(News from LA Journal)
What's a medical marijuana supplier to do when a worker is injured? Or when a burglar makes off with the pot?
Increasingly, the answer is: Call the insurance company.
Insurance firms are turning to one of the state's few growth industries, medical marijuana dispensaries (MMDs for short), as a new source of business.
"It's not often that you get to see the dawn of a new industry, but that's what we're seeing. We're seeing the birth of an industry providing customized insurance services to MMDs," said Mike Aberle, a commercial insurance agent with Rancho Cordova-based Statewide Insurance Services and head of its MMD unit.
Legal marijuana dispensaries may be a recent phenomenon, but their climate-control systems are as prone to breakdowns as any grocery store's freezers, and their product is as much a target for thieves as any gold dealer's.
The door for dispensaries and commercial insurers opened in 1996, when California voters approved Proposition 215, which allows physicians to recommend cannabis for cancer, anorexia, AIDS, chronic pain, spasticity, glaucoma, arthritis, migraines or "any other illness for which marijuana provides relief."
But the number of dispensaries skyrocketed this year when the Obama administration said it would not arrest marijuana growers and sellers who abide by state laws. Previously, federal officials had actively prosecuted them.
From January to June the number of Sacramento marijuana dispensaries doubled to around 30.
Dispensary growth statewide has been so rapid the industry and commercial insurers can't pin down specific numbers. Low-end estimates put the number in California at about 1,000. Others say it's closer to 2,000.
Aberle said it's his understanding that more than 800 nonprofit dispensaries have been set up this year in the Los Angeles area alone.
"There are more dispensaries in Los Angeles than Starbucks," said Rich Pitto, a commercial broker with Hayes Insurance Agency in El Sobrante in Contra Costa County.
Pitto was a marijuana dispensary insurance pioneer, offering comprehensive coverage shortly after the passage of Proposition 215.
"Now," Pitto said, "it's huge … but there are a lot of Johnny-come-latelies out there."
Aberle saw the potential two years ago, when he proposed the idea of an MMD unit at Statewide.
George Koster, Statewide's general manager, said Aberle's proposal was met "with some amount of skepticism, even within our own company. But this is a very competitive business, and he saw the potential."
Statewide's MMD unit was only recently formalized – the 10 people who work there are still customizing coverages for specific operations – but Aberle said he already has clients in California, Colorado, New Mexico and Rhode Island.
All of those states have legalized marijuana dispensaries, collectives and cooperatives, and Maine recently joined that group.
Growth, Aberle said, is reaching wildfire stage: "In the last 10 days, I've heard from 17 dispensaries that are brand new."
For medical pot sellers, the availability of insurance coverage has been a godsend.
"I actually had a lot of (insurers) laugh at me when I was looking for help," said SaraJane Sinclair, chief financial officer of the SaraJane & Co. Cooperative Inc. in Sacramento. "I really didn't know what to do."
Sinclair said she hooked up with Statewide through a recommendation from a State Farm representative. She said Statewide not only offered insurance products she needed, but "they respected the privacy of the business."
Statewide's coverages run the gamut: general liability, property, workers' compensation, product spoilage, equipment, commercial automobiles and marijuana growers coverage.
Aberle said premiums range from about $650 annually up to as high as $25,000 a year, with numerous variables affecting price. He said typical policies have annual premiums in the $1,000-to-$4,000 range.
Besides tailoring policies to the dispensaries, Aberle said a key part of working with them is "understanding their privacy issues."
He explained: "MMDs have to deal with changing laws and patients who want privacy … plus the fact that MMDs can be targets for break-ins and theft.
"You have to understand where they're coming from, and we try to do that. These are very professional people."
Sinclair started her shop after her own "traumatic experience," which she said was not helped by drugs with debilitating side effects. She ultimately turned to medical marijuana.
"I got my life back," she said. "I wanted to see what I could do to help other people."
Besides her office duties, Sinclair is taking college pre-med classes locally.
Her office handles marijuana that can be ingested or inhaled. She also carries various oils and other non-mainstream products. She said most of her clients have cancer or are seniors.
Like other dispensers, Sinclair keeps the marijuana in a secure vault.
Aberle noted that most marijuana stores "have security systems that are much more advanced than what you'll find at most other retailers and businesses. … They have security cameras, steel doors, bulletproof glass, storage in vaults and indoor motion sensors."
Aberle said he researches potential clients' backgrounds to make sure they are legitimate MMD nonprofits.
Pitto, the broker in El Sobrante, said thoroughly screening prospective clients is key to insurers choosing to offer them coverage.
He offered this stark assessment: "There are two kinds of dudes in this business. One is a good businessman who has a good sense of business, and then there are true drug dealers. You have to know who you're dealing with."
Pitto said his agency advertises in cannabis magazines and online, but even that aspect of insuring pot dispensaries is going mainstream.
Aberle said his unit long relied "on word of mouth," but it recently enlisted the help of marketing professionals.
In another sign of the new openness, Canna Care, a dispensary in North Sacramento, started running spots last month on K-HITS (KCCL, 92.1 FM).
Aberle and Sinclair predicted that their respective niches will continue to expand as California and other states come to grips with medical marijuana as an emerging industry.
Sinclair believes other satellite industries – everything from packaging to distribution – will develop with the growth of MMDs.
Aberle speculated that "the whole face of insurance for this industry could change by early spring next year. … I would say that we're going to see more and more states develop dispensary laws, if not the majority of the states."
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