As more states legalize some form of medical or recreational marijuana, the demand for cannabis insurance is increasing dramatically. To date, 37 states have approved medical marijuana and 18 states, plus the District of Columbia, have legalized the recreational use of marijuana. Yet the divide between federal and state laws continues to create conflicts for insurance carriers, insurance agents and financial service providers.

Earlier this month, the U.S. House of Representatives passed legislation that would legalize marijuana nationwide, eliminating criminal penalties for anyone who manufactures, distributes or possesses the substance. Lawmakers approved the measure in a 220-204 vote, leaving business owners and insurance agents alike wondering what federal legalization will mean for their operation.

“Federal prohibition of cannabis continues to complicate the business landscape and operations for cannabis license holders," says Norman Ives, broker, cannabis practice leader at Amwins. “Limited access to banking and other traditional financial services force the cannabis operators to, oftentimes, employ complex business structures to negate harsh tax treatment due to cannabis still being considered a Schedule I drug under the federal Controlled Substances Act. This increases the operating costs associated with running a cannabis business."

And while the U.S. legal cannabis industry is projected to exceed $30 billion in 2022, according to Headset, a marijuana analytics company, the drug's current legal status makes it difficult for cannabis businesses to find affordable, comprehensive insurance coverage. 

“As new states come on board with legalization, agents are trying to keep up with the submission flow, especially on risks they might have never worked on—in a hard market," says Emily McDaniel, broker, commercial insurance, Burns & Wilcox. “There are few agents that commit to specializing in cannabis insurance in areas where it has not yet been legalized."

The continued legalization of cannabis in certain forms in U.S. states has been raising concerns for many employers. The rapidly evolving landscape of cannabis legalization and the increasing use among workers has many implications.

Nearly 18% of adults who are employed full time, and nearly 21% of adults who are employed part time, reported using cannabis during 2019, according to the Centers for Disease Control and Prevention (CDC). The implications for workplace safety are emerging, as well as concerns about impairment, risk of injury, recruitment and hiring, regulatory issues, and the overall health and well-being of both workers and the public.

Additionally, while many treatments for occupational injury and illness are covered under workers compensation insurance, reimbursement for medical marijuana treatments for work-related conditions varies.

“State legislatures and courts continue to grapple with the issue of medical marijuana reimbursement in workers comp," says Laura Kersey, division executive—regulatory & legislative analysis, regulatory division, National Council on Compensation Insurance (NCCI). “States have been divided as to whether to allow reimbursement, require reimbursement or prohibit reimbursement for medical marijuana." 

“Several states have introduced legislation addressing this issue in 2022," Kersey continues. “Mississippi and South Dakota recently passed legislation providing that workers comp insurers are not required to reimburse for medical marijuana, and other states, such as Maine and Nebraska, are considering similar bills." 

Meanwhile, both New Jersey and New Hampshire recently ruled that reimbursement is allowed.

Further, agents and businesses cannot assume that there is a relationship between medical, recreational and compensable cannabis, explains Patrick McManamon, managing director—cannabis practice leader, Cannasure. “One would assume that we'd see commonality in each state on consumer consumption usage and the workers comp medical prescriptions," he says. However, “each area is managed by two completely different regulatory boards, so no such commonality exists."

While some research has been carried out on marijuana and its use by employees, as well as the impact on worker safety, additional research on the links between cannabis use and occupational health and safety needs to be explored across different populations, occupations, workplace settings, worker characteristics and work patterns, according to the CDC.

Currently, most jurisdictions have workers comp laws that restrict workers comp benefits when the injury is attributed to intoxication or drug use, according to the NCCI.

The NCCI, as well as many others, are “monitoring federal marijuana legislation, including bills that would remove marijuana from the list of Schedule I drugs under the federal Controlled Substances Act, provide a 'safe harbor' from penalties for financial institutions that provide services for legitimate cannabis-related businesses, and provide a safe harbor for insurers engaging in the business of insurance in connection with a cannabis-related legitimate business," Kersey says.

On Feb. 4, the Big “I" reported that the U.S. House of Representatives passed the “America Creating Opportunities for Manufacturing, Pre-Eminence in Technology, and Economic Strength Act of 2022" or the “America COMPETES Act of 2022." The Big “I"-supported cannabis legislation, titled H.R. 1996, the “Secure and Fair Enforcement (SAFE) Banking Act," was added to the broader legislation as an amendment the night before.

The SAFE Banking Act, introduced by Rep. Ed Perlmutter (D-Colorado), would reconcile federal law with conflicting cannabis-related state laws by providing a federal safe harbor to financial services providers, including insurers and agents and brokers.

Olivia Overman is IA content editor.