Business
Insurance Industry Groups Endorse Bill To Ease Coverage For Marijuana Businesses
A coalition of trade associations that represent the insurance industry is backing recently filed congressional legislation that would provide a protect companies that provide coverage for state-legal marijuana businesses from federal punishment.
“The insurance industry is potentially exposed to liability arising from the differences of the legal treatment of cannabis and cannabis products under federal and state law,” the groups wrote in a letter to the bipartisan House and Senate sponsors of the Clarifying Law Around Insurance of Marijuana (CLAIM) Act, which would provide a safe harbor for insurers, brokers and agents from being penalized by federal regulators for providing insurance services to state-licensed marijuana companies.
“By resolving the legal uncertainty presented by the dueling state and federal treatment of marijuana, the insurance industry can serve both cannabis-related legitimate businesses (CRLBs) and other commercial lines consumers, as well as personal lines consumers who may have a direct or indirect relationship to state-legalized cannabis, and still be in compliance with the law,” the letter to the House and Senate sponsors of the legislation says.
It was signed by the American Land Title Association, American Council of Life Insurers, American Property Casualty Insurance Association, Council of Insurance Agents & Brokers, Independent Insurance Agents & Brokers of America, National Association of Mutual Insurance Companies, National Association of Professional Insurance Agents, Reinsurance Association of America and Wholesale & Specialty Insurance Association—which said that they “represent a majority of the companies, agents, and brokers offering property-casualty, life, title, and reinsurance in the U.S.”
“Further, the CLAIM Act will enable those engaged in the business of insurance to be able to comply with a variety of state statutory and regulatory requirements,” the letter says. “Importantly, this legislation would help consumers, with direct or indirect contact with state-legalized cannabis, access insurance products and services and the protections they provide.”
The House version of the bill was introduced last week, while a Senate companion was filed earlier this year.
“The CLAIM Act is a comprehensive solution to provide legal certainty for our market while also preserving the states’ traditional role in regulating the business of insurance,” the letter to Sens. Kevin Cramer (R-ND) and Ruben Gallego (D-AZ) and Reps. Nydia Velázquez (D-NY) and Warren Davidson (R-OH), who are the leading sponsors of the legislation, says. “Under the bill, insurers must still satisfy all applicable state statutory or regulatory requirements, such as those pertaining to consumer protections and claims payments.”
“We appreciate your interest and effort to ensure our industry is not caught between conflicting obligations under federal and state law when serving our customers,” it concludes.
This is the fourth Congress in a row that the cannabis business insurance measure has been introduced, and the text of the current bill, H.R.10471, remains largely the same as prior versions.
Earlier this year, bipartisan House and Senate lawmakers filed related legislation to provide safeguards for banks that work with the cannabis industry.
As it stands, cannabis firms are limited in their ability to gain property, casualty and title insurance coverage. The CLAIM Act would prohibit federal agencies from penalizing insurance providers for simply covering those businesses, and it would bar insurers from terminating or limiting policies for marijuana companies or ancillary businesses due to the nature of their enterprise.
The legislation also includes a requirement that the Government Accountability Office (GAO) study and issue a report on “barriers to marketplace entry, including in the licensing process, and the access to financial services for potential and existing minority-owned and women-owned cannabis-related legitimate businesses.”
It additionally provides protections for employees of insurers, affirming that they could not be held liable just because they work with a cannabis company.
Supporters of the legislation have argued that providing insurance access to these businesses would mitigate safety risks and prevent the companies from being denied bank financing, which can occur when the businesses lack insurance coverage.
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Meanwhile, the Trump administration is moving forward with the process of rescheduling marijuana under federal law.
Attorney General Todd Blanche in April issued an order that immediately reclassified state-licensed medical cannabis, as well as marijuana products approved by the Food and Drug Administration (FDA) from Schedule I of the Controlled Substances Act (CSA) to Schedule III.
Under a separate order the attorney general signed, a hearing is considering more comprehensively moving marijuana to Schedule III.
