These organizations need insurance, just like everyone else. However, because marijuana is still federally illegal, obtaining insurance is difficult, if not impossible, for some companies.

Senators Bob Menendez (D-NJ), Rand Paul (R-KY), Jeff Merkley (D-OR) and John Cramer (R-ND) have introduced a bill to Congress that would ensure access to insurance for cannabis-related businesses.

It is called the Clarifying Law Around Insurance of Marijuana, or CLAIM Act. Here's what you need to know:

• The act first defines a number of terms. Cannabis is defined as marijuana as defined in the Controlled Substances Act (21 U.S. C. 802). A cannabis product is anything containing cannabis, including concentrates, edibles, tincture, topicals, flowers, or a cannabis-infused product. A cannabis-related business is a manufacturer, producer, or any person or company that engages in any business or organized activity involving cannabis or cannabis products. Such activity includes cultivating, producing, manufacturing, selling, transporting, dispensing, distributing, purchasing or displaying any cannabis or cannabis-derived products or deriving any proceeds from such. Therefore, growers, processors, dispensaries, and related businesses are all cannabis-related businesses by definition. Also included are organizations providing any financial services including retirement plans, exchange trade funds; renting, selling or leasing property; legal services, business services or ancillary services related to cannabis. This addresses not only banks and credit unions, but building owners, equipment suppliers, and other providers of services an organization may need.
• The definition of Federal Agency refers to terms in the United States Code section 105 title 5, and also includes a private attorney as defined in section 3002(1)(B) of title 28 of the code. Likewise, the term financial service is a means of financial product or service as defined in section 1002 of the Dodd-Frank Wall Street Reform Act and includes the business of insurance, and the terms Indian Country, Indian Tribe, and Insurer all refer to various sections of the U.S. Code.
• Manufacturer is defined as a person or company that manufactures, compounds, conveys, processes, prepares or packages cannabis or cannabis products. A producer is the person planting, cultivating, harvesting or in any way dealing with the growth of the cannabis itself.
• A state is each of the states, including the District of Columbia, Puerto Rico, and any United States territories or possessions.

Additional clarifications

Next, the act outlines what a Federal Agency may not do, including prohibiting, penalizing or discouraging an insurer from engaging in the business of insurance in connection with a cannabis-related business or a state, political subdivision of a state, or Indian tribe exercising jurisdiction over cannabis-related businesses.

The Federal Agency may not terminate, cancel or limit an insurer's policies because the insurer engaged in business with a cannabis-related business, nor can an agency discourage or incentivize insurers from engaging in such business or in downgrading or cancelling business if the insured is involved in a cannabis-related business as a manufacturer, producer, owner, employee of any such business. Likewise, the insurer is not to take any adverse or corrective action on a policy for a cannabis-related business solely because the owner or operator is a cannabis-related business, nor is the insurer to take any such action against employees, service providers, or owners of real estate or equipment because the person or organization works for or with cannabis-related companies.

Federal agencies cannot force insurers to discriminate against any potential insured involved with the cannabis business.

Expanded business protections

Certain protections under federal law also are outlined. These protections involve engaging in the business of insurance within states, subdivisions of states or Indian country that allows the cultivation, manufacture, processing and other cannabis-related activities pursuant to laws of the respective states, political subdivisions or Indian countries.

Insurers in such activities may not be held liable pursuant to any Federal law for solely engaging in the business of insurance, or for further investing any income derived from the business of insurance. This is stating that activities and funds received because of insurance transactions related to marijuana are not subject to Federal laws restricting it.

Lastly, the act states that nothing in the act requires an insurer to engage in providing coverage for cannabis-related business or activity, nor does the act interfere with the McCarran-Ferguson Act or the Dodd-Frank Wall Street Reform Consumer Protection Act. The complete text of the act can be found here: CLAIM Act.

See also:

• P&C Legislative Round-Up: August 2019
• New bill aims to help cannabis businesses obtain insurance
• A change in cannabis insurance coverage is on the horizon