The U.S. Senate bill would provide a safe haven for insurers who insure cannabis-related companies that operate in accordance with state and local laws Hinshaw & Culbertson – Insights for Insurers


A bipartisan group of US Senators – Rand Paul (R-KY), Robert Menendez (D-NJ), and Jeffrey Merkley (R-KY) – recently introduced the CLAIM Act. The proposed legislation is designed to encourage insurance for members of the cannabis industry who operate in accordance with state and local laws.

In recent years, cannabis has been legalized for medicinal purposes in 35 states, and 16 states have legalized recreational adult use. Notably, many cannabis companies have even been defined as “essential business” and exempted from many governmental COVID-19-related shutdown orders.

Even so, cannabis remains a List 1 substance under the Controlled Substances Act of 1970. It is generally illegal to manufacture, sell, or distribute cannabis under federal law. It is also illegal under federal law to knowingly distribute equipment or materials used in the manufacture of cannabis and, under certain circumstances, to conduct or attempt monetary transactions in cannabis, among other things.

Notwithstanding the legalization of cannabis companies under the laws of some states, insurers have understandably hesitated to insure cannabis companies, given their illegal status under federal law, the predominance of federal law, and the potential for law enforcement. In some cases, the inability to obtain insurance can discourage or discourage individuals or organizations from engaging in cannabis deals. In states where the cannabis business must take out insurance – such as B. General Liability, Property, or Workers Compensation Insurance – as a prerequisite for securing a license to operate the business, the inability to obtain coverage precludes the lawful operation of a cannabis business under state law.

In general, the CLAIM Act would prohibit federal agencies from penalizing or deterring an insurance company from doing business with cannabis companies that operate in accordance with state and local laws. It is expressly provided that federal law or regulation does not allow insurance companies to be held liable solely for conducting insurance business involving legitimate cannabis-related business. Traditional insurers will no doubt examine the language of the bill to see if it offers adequate protection and is broad enough to cover all aspects of their business and safely allow cannabis companies to be insured. It remains to be seen whether the bill will receive sufficient support to move forward, given the many current legislative priorities.