READ MORE: Insurance Issues for Medical Marijuana

“We found that legitimate businesses were having difficulty restarting things after going through something like a raid or arrest or search warrant,” said Mike Aberle, national director of MMD Insurance Specialists, an offshoot of Sacramento, Calif.-based commercial broker Statewide Insurance Services.

The word “legitimate” is important to the coverage, which provides defense, court and investigation costs to business owners only if and after they are proven not guilty of all raid-related charges, Mr. Aberle said. The distinction is crucial to adhering to insurance law.

Although 15 states have laws regarding the use of medical marijuana, guidelines can be unclear, and it is still illegal under federal law.

About two years ago Mr. Aberle lobbied his bosses to start insurance programs for the medical marijuana industry. Since then, demand has grown and the endorsement for pot raid coverage marks another step in meeting the needs of this evolving industry.

“We are crawling before we run,” Mr. Aberle said. “You must remember there are no actuaries—not a lot of history to draw from when writing this. But our carrier sees the need and the opportunity in this niche. We’re setting underwriting standards.”

Mr. Aberle would not reveal his insurance carrier, but it is an A+-rated international insurer, he said.

Coverage for the medical marijuana industry has grown quickly to include general liability, property insurance for stock and equipment, workers’ compensation, commercial auto, crop insurance, and more.

“Business is going very well,” Mr. Aberle said. “There’s a low loss ratio. We’re developing safety protocols for the industry. As we continue to demonstrate it can work, we look to expand coverages.”

MMD Insurance Specialists is endorsed by the American Alliance for Medical Cannabis.