Joe Biden’s election as President of the United States and the Democrats’ reclamation of control of the U.S. Senate may well have far-reaching effects on the U.S. cannabis industry, including, but not limited to, ultimately impacting what insurance coverage is available to businesses in and ancillary to the industry.
More immediately, Merrick Garland’s recent confirmation as U.S. Attorney General is also likely to benefit the cannabis industry – including by potentially encouraging more insurers to offer coverage for this industry.
As such, starting now, cannabis-related businesses needing to place or renew insurance policies should work with their insurance brokers to fully explore the ever-changing insurance market, determine whether there are in fact additional insurers willing to write coverage for this industry, investigate how else the market may have changed since Garland’s confirmation and review carefully any specimen insurance policies available.
To be sure, legalization, or decriminalization, of cannabis at the federal level in the U.S. obviously would be a game-changer. If cannabis were to become federally legal, almost certainly, more, if not most, “mainstream” insurers would begin to offer coverages for cannabis-related businesses.
Even short of full legalization, there is other legislation pending, which if passed by the U.S. Congress and signed by President Biden, would likely dramatically affect the relevant insurance market.
For example, if enacted into law, the Clarifying Law Around Insurance of Marijuana Act, or the CLAIM Act, as currently proposed in the U.S. House of Representatives, would mean, in relevant part, that:
“[a] Federal agency [could] not (1) prohibit, penalize, or otherwise discourage an insurer from engaging in the business of insurance in connection with … a cannabis-related business …; (2) terminate, cancel or otherwise limit the policies of an insurer solely because the insurer has engaged in the business of insurance in connection with a cannabis-related business; (3) recommend, incentivize, or encourage an insurer 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 … a manufacturer or producer; or … the owner, operator, or employee of a cannabis-related business …; or (4) take any adverse or corrective supervisory action on a policy to … a cannabis-related busines, solely because the owner or operator owns or operates a cannabis-related business ….”
If the CLAIM Act or other similar legislation become law, it is logical to expect more insurers to step into the cannabis space. More participating insurers, of course would mean a more robust insurance market, which should yield more competition, higher available policy limits and lower premiums.
The cannabis industry, however, likely will not have to wait until the passage of any such legislation to reap at least some benefits of the new administration or the new Congress. On March 10, the Senate voted to confirm Garland, who was nominated by President Biden. And that, in and of itself, has the potential to spur positive change in the insurance market.
The new Attorney General is viewed cautiously as a potential ally of the cannabis industry. After Garland’s recent confirmation hearings, Justin Strekal, the political director for the National Organization for the Reform of Marijuana Laws, for example, stated: “There is much work left to do, but for the first time in over 4 years, supporters of ending federal marijuana criminalization no longer have an active opponent leading the Department of Justice.”
During those hearings, Garland testified, in relevant part, that he did not believe it was “a useful use of limited resources that we have, to be pursuing prosecutions in states that have legalized and that are regulating the use of marijuana, either medically or otherwise.”
Statements like that one may be enough to entice more insurance companies to enter the market.
Previously, the nominations, confirmations, or actions of other Attorneys General – or even other more generalized shifts in cannabis-related national public policy – seemed to affect insurers’ appetite to cover the cannabis industry.
For example, after former Attorney General Jefferson B. Sessions rescinded the “Cole Memorandum” in 2018, multiple insurers reportedly lost their interest in insuring the cannabis industry:
- According to Greenpoint Insurance: “Markel Corp., through one of its affiliated companies Evanston Insurance Company, … decided to no longer offer medical cannabis insurance to the marketplace. … [T]he insurance carrier cited the recent change in position by Attorney General Jeff Sessions as their reason for the departure. The Attorney General most recently changed the direction of the Department of Justice to allow US Attorneys to decide if federal enforcement of cannabis laws will be in their best interest.”
- Also, according to Greenpoint Insurance, “Managing General Agent Risk Placement Services, Inc (‘RPS’) … announced their departure from offering insurance to the cannabis industry as a result of Attorney General Jeff Sessions[‘] recent roll back of the Cole Memorandum paving the opportunity to enforce federal cannabis laws.”
- The California Cannabis Manufacturers Association likewise advised that “marijuana insurers drop from market after removal of Cole Memo.”
Conversely, after the Trump administration signaled a change later in 2018 about its stance on cannabis, pressure increased on insurers to enter or return to the market. California Insurance Commissioner Dave Jones continued his push to get admitted “insurers to offer insurance products for California’s legalized cannabis industry” following news that President Trump had “abandoned… Sessions’ policy on federal law enforcement of cannabis.”
A few months later, “approved a filing from Golden Bear Insurance Co.,” which amended the admitted carrier’s “California [c]annabis program product to lower rates, expand coverage options and expand the classes of business they will cover.”
While insurers have not necessarily been as quick to return to the cannabis industry as they were to leave, Garland’s confirmation certainly has the potential to be a catalyst for positive change and a more robust insurance market, which would, of course, benefit policyholders. A more cannabis-friendly Attorney General may provide insurers the comfort they believe they need to be able to more fully service this industry.
Policyholders – and their insurance brokers – should proceed accordingly, making sure to stay up to date on the comings and goings in the market and, at the time of placement or renewal, to fully investigate all insurance available.
Sampson is chair of Leech Tishman Fuscaldo & Lampl LLC’s insurance coverage practice group and co-chair of the law firm’s Cannabis practice group. Sampson routinely works with policyholders and their insurance brokers at the time of insurance placement or renewal to review quotes and specimen policies to maximize coverage and minimize cost. He continues to monitor the effects of Garland’s confirmation on the insurance market for the cannabis industry. Sampson, who has a national insurance-coverage and cannabis-related legal practice, can be reached at firstname.lastname@example.org or at (412) 261-1600.
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