There are multiple bills pending in Congress that are designed to ease significantly, and ultimately eliminate, the tension that exists between the laws of states that have legalized the use of cannabis for adult use and federal law, which prohibits the cultivation, distribution, or use of marijuana.
The tension between state and federal law leaves the cannabis industry and those who partner with it uneasy over whether the federal government will recognize their commercial ventures, including contractual relationships, such as insurance policies.
Back and forth
The Obama Administration provided some protection that the federal government would not target cannabis businesses, provided that the businesses were operating in accordance with state laws that highly regulate cannabis for the businesses’ specified purpose.
In turn, the Trump Administration rescinded the Cole Memorandum, which stated that given limited resources, the U.S. Department of Justice would not enforce federal marijuana prohibition in states that “legalized marijuana in some form and … implemented strong and effective regulatory and enforcement systems to control the cultivation, distribution, sale, and possession of marijuana.”
Recently, President Joseph Biden pardoned all prior federal offenses of possession of marijuana. President Biden also issued a re-examination of how marijuana is classified, inching closer toward removing the Schedule I classification.
How does this affect your clients?
Given the growing change in public perception, individual states have implemented their own rules on cannabis for medical and adult-recreational use. Each state has separate rules and requirements related to the uses, but there are general themes that can be drawn from the individual states’ policies.
Still, while some insurers are willing to do business with state-regulated cannabis businesses, other insurers have avoided engagement with the cannabis industry to adhere to federal law and avoid damaging their reputations.
What does this mean moving forward?
Despite significant increases in profits and sales, cannabis businesses continue to confront obstacles in financial and business services support, primarily due to concern about being a busines partner in an illegal industry, misinformed conclusions about the law, unease about public perception, and conservative risk management.
Given concerns over whether the insurance contracts may be challenged based on legality, some states have tried to offer the carriers guidance on how to proceed.
For more information
PIA offers members many resources to help you stay up to date on the cannabis insurance issue.
For additional state-specific information on this topic, see the related articles:
All states
PIA calls for agents to support Cannabis Safe Harbor bill
Cannabis Safe Harbor legislation reintroduced
National Association of Professional Insurance Agents 2022 issues of focus, in the PIA QuickSource library (QS90107)
Cannabis insurance coverage, in the PIA QuickSource library (QS90993)
Connecticut
As the summer winds down, Connecticut prepares for cannabis sales and upcoming elections
New Jersey
N.J.: Cannabis safe harbor bill introduced in state Senate, federal hurdles still exist
N.J.: Cannabis safe harbor bill moves forward
PIANJ, NJYIP and federal legislators discuss the NFIP, cannabis and S corporations
New York
DFS issues guidance on cannabis-related criminal convictions and underwriting
N.Y.: The cannabis conundrum in New York
PIANY, national legislators discuss flood and crop insurance, cannabis safe harbor and taxes
PIANY’s Regional Advisory Councils hold ‘Spring Into Advocacy’ meetings with local legislators
Shirley Albright, CPIA, CISR
Shirley Albright, CPIA, CISR, has been a cornerstone of PIA since joining the association in 1983. Over the decades, she has contributed meaningfully across numerous departments, demonstrating unwavering dedication and leadership. In 1995, Shirley played a pivotal role in launching the Industry Resource Center, where she led the development of a comprehensive software system designed to log and manage all incoming and outgoing member inquiries—an innovation that transformed the center’s operational efficiency. As director of the Industry Resource Center, Shirley oversees the center’s daily operations, including the triage and resolution of thousands of member inquiries and multiple database updates, ensuring timely and accurate support across the organization. Her industry accomplishments include earning her New York state property/casualty broker’s license and has obtaining the CPIA and CISR professional designations, underscoring her deep expertise and commitment to excellence in the insurance industry.
