Medical Marijuana Raid Coverage to Ease Worries of Dispensary Owners

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by Amy O'Connor

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.”

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  • February 24, 2011 at 1:19 pm
    Doris Jordan says:

    I sincerely agreed with this. A new day is dawning for the insurance industry. The successful legislation of medical marijuana has opened up a new frontier of business development for this country. Who would have thought marijuana would achieve legitimacy through the medical industry; and with that a new frontier of business development would emerge. The break through legislation that began with California in 1996 has spread across the country to fourteen other states, with the most recent being Arizona this past November. Not only do we see a shift in a culture that is kinder to those who use the product; but a social recognition of the business end of the growing, manufacturing and selling of this product as a legitimate enterprise worthy of respect. It is time for us to look at medical marijuana not only from a health aspect, which is, of course, a good thing for many; but as a potential new business endeavor.

    To step up to this new found status, business entities will need to recognize even more so then others, that they have a responsibility to maintain credibility by functioning like any other business. One area to help with establishing this credibility is insurance.

    In all my years of experience in the insurance industry I have never been so excited about the possibilities of marketing to this new industry. Usually insurance programs develop after some disaster or product development is fear based (Terrorism coverage). But in this case, here is a business enterprise that will bring benefit to the community not just in the form of sales tax revenue and license fees but provide an essential health service. One of my efforts is to educate the insurance carrier(s) to get out of their 20th century box and join us in the 21st century by shedding their traditionalist thinking. The business of selling Medical Marijuana is a commodity entitled to all of the same protections that insurance provides.

    This new industry of dispensaries/collectives and growers ought to be treated like any other business whether it’s a computer game or jewelry store or a coffee house or an Urgent Care facility. Each is a mainstream entity with specific exposures to the business as well as similar risks such as theft, vandalism, fire, or slip and fall liability.

    I have found from my discussions with owners of dispensaries/collectives the scale of Insurance coverage swings from decent to inadequate to none. Instead of gambling that the “what if something happens” never happens; business owners need to recognize that their companies can acquire insurance that contains all of the protections an enterprise needs for growth and stability in this modern world. What a wonderful opportunity for carriers, agents and clients.

    Doris Jordan ARM, President, Myoho Insurance Services

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