-edge industry that has the real potential to treat millions of American’s mental health disorders without relying on Big Pharma drugs. While there are too many factors and moving pieces to predict exactly what will transpire in 2024, given the meaningful headway the psychedelic medicinal industry made in 2023, R&A PSYINS reasonably anticipates – and is cautiously optimistic – that further progress will be made in 2024 and beyond.

As more treatment centers, clinics, retreats, cultivators and distributers pierce through the regulatory landscape to be a part of this burgeoning industry, the need for specialized insurance coverages to address the unique risks and shield psychedelic ventures from potential lawsuits will be paramount.

Working with an insurance broker experienced in psychedelic medicine is critical. R&A PSYINS is at the forefront of this movement and provides psychedelic ventures throughout the ecosystem with Business Liability Insurances. If you have questions or would like to schedule a free consultation, please click here or call (954) 790-6604.