A change in cannabis insurance coverage is on the horizon

This week, Senator Bob Menendez of New Jersey introduced a bipartisan bill that would ensure legal marijuana and related businesses have access to comprehensive and affordable insurance coverage.

The Clarifying Law Around Insurance of Marijuana (CLAIM) Act, which is co-sponsored by Senators Rand Paul (R-Ky.), Jeff Merkley (D-Ore.) and Kevin Cramer (R-N.D), could expand insurance coverage for thousands of cannabis businesses.

The legislation follows the Secure and Fair Enforcement (SAFE) Banking Act of 2019, which would ensure banking services, including credit cards and savings accounts, become legally available to legitimate marijuana businesses. The SAFE Banking Act passed in the House in March and is now pending a Senate vote.

At the moment, cannabis businesses operating in legal states have limited access to, and are often denied, insurance coverage, as insurers remain hesitant to enter the marketplace, despite growing demand. On the other hand, marijuana businesses that have secured coverage are often faced with inadequate limits and/or coverage gaps. The CLAIM Act aims to open the door for insurers to provide comprehensive cannabis coverage without fear of federal consequences.

“With New Jersey just expanding their medical marijuana program, and other states across the country legalizing recreational and medical cannabis, we must ensure these businesses can fully operate just as any other legal small business would,” Sen. Menendez said in a press release.

“Current federal law prevents these small business owners from getting insurance coverage, and without it, they can’t protect their property, employees, or customers,” he continued. “We can solve this problem with legislation that allows insurance companies to provide coverage to these enterprises without risk of federal prosecution or other unintended consequences.”

The CLAIM Act would:

• Prohibit penalizing or discouraging an insurer from providing coverage to a state-sanctioned and regulated cannabis business, or an associated business, such as an lawyer or landlord providing services to a legal cannabis business;
• prohibit the termination or limitation of an insurer’s policies solely because the insurer has engaged in the business of insurance in connection with a cannabis-related business;
• prohibit recommending, incentivizing, or encouraging an insurer not to engage in the business of insurance in connection with a policyholder, or downgrade or cancel the insurance offered to a cannabis or cannabis-related business;
• prohibit the federal government from taking any adverse or corrective supervisory action on a policy to an owner or operator of a cannabis-related business or real estate or equipment that is leased to a cannabis-related business, solely because the owner or operator is engaged with a cannabis or cannabis-related business; and
• protect employees of an insurer from any liability solely for engaging in the business of insurance with a cannabis or cannabis-related business.

“The principles behind the CLAIM Act are simple: respect the voices of the states and their people and stop shutting out legitimate businesses from obtaining basic protections,” said Sen. Paul in the release. “The states are making their own decisions on these issues, and it’s time for the federal government to accept that.”

For similar news coverage, please visit our Marijuana and the Insurance Industry Insight Instants page.