Overview
In early March 2019, U.S. Rep. Ed Perlmutter (DCO) introduced H.R. 1595, the Secure and Fair Enforcement Banking Act of 2019, also known as the SAFE Banking Act of 2019. The stated purpose of this legislation “is to increase public safety by ensuring access to financial services to cannabis-related legitimate businesses and service providers and reducing the amount of cash at such businesses.”
To that end, the Act provides a “safe harbor for depository institutions,” which would allow such institutions to provide “financial services to a cannabis-related legitimate business or service provider.”
U.S. Rep. Steve Stivers (ROH) recently introduced an amendment to the SAFE Banking Act of 2019 extending that safe harbor to insurers providing financial services to “cannabis-related legitimate businesses.”
On March 28, 2019, the U.S. House Financial Services Committee voted 45 to 15 in favor the SAFE Banking Act of 2019. The amendment introduced by Rep. Stivers was adopted by voice vote. The legislation now moves to the floor of the U.S. House of Representatives for consideration. As of April 11, the Act has 160 cosponsors.
SAFE Banking Act of 2019, Rep. Stivers’ Amendment, and the Insurance Industry
As now amended, the SAFE Banking Act of 2019 would offer insurers important protection when they do business with “legitimate” cannabis-related businesses. If enacted, the Act would provide:
(a) In General.—With respect to providing a financial service to a cannabis-related legitimate business or service provider within a State, political subdivision of a State, or Indian country that allows the cultivation, production, manufacture, sale, transportation, display, dispensing, distribution, or purchase of cannabis pursuant to a law or regulation of such State, political subdivision, or Indian Tribe that has jurisdiction over the Indian country, as applicable, a depository institution, entity performing a financial service for or in association with a depository institution, or insurer that provides a financial service to a cannabis-related legitimate business or service provider, and the officers, directors, and employees of that depository institution, entity, or insurer may not be held liable pursuant to any Federal law or regulation—
- solely for providing such a financial service; or
- for further investing any income derived from such a financial service.
The Act, as amended by Rep. Stivers’ amendment, also would provide that:
(i)“The term ‘business of insurance’ has the meaning given such term in section 1002 of the DoddFrank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5481).”
(ii) “The term ‘financial service’” would “include[] the business of insurance.”
(iii) “The term ‘insurer’” would have “the meaning given that term under section 313(r) of title 31, United States Code.”
If the SAFE Banking Act of 2019 becomes law
Passage of the SAFE Banking Act of 2019 would benefit not only insurance companies; it would benefit policyholders too. If insurers are shielded from liability pursuant to federal law for providing financial services to cannabis-related business operating in states where cannabis is legal, then more insurers are likely to start selling more coverage to businesses in the cannabis industry. A larger market and more options obviously would benefit policyholders as well. Not only would there be more policies to choose from, but increased competition should also result in better coverage and lower premiums.
Client Alert 2019-089
