Insurers have been hesitant to provide equitable coverage for those in the cannabis industry amid conflicting state and federal laws. To encourage greater availability of policies for cannabis-related businesses (CRBs) and coverage for individuals, Assembly Democrats Joe Danielsen, John McKeon and Joann Downey sponsored legislation that would protect New Jersey insurers.
The bill (A-377), cleared 65-12-2 by the full Assembly on Monday, would specifically restrict State and local government agencies from penalizing, or treating differently, insurance companies and producers doing business with CRBs and insuring cannabis users.
“Insuring a cannabis-related business or individual in New Jersey is considerably risky because of the vast number of legal uncertainties,” said Danielsen (D-Middlesex, Somerset). “This has severely limited the existence of insurance policies leaving businesses and people in the cannabis industry with no real safety net or protections.”
Handling large sums of cash due to restrictive federal banking regulations, many CRBs are at a higher risk for theft. They also share the same general liability risks agricultural and manufacturing businesses face – workplace accidents, damage to property, crop failure, and fire – and are subject to product liability and safety recalls.
Often, cannabis users can also be faulted in workers’ compensation claims, subject to employment-disqualifying drug screenings and susceptible to higher auto insurance rates because of elevated risk of driving under the influence.
“We are only just beginning to navigate this issue. As we look toward growing use of medical marijuana and the potential legalization of recreational use cannabis, it’s imperative we’re instituting the necessary safeguards for insurance to flourish simultaneously,” said McKeon (D-Essex, Morris). “Right now, perceived risk is too great. This bill is the first in a series of steps to help insurers gain the confidence needed to provide more inclusive and affordable coverage options.”
“We have taken major strides to expand access to medical marijuana products for patients across New Jersey,” said Downey (D-Monmouth). “However, in order to see the cannabis industry thrive and fully meet the needs of residents, insurance providers must be in a position to offer equitable coverage and protections.”
Provisions of the bill provide a State or local government agency may not:
- prohibit, penalize, or otherwise discourage an insurer from engaging in the business of insurance in connection with a CRB;
- 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 CRB;
- 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 or becomes the owner, operator, or employee of a CRB; or
- take any adverse or corrective supervisory action on an insurance policy against a CRB 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 CRB, as applicable.
The bill was approved in the Assembly Financial and Institutions Committee on February 13, 2020. It now goes to the Senate for further consideration.