Medical marijuana dispensary owners face a variety of risks because of the product they sell and the controversy that surrounds it. Even when they are doing everything right in terms of following proper city ordinances and state regulations, there is still the potential that the dispensaries could be raided by state and city agencies.


A new option for medical marijuana dispensaries from MMD Insurance Services can provide peace of mind and protection for dispensary owners who follow the medical marijuana laws in their city and state. The endorsement will reimburse the legal costs in the event of a raid if the owner is found to be not guilty.


"We built it to help assist the financial needs for these clients," says Mike Aberle, national director of MMD in Rancho Cordova, Calif. "When they go through a raid, not only are they looking at possible destruction of the property they reside in, but also materials, plants, the product they are selling, computers and then also the legal cost."


This leaves the dispensary owner stuck with having to rebuild his or her business, which sometimes they cannot afford to do. Aberle says the coverage is built to be very simple and work in a simplified way.


"If you are not guilty, the charges are dropped, or you are acquitted, whatever, as long as you are found not guilty the coverage is there for you," he says.


The arrest or claim has to be related to the dispensary operations that abide by medical marijuana laws. The endorsement cost is flat $500 for a year.


"We created it to give a little financial relief to those businesses that are doing things right and following the letter of the law," says Aberle.


As of November 2010, 15 states have legalized medical marijuana, with Arizona being the most recent. MMD can provide the coverage in all these states. Because federal laws still prohibit medical marijuana, the insurance coverage does not apply to federal raids, because businesses cannot insure against illegal acts.


"It is against insurance code," Aberle says. "If it was legal, we would absolutely [provide coverage], but right now as of how the law stands we can only do state level."


Aberle says the coverage is designed for dispensaries, growers, edible manufacturers or laboratories that potentially have product in the facility to do testing. He says if other related industries down the line need this type of coverage, his company may expand the availability.


"I don't know of any other industries where you have a federal and state conflict of law, where state law says it's OK, and then you still have the state arresting those facilities and then finding them not guilty," he says. "I don't know of any other industries that this would apply to at this point."


SaraJane Sinclair, owner of SaraJane & Co., a dispensary in Sacramento, Calif., is very excited about the new raid endorsement and has already made an appointment to buy the coverage.


"It is awesome," she says. "Attorney's fees from a raid could put someone out of business. You would think that it is something that isn't needed, but unfortunately right now it is."


Sinclair is not alone in seeing the need for a policy like this. MMD issued over 30 policies within two days of launching the endorsement, and Aberle estimates there are probably another 40 to 45 applications that are pending and waiting approval.


Sinclair says she and her fellow dispensary owners pay close attention to raids on their industry and know there is a chance it could to happen to them because of the controversy surrounding their business, even if they are doing everything right.


"I've just seen [raids happen] as mishaps. People are operating in ordinances and for some reason get raided. I've never seen a very good reason for a raid on a dispensary that was working correctly under ordinances," she says. "Mishaps happen … Someone complains or sees something they think is suspicious. I would rather be safe than sorry."


Aberle says ever since his company began working in the medical marijuana industry, it has received requests for coverage like this.


"A lot of [the dispensary owners] live in fear on a regular basis because the state law says it's OK, but they know of friends or colleagues that have been raided by state level authorities," he says. "They are paying taxes, have permits, workers' compensation insurance, employee benefits … they have done everything they could possibly do to run like any other business. They follow the letter of the law and still live in fear."


Sinclair and her colleagues agree that supporting programs like this are important for their industry.


"If you buy into the insurance, even if you never use it, you support the program," she says. "The more you support these programs, the more they become available to us, and that is a good thing. I would like to see more of them."