A closer look at CLAIM, the proposed marijuana insurance act

Among other things, the CLAIM Act before Congress stipulates that insurers working with legal cannabis businesses are not breaking federal law.

The proposed CLAIM act clarifies definitions applicable to the cannabis industry, proposes legislative protections for companies doing business with in or in partnership with the industry, and outlines potential federal agency guidelines. (Shutterstock)

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More and more states are legalizing marijuana for either medical or recreational use or both; growers, dispensaries, and other companies have formed to meet demand.

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:

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.

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