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Sen. Bob Menendez Offers Federal Marijuana Insurance Bill to Ease Capital Access for Businesses

Now that New Jersey and other states have moved to decriminalize marijuana, Sen. Bob Menendez is joining with other federal lawmakers to ease access to insurance products for marijuana-related businesses.

Menendez, joined by Sens. Rand Paul (R-KY) and Jeff Merkley (D-OR), recently offered bipartisan legislation (S. 910) that the New Jersey Senator said would “take the shackles off of state-authorized cannabis businesses, allowing this burgeoning industry to thrive.”  

The bill aims to remove federal penalties and prohibitions that hinder insurers from legally selling products like workers compensation, property, casualty, and title insurance to businesses operating under state laws that now allow recreational or medical marijuana.

Patchwork of Laws

Marijuana remains illegal under federal law, but according to the National Conference of State Legislatures, some 15 states and three U.S. territories have regulated adult-use marijuana programs in place. Some 36 states have legalized medical marijuana along with the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands, according to the group, which represents state legislatures in their dealings with the federal government.

Menendez, a senior member of the Senate Banking Committee and chairman of the subcommittee that oversees the insurance industry, said current federal law prevents small business owners in New Jersey and other states where marijuana has been decriminalized from getting insurance coverage “and without it, they can’t protect their property, employees or customers.”

Gov. Phil Murphy signed three marijuana-related bills into law on Feb. 22 to legalize marijuana possession, clarify marijuana and cannabis use and possession penalties for individuals younger than 21, and create a regulated marketplace. Murphy noted at the time that state residents voted overwhelmingly in favor of decriminalization in the 2020 election. The ballot initiative, which called for amending the state constitution to legalize pot effective Jan. 1, garnered yes votes from 67% of New Jersey voters.

New Jersey Law

“Our current marijuana prohibition laws have failed every test of social justice, which is why for years I’ve strongly supported the legalization of adult-use cannabis,” the governor said Feb. 22.

Menendez pledged at the time to pursue federal policies “that respect and protect the ability of local enterprises and law-abiding citizens to do business in a cannabis marketplace that is transparent, equitable, safe and accountable.”

Under the New Jersey legalization bill, the Cannabis Regulatory Commission (CRC) will oversee regulations to govern the medical and adult-use industries as well as the applications for licensing of cannabis businesses. The legislation provides for the state Legislature to reinvest cannabis revenues in designated “impact zones;” directs the CRC to promote diversity and inclusion in business ownership; and provides employment protections for people who engage in lawful behavior with respect to cannabis.

Menendez Marijuana Insurance Bill Provisions

Menendez’s Clarifying Law Around Insurance of Marijuana (CLAIM) Act would prohibit penalizing or discouraging an insurer from providing coverage to a state-sanctioned and regulated cannabis business, or a related business such as a landlord or cleaning service.

The bill would prohibit terminating or limiting an insurer’s policies solely because the insurer provided coverage in connection with a cannabis-related business. Moreover, it would bar “recommending, incentivizing, or encouraging an insurer not to engage in the business of insurance in connection with a policyholder” and prohibit downgrading or canceling the insurance offered to a cannabis or cannabis-related business.

Furthermore, the proposed law would prohibit the federal government “from taking any adverse or corrective supervisory action on a policy to an owner or operator of a cannabis-related business or real estate or equipment that is leased to a cannabis-related business, solely because the owner or operator is engaged with a cannabis or cannabis-related business.”

Additionally, the bill’s language providing liability protections for employees of insurers who do business with cannabis-related businesses.

Senate Action

Menendez, Paul and Merkley previously teamed up in 2019 to offer legislation aimed at ensuring that legal marijuana firms can access banking services, such as lines of credit and savings and checking accounts. That bill garnered more than 30 cosponsors in the Senate but failed to advance.

Sen. Merkley said of the lawmakers’ insurance proposal that legal cannabis businesses “should not be shut out from the kind of tools and financial services all businesses need to thrive,” including insurance to protect against unexpected emergencies.

Sen. Paul added it’s time for the federal government to accept that states are making their own decisions on the legality of marijuana. Federal law should “respect the voices of the states and their people and stop shutting out legitimate businesses from obtaining basic protections,” he said.

The CLAIM Act, which was referred to the Senate Banking Committee, so far has attracted more than 25 additional bipartisan cosponsors. Reps. Nydia Velazquez (D-N.Y.) and Steve Stivers (R-OH) introduced companion legislation (H.R. 2068) March 18 in the U.S. House.

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