Cannabis and the Workplace Part 5: Business Considerations

Employee Benefits, Property & Casualty, Risk

As certain states adopt decriminalization and/or legalization of the possession and use of cannabis, it continues to be a violation of federal law. Under federal law it remains illegal to grow, sell, possess, or use cannabis products.

Despite this contradiction between federal and state law, state-level legalization may open new avenues for your organization to do business directly with a marijuana-related business (MRB) or with an organization connected to the cannabis industry. Something to be mindful of is how doing business with an MRB would affect your organization’s compliance efforts and the ramifications on your insurance policies.


Regulated financial institutions (including insurance carriers) have been reluctant to offer services to MRBs. This comes with a concern about potential legal issues, particularly in regards to federal compliance. This issue has opened the door for potential legislation (SAFE Banking Act) which could eliminate regulatory punishment for doing direct business with MRBs. However, until such legal remedies are codified into law, the availability of services from financial institutions will continue to be very limited.

Doing business with an MRB

When considering whether or not to do business with an MRB, you should consider your relationship to the entity.  That relationship could have an effect on your organization’s status with financial institutions and federal compliance.  Here are the three different scenarios for an organization doing business with an MRB and how it could affect your insurance:

  • Direct relationship: Organizations who choose to have a direct relationship with an MRB (ex: financing, supply chain, consulting, etc.) could see that relationship adversely affect your liability insurance coverages. If there is a direct relationship, many insurance carriers have taken the position against providing coverage until cannabis is federally legalized or safe harbors are codified into law. Coverage, especially management liability coverage, can be difficult to acquire and may only be available at a premium.
  • Indirect relationship: If there are degrees of separation between your company and the MRB (ex: providing a software solution to companies directly involved with MRBs), insurance carriers are taking a slightly more favorable approach. The risk in providing insurance and services to these companies may be lower, as you are not directly doing business with the MRB. Coverage will be more widely available, but could still be more expensive than it would be otherwise.
  • No relationship: Currently, the only way to completely protect your corporate insurance program and have the full breadth of the insurance marketplace available to you is to choose not to do business with MRBs until cannabis legalization is passed by the federal government.

Key Takeaway

Organizations of all types do business with organizations in many industries. You should be aware of your business partners and how they could affect your compliance with federal law, risk and insurability. We encourage you to work with your legal counsel to determine your risks. If you have any questions, or would like more information, please reach out to your M3 Account Executive.

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