Federal Bill Would Expand Insurance Coverage to Cannabis Industry

Published on July 23, 2019 · Last updated July 28, 2020
image: cannabis farmer saves crop from wildfires
Anthony Lopez harvests cannabis plants as the Loma fire burns around his home near Morgan Hill, CA, on Sept. 27, 2016. Many cannabis growers have been hit doubly hard by wildfires because they're unable to insure their crops. (Noah Berger/AP)

As California cannabis farmers prepare for the arrival of peak wildfire season, echoes of last summer’s devastation are fresh in their minds. Nearly two million acres of the state went up in flames in 2018, killing more than a hundred people and destroying about 18,000 structures. Dozens of leafy green cannabis gardens just days away from harvest were transformed into charred, barren ruins.

Climate change means the fires will just keep coming. But a newly introduced bill in Congress could one day limit the human and financial cost of natural disasters and other threats. The Clarifying Law Around Insurance of Marijuana (CLAIM) Act would extend insurance protections to the cannabis industry, allowing state-legal cannabis companies to obtain insurance coverage just like any other legal business.

Introduced by US Sen. Bob Menendez (D-NJ) and sponsored by a bipartisan coalition including Sens. Rand Paul (R-KY), Jeff Merkley (D-OR), and Kevin Cramer (D-ND), the CLAIM Act would essentially do for insurance what the SAFE Act would do for banking. The bill would allow insurers to provide coverage to state-legal cannabis businesses in both medical and adult-use states. It would also prevent insurance companies from dropping coverage of entities that do business with cannabis companies, such as landlords.

The full text of the bill is embedded at the end of this article.

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“Current federal law prevents these small business owners from getting insurance coverage, and without it, they can’t protect their property, employees, or customers,” Menendez said in a statement released Tuesday. “We can solve this problem with legislation that allows insurance companies to provide coverage to these enterprises without risk of federal prosecution or other unintended consequences.”

Menendez noted that New Jersey recently expanded its medical cannabis program and that Gov. Phil Murphy, who as a candidate pledged to legalize cannabis for adult use, has already endorsed the insurance bill. In a statement, Murphy said: “It is our responsibility to make sure that businesses associated with this life-changing medical treatment are treated similarly to other medical service providers.”

A number of niche, so-called surplus-lines insurers currently do offer insurance products to the cannabis industry, but those policies tend to be expensive and available only to certain elements of the cannabis industry.

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Past efforts to expand insurance coverage to the legal cannabis industry have been limited by federal cannabis prohibition. In California, state insurance officials and cannabis industry leaders attempted to persuade major insurance companies to begin covering cannabis businesses in 2017. The state insurance commissioner at the time, Dave Jones, said the state was approaching companies including Farmers, State Farm, Nationwide, AIG, and others. Two years later, however, none of those companies appear on the state’s cannabis insurance list.

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Ben Adlin
Ben Adlin
Ben Adlin is a Seattle-based writer and editor who specializes in cannabis politics and law. He was a news editor for Leafly from 2015-2019. Follow him on Twitter: @badlin
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