Cannabis Businesses Legislation Update

Recently, new bipartisan legislation—the Clarifying Law Around Insurance of Marijuana Act of 2021 (Claim Act of 2021)—was introduced to the U.S. Congress. This legislation provides protections for insurers of cannabis businesses and related, legitimate businesses. Since many states are legalizing or have legalized the sale of marijuana, the number of cannabis businesses has increased dramatically over the past decade. However, these businesses have had difficulty finding insurance coverage, as federal law still prohibits the sale of marijuana.

 Cannabis Businesses

What Is the Claim Act of 2021?

The Claim Act of 2021 creates a safe harbor for insurers (i.e., precludes them from liability) that engage in the business of insurance in connection with a cannabis-related legitimate business, particularly within states that allow for the:

  • Use;
  • Cultivation;
  • Production;
  • Manufacture;
  • Sale;
  • Transportation;
  • Display;
  • Dispensing;
  • Distribution; or
  • Purchase of cannabis.

The bill was introduced to prevent cannabis-related businesses from being shut out from basic protections.

What Protections Does the Act Provide?

The Claim Act of 2021 would provide protections to insurers allowing them to provide insurance coverage to cannabis-related businesses without federal penalty. These insurance coverages include:

Since the sale of cannabis is illegal under federal law, many insurance companies will not cover cannabis-related businesses. This bill would prevent insurers from being penalized by federal agencies for providing coverage to such businesses. In particular 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;
  • 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.
 Cannabis Businesses

When Does the Act Apply?

The Claim Act of 2021 only applies to insurers that are providing insurance services to cannabis-related, legitimate businesses, or a state, political subdivision of a state or Native American tribe that exercises jurisdiction over cannabis-related legitimate businesses.

Cannabis-related, legitimate businesses include manufacturers, producers, or any person or company that engages in any activity that involves handling cannabis or cannabis products.

If the legislation passes, it would allow cannabis-related, legitimate businesses to obtain the proper insurance coverage necessary to responsibility run their operations. Additionally, insurers would be able to provide coverage to these companies without fear of prosecution or negative consequences. Overall, the Claim Act of 2021 could benefit small businesses in many states that have legalized marijuana.

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