One Year After Legalization: Cannabis and Insurance Coverage in Missouri—Where We’ve Been and Where We’re Attempting to Go

As Missouri closed out its inaugural year following the legalization of recreational cannabis (which started December 8, 2022), many questions remain regarding the practicalities of insuring companies engaging in a quasi-legal industry. Federal law has retained its classification of marijuana as a Schedule I controlled substance, a designation in place since the enactment of the SCA in 1970.[i] Despite this federal classification, Missouri was the 21st state in the union to pass an amendment legalizing recreational marijuana use.

The process of marijuana legalization began in the United States in 1996 when California legalized the use of marijuana for medical purposes only. Sixteen years later, in 2012, Colorado and Washington became the first states to legalize cannabis consumption for recreational use. In the decade that has followed, an unprecedented trend towards legalization has resulted in 24 of the 50 states legalizing the recreational use and sale of cannabis. However, many questions have arisen across the legal profession and elsewhere regarding the direct conflict of state and federal laws. This problem, while not new to insurance defense work nationwide, has caused a stir in the Missouri Bar over the last 12 months, raising a key question: How do we as professionals navigate the laws and provide sound advice to our corporate clients who wish to insure companies that work with cannabis in some capacity?

Why Aren’t Insurance Companies Expanding into the Cannabis Industry at the Appropriate Rate?

Cannabis-related businesses have the same general liability concerns as other similarly situated businesses (e.g., agricultural, manufacturing, and retail), but due to the discrepancy between state and federal drug laws, an insurance desert has arisen. This has created increased problems for entrepreneurs in Missouri and other states. According to a New Dawn Risk report, in 2020 there were approximately 30 insurance companies offering cannabis coverage nationwide.[ii] This is a staggeringly low number, especially in comparison with the 1,749 regulated insurance entities doing business in the state of Missouri alone.[iii] Why aren’t there more insurance companies seizing the opportunity to infiltrate this new and rapidly expanding industry, especially in markets like Missouri that have historically operated large-scale agribusinesses?

First, the state of Missouri currently does not have a cannabis business insurance requirement.[iv] The only mandated insurance requirement in Missouri for this new industry remains the universal workers compensation insurance requirement, which applies to organizations having five or more employees. The Missouri Constitution, Section 14, ensures that state-licensed physicians and nurse practitioners are able to prescribe medical marijuana to qualifying patients by providing its base-level assurance that the state will not reprimand prescribing healthcare providers; however, it does not require health insurance companies to cover the resulting costs of such a prescription. “MO CONST Art. 14, § 1 (13) Nothing in this section shall be construed as mandating health insurance coverage of medical marijuana for qualifying patient use.”[v]

Second, even if insurance companies choose to expand to cover cannabis-related businesses, insuring a company in an industry that lacks federal acknowledgement that that industry is legal at the state level means financial institutions serving legal marijuana businesses would be forced to work with clients in a cash-only market.

Congress is attempting to change this by working in a rare bipartisan effort toward the introduction of the Secure and Fair Enforcement Regulation Banking Act of 2023 (SAFER Banking Act). This Act, introduced in late September 2023, provides protections for federally regulated financial institutions that serve state-sanctioned marijuana businesses. Currently, many financial institutions do not provide services to state-sanctioned marijuana businesses because, as stated earlier, at the federal level, marijuana is still classified as a Schedule I controlled substance.[vi] The SAFER Banking Act would resolve financial issues by providing protection for financial institutions (such as banks, credit unions, and  insurance companies), allowing them to operate in the financial mainstream by shifting away from cash-reliant operations.

The U.S. House of Representatives passed the SAFER Banking Act six times, and it’s also been passed by the Senate Banking Committee. With Congress already having adjourned from its 2023 sessions, there will be no answer to these questions until later this year, when the U.S. Senate will hopefully bring the SAFER Banking Act to a vote.

[i] P.L. 91-513 (1970).

[ii] Aaron Brandenburg, Cannabis and Insurance, National Association of Insurance Commissioners (Sept. 5, 2023).

[iii] A Firm Foundation: How Insurance Supports the Economy, Insurance Information Institute, (2021); 2021 Insurance Department Resources Report, published by the National Association of Insurance Commissioners (NAIC).

[iv] Matt Hernandez, State Laws and Insurance Requirements for Cannabis Businesses, Insureon (2023).

[v] MO CONST Art. 14, § 1

[vi] H.R.2891—118th Congress (2023-2024).

  • Elizabeth E. Rathert

    Elizabeth E. Rathert focuses her practice on trials involving the defense of civil litigation matters, including insurance law, personal injury, products liability, and property damage.

    Prior to joining HeplerBroom, Ms ...

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