Clarifying Law Around Insurance of Marijuana Act Would Reduce Gaps, Expert Says

By | August 8, 2019

Chris Boden is stoked about the potential of a recently introduced bill in Congress that would create a safe harbor for insurers engaging with cannabis-related businesses.

Boden is the cannabis practice group team leader at Crouse & Associates, a wholesale broker headquartered in San Francisco, Calif.

The CLAIM Act introduced on July 22 by US Sen. Bob Menendez, D-NJ, promises to do for insurance what the SAFE Act would do for banking. The bill was introduced a week later in the House by U.S. Rep. Nydia Velázquez, D-N.Y., and Rep. Steve Stivers, R-Ohio.

H.R. 4074, and Senate Bill 2201, the Clarifying Law Around Insurance of Marijuana Act, states that an insurer engaging in business with a cannabis-related company or a service provider or in the cannabis sector engaged “in a transaction permissible under state law related to cannabis, and the officers, directors, and employees of that insurer may not be held liable pursuant to any Federal law.”

Boden believes the act will help insurers and brokers fill numerous gaps in coverage for cannabis businesses.

“There’s such a huge gap in coverage availability that this could really help fill those gaps,” Boden said.

Menendez in introducing the bill noted that federal law prevents cannabis business owners from getting insurance coverage, but without the coverage they can’t protect their property, employees or customers.

“With New Jersey just expanding their medical marijuana program, and other states across the country legalizing recreational and medical cannabis, we must ensure these businesses can fully operate just as any other legal small business would,” Menendez said in a statement following the introduction of his bill.

S.B. 2201 is co-sponsored by a bipartisan coalition including Sens. Rand Paul, R-Ken., Jeff Merkley, D-Ore., and Kevin Cramer, D-N.D.

Boden, who witnessed insureds in the cannabis business lose well over $1 million in crops due to wildfires in California over the last few years, said that despite the legality of cannabis in more and more states, it’s often difficult for these companies to find insurance because of the limited number of insurers that are willing to offer products because cannabis is considered illegal by the federal government.

He estimates that cannabis businesses in California are paying a ballpark average of 10 to 15 percent higher on rates for some policies due to the lack of options.

“It would give more options, which ultimately really helps drive down premium costs,” he said of the act. “This could also allow more carriers to come into the market.”

In California, one of the oldest medicinal use markets, where adult use has now been legal for three years, few large carriers offer cannabis insurance, the California Department of Insurance’s most recent cannabis insurance list shows.

The National Cannabis Industry Association and the National Organization for the Reform of Marijuana Laws are among the supporters of the CLAIM Act.

S.B. 2201 was referred to the Committee on Banking, Housing, and Urban Affairs. H.R. 4074 was referred to the House Committee on Financial Services.

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