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In turn, the Trump Administration rescinded the Cole Memorandum, which stated that given limited resources, the U.S. Department of Justice would not enforce federal marijuana prohibition in states that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:
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)
Shirley Albright, CPIA, CISR
Shirley Albright, CPIA, CISR, joined PIA in 1983 and has worked in many facets of the association over the years. In 1995, she was an integral part of establishing the Industry Resource Center to include the development of the software system to record and track all incoming and outgoing inquiries. She quickly moved from industry resource representative to assistant director and eventually to her current position as director. Currently, Shirley oversees the daily operations of the Industry Resource Center to include the triage of thousands of incoming member inquiries. Her other accomplishments include obtaining her New York state property/casualty broker’s license, CPIA and CISR designations.