See the sidebar “States Where Medicinal Marijuana is Legal.”

After California's legalization in 1996, the U.S. government tried to take away medical licenses from doctors who recommended the use of MMJ—although that was ruled unconstitutional in 2002. In 2003, the U.S. House of Representatives rejected an amendment to stop federal raids on MMJ patients. Three years later, the DEA raided a marijuana candy manufacturer and confiscated Stoney Ranchers, Rasta Reece's and Buddafingers candies. And just last May, a Denver attorney lost her liability coverage from The Hanover because she represents MMJ clients.

However, creative agents and brokers have found ways to write coverage pertaining to all of these situations.

Related: Read the article “Courts: Employers Have No Duty To Keep Medical Marijuana Users” by Chad Hemenway.

MMJ holds higher risks because it's a medicine that is acquired not through a typical pharmacy. There also are security issues to consider and the confusing compromise between federal and state laws.

Aberle agreed. “The businesses require services, lawyers, doctors, testing laboratories and distributors—the same coverages in any industry. The types of risks are identical.”

Statewide Insurance Services' MMD Insurance, which accounts for 25 to 35 percent of total revenue, supplies medicinal marijuana coverage to 2,500 clients through a Lloyd's of London syndicate. Although legal in 17 states, MMD Insurance is licensed in all 50 states, available to those who serve the MMJ industry, such as accountants or lawyers.

Aberle said that clients still want local agents. MMD's MMJ program is now available through 650 agencies. With the help of MMD, PPIB has put together a program that brokers can access. PPIB is an agency driven by its specialties: tattoo and piercing shops, medispas and the like. MMJ accounts for about 5 percent of PPIB's business.

Planted and sold

Common MMJ insurance clients include dispensaries and growers and policies include general liability, property, commercial vehicle and workers' comp. In addition, many dispensaries and growers hold computerized sales records, which contain patient information, and so require cyber coverage. Agents also may write crop coverage for indoor growers.

Related: Read the article “Making It Special” by Laura Mazzuca Toops.

Theft and burglary risks are common for dispensaries. MMD insists that dispensary clients have double entrance doors, video surveillance with central burglar alarm systems and panic buttons. Video surveillance should be installed in the parking lot, lobby, main grow house and back areas.

Susan Preston, president of PPIB, said her agency's policy prohibits public access to the indoor grow facilities. PPIB asks clients to keep stock in a safe, and only covers 25 percent of the stock stolen from outside of a safe during the day. At night, all stock should be kept in a safe, and as such, PPIB doesn't cover any stock stolen from outside of the safe at night.

Growers face fire and water damage. Cultivating marijuana requires 1000-watt bulbs and buildings often aren't wired to handle that workload. Some growers choose to hand water their plants, but others leave water hoses turned on unattended. Before approving a policy, MMD requires clients to hire an electrical contractor to certify the building. Statewide's MMD Program also requires the insured to install and maintain automatic shutoff valves that are set to 20 minutes for water facilities.

“A lot of these businesses don't have a clue that these coverages are available to them,” DeChynne said. “They end up getting inadequate insurance just to open the doors.”

Marijuana laboratories and product manufacturing also require coverage. Medicinal marijuana is available through different food products, such as salad dressings or lozenges, or through a patch. Common policies for these businesses include E&O and professional coverages. Agents also should insist that product developers manufacture only in commercial locations. Some clients may want to manufacture food products in their homes, but this exposes the products to things such as cat hair or other household items.

See the sidebar “Weed at Work.”

Aberle said his risk management program works because other programs have 55 to 200 percent loss ratios, but his program has 9 percent. This is in part to MMD's research when writing its MMJ Plan. Aberle met with activist group Drug Policy Alliance and scientists to understand how MMJ is grown, transported and sold.

Government Intervention

In addition, Aberle claimed that MMD launched the first endorsement for government action, aka “pot raid coverage.” Created only for the state level, if an insured is found not guilty, the coverage pays for defense reimbursement, court fees and legal costs. The coverage does not include property reimbursement under government actions, but it does have liability.

As federal raids increase, the government's federal raids increase, the government is targeting landlords in a fight to shut down dispensaries. Part of a crackdown announced last October, the federal government's strategy is to pressure landlords into closing down businesses or seek forfeiture of properties through a civil statute designed to seize the assets of drug-trafficking organizations. When writing coverage for dispensaries or growers, agents should talk with the building landlords and ensure they are protected if the government should intervene.

Related: Read the article “Reefer madness: Insurance high on marijuana growth potential” by Laura Mazzuca Toops.

Aberle warns agents to be prepared for a different way of working with clients. The clients aren't necessarily business insurance minded, he said, and agents need to educate and guide them through the insurance process. “These clients are not typically willing to provide information,” Aberle said. “You have to create that structure. They are cautious.” Agents also need to have relationships outside of the MMJ industry, including lawyers and tax attorneys.

Aberle's relationships with his MMJ clients have pushed MMD into a new division—entertainment. MMD insures small to large concerts and festivals, but mainly hip hop and rap shows such as Rock the Bells, which include artists Snoop Dogg and Lauryn Hill.

DeChynne, who has fibromyalgia and is an MMJ patient, agrees that this is a difficult specialty to enter. “The best thing I did was get my recommendations renewed so I could talk to these people,” he said. “I am a current card holder in Oregon and a current recommendation holder in Washington. That gives me access to these people, because if you don't have these documents, they don't want to talk to you.”