Marijuana Dispensaries Struggle To Insure Shops

The medical marijuana industry is booming in California. And as medicinal pot dispensaries are becoming more the norm, these businesses want what any business wants — insurance.

The SaraJane&Co. shop in midtown Sacramento, Calif., has urban-style art all over the walls — think graffiti — and a few closed doors in back.

"This is the heart of our dispensary, where all of our business is done and all of our products are sold," says SaraJane Sinclair, the chief financial officer for the medical marijuana operation.

In a tiny room, Sinclair points out the "edibles" — pot cookies and fudge. A variety of pot is stored in mason jars and displayed in a glass case. The jars are labeled "Purple Kush" and "Sticky Icky Mendo Goo."

'Peace Of Mind'

The store has been open for a couple of years and has a business permit. For Sinclair, getting through the red tape to meet the state and local guidelines to open the dispensary wasn't too bad. But finding a company to insure her business? That was difficult.

"The first person laughed and hung up," she says. "I was like, OK, this is going to be interesting. I must have made upward of 50 phone calls."

But Sinclair persisted because she wanted coverage for her shop in case there was a fire, theft or crop damage.

"Just like any other business, I want to be able to provide insurance for my products, workers' comp for employees, sensible things, basically a peace of mind," she says.

Finally Sinclair found coverage through Statewide Insurance Services. She pays about $1,200 a year for her policy.

Michael Aberle, who heads up the medical marijuana insurance unit at Statewide, says his company saw an immediate opportunity with the dispensaries.

"There is a big market for it, and these people really needed help," Aberle says. "Very few companies do it, and the ones that do won't even advertise that they do. We do."

In fact, a lobbying group for medical marijuana — California Capitol Solutions — believes only a half-dozen insurers around the country offer similar insurance. Many insurers have stayed away because of the ongoing legal battles and high risk for property loss.

A Growing Business

But Aberle says Statewide wanted new clients.

"Our company came to us early last year and asked us to start thinking out of the box as the market economically has dried up," Aberle says. "So we had to develop new ideas, and they've been a great support."

Covering marijuana businesses was out of the box. Aberle says his company offers coverage in six other states and is ready to sell policies in any state that legalizes medical marijuana. Providing insurance to a dispensary isn't the same as providing it to other small businesses, he says.

"Some of the highest risks within a dispensary, of course, is the theft, whether it be during or after business hours," Aberle says. "That is one of their greatest risks, outside of seizure of the federal government."

Aberle says the insurance does not cover government or local law enforcement seizures of medical marijuana or arrests. And the policies do require increased security and strict compliance with the law to help offset the business risks.

"I think that California is in a place where we can run a business like this," says Richard Dorf, a professor at the Graduate School of Management at University of California-Davis.

He says the stakes may be high, but it makes sense for insurers to get in on this burgeoning industry. Dorf says medical marijuana dispensaries aren't much different from a liquor store or gun shop.

"If it's well-legalized and well-regulated and it helps people, then we will have succeeded," he says.

While insurers may try to cash in on this expanding industry, it's still not a stable market. Many cities in California — and in other states — don't allow dispensaries, or they're restricting new ones from opening.

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