N.J.: Cannabis safe harbor bill moves forward

PIANJ-supported legislation, A-389, which would create a safe harbor for insurance producers and carriers working with a cannabis-related business was reported out of the state Assembly Financial Institutions and Insurance Committee—a major step toward the bill eventually becoming law.

Last year, New Jersey joined the growing number of states that have legalized adult-use cannabis for recreational and/or medical use. In joining that group, New Jersey also created a conflict between federal and state law. While more than half of the states in America have legalized cannabis either for medical or recreational purposes, it remains illegal under the federal Controlled Substances Act. Under that law, Cannabis is a Schedule I drug, and it is stated to have no medical benefits. Since cannabis still is classified as an illegal drug, if a producer were to sell insurance to a cannabis-related business he or she may be in violation of several federal statutes, including the Racketeer Influenced and Corrupt Organizations Act, which is designed to combat organized crime.

This legislation, sponsored by Assemblymen Joe Danielsen, D-17, John McKeon, D-27, and Roy Freiman, D-16, would not impact the federal government (more on that below). However, it does prevent the state government from taking certain adverse actions against insurance producers and carriers.

Under the bill, no state or local government agency may:

• prohibit, penalize, or otherwise discourage an insurer or insurance producer from engaging in the business of insurance in connection with a cannabis-related business;
• terminate, cancel, or otherwise limit the policies of an insurer solely because the insurer or insurance producer has engaged in the business of insurance in connection with a cannabis-related business;
• recommend, incentivize, or encourage an insurer or insurance producer not to engage in the business of insurance in connection with a policyholder, or downgrade or cancel the insurance and insurance services offered to a policyholder solely because the policyholder is or becomes the owner, operator, or employee of a cannabis-related business; or
• take any adverse or corrective supervisory action on an insurance policy against a cannabis-related business or a person that does business with or is employed by a cannabis-related business, solely because the business or person owns or operates or does business with or is employed by a cannabis-related business, as applicable.

In addition, the bill provides that insurers and insurance producers cannot be held liable under any state law or regulation for engaging in the business of insurance with cannabis-related businesses, or for further investing any income derived from that business of insurance.

Historically, PIANJ has supported cannabis safe-harbor measures and the association was integral in getting insurance producers included under the protections of an earlier version of this bill.

Federal action still needed

While this legislation addresses adverse actions by the state government, it does not apply to the federal government, which is where the conflict of law exists. The Supremacy Clause of the U.S. Constitution establishes that the Constitution and the federal laws made pursuant to it are the supreme law of the land.

If there is a conflict between federal and state law, the federal law would reign supreme. This means that while A-389 is well-meaning it would not protect insurance producers from federal prosecution. For that, federal legislation is needed.

PIANJ and PIA National have long advocated for a federal Cannabis Safe-Harbor bill and both associations will continue to do so.