Current federal law makes access to insurance products by cannabis businesses illegal.
The Clarifying Law Around Insurance of Marijuana (CLAIM) Act of 2021 has been reintroduced by U.S. Senator Bob Menendez of New Jersey. Menendez is a senior member of the Senate Banking Committee and chairman of the subcommittee that oversees the insurance industry. The CLAIM Act seeks to help legal marijuana and related businesses access comprehensive and affordable insurance coverages. That includes workers’ comp, property, casualty and title insurance. The bill is cosponsored by Sens. Rand Paul (R-Ky.) and Jeff Merkley (D-Ore.).
All but six states have marijuana legalization or decriminalization laws on the books for recreational or medicinal purposes. In the 2020 election, voters in New Jersey, Arizona, Montana, Mississippi and South Dakota approved of creating or expanding the legal use of marijuana.
The Bill was first introduced by Senator Menendez in July 2019. It referred to the Committee on Banking, Housing, and Urban Affairs.
Insuring Cannabis Businesses is Illegal
“Current federal law prevents … small business owners from getting insurance coverage. Without it, they can’t protect their property, employees or customers,” said Senator Menendez in a statement. “Our legislation simply levels the playing field for legal cannabis businesses. Allowing them to fully operate just as any other legal small business would by permitting insurance companies to provide coverage to these enterprises without risk of federal prosecution or other unintended consequences.”
“The principles behind the CLAIM Act are simple. Respect the voices of the states and their people. Stop shutting out legitimate businesses from obtaining basic protections,” said Sen. Paul. “The states are making their own decisions on these issues, and it’s time for the federal government to accept that.”
“State legal cannabis businesses should not be shut out from the kind of tools and financial services all businesses need to thrive. Including insurance to protect stores, customers, and workers from an unexpected emergency,” said Sen. Merkley. “It’s time to pass the CLAIM Act so we can deliver on that principle. And to continue working together to support our local businesses.”
The CLAIM Act ensures businesses operating under state laws that have legalized recreational or medical marijuana have access to insurance products. To clarify, products such as worker’s compensation, property, casualty and title insurance.
Because they could be prosecuted or face penalties under federal law, these state-authorized cannabis businesses are often denied access to the insurance market. Thus, leaving them vulnerable and risking the safety of employees, customers, and the community. In addition, businesses can also be denied bank financing if they do not have the proper insurance.
What the CLAIM Act Does
The CLAIM Act would:
- Inhibit penalizing or discouraging an insurer from providing coverage to a state-sanctioned and regulated cannabis business, or an associated business (such as a cleaning service 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.
- Prevent 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.
Sens. Menendez and Paul also cosponsored the Secure and Fair Enforcement (SAFE) Banking Act of 2019, which was introduced by Sen. Merkley in the last Congress, to ensure that legal marijuana businesses can access banking services. Services such as lines of credit, savings and checking accounts, processing customers’ credit cards and employee payrolls.
Congresswoman Nydia M. Velazquez (D-N.Y.) plans to introduce companion legislation in the House of Representatives.
Morgan Fox is a media relations director for the National Cannabis Industry Association. She stated that although conservative members of Congress have traditionally rejected comprehensive cannabis reform, many have been open to more incremental changes in the past. Plus, according to Fox, “a growing number of polls [in red states show] increasing support for legalization among conservative voters, particularly in younger demographics. … It is tough to tell at this point how much momentum this bill will have in the coming weeks and months. But, we are cautiously optimistic that it will be approved as a stand-alone.”