Policies cropping up to service medical marijuana dispensaries

As medical marijuana has become increasingly more widely accepted, a new market has begun to emerge for a variety of businesses opening their services to the once-fringe industry that sprung up only in 1996.

[caption id="attachment_25751" align="alignright" width="212"] Carl Kerwick, David McCullick[/caption]

Insurance is one such sector, with a bevy of brokers and even national carriers offering a wide array of policies and products to dispensary owners.

The supposed economic value of marijuana has spurred Proposition 19, which would legalize recreational marijuana usage in the state, partly as a means to gain a new, taxable revenue source for cash-strapped California.

But irrespective of Prop. 19’s passage, insurers and dispensaries alike have seen a significant shift in policies geared toward the industry, and both said they expect it to continue.

“In the very beginning there were very few brokers who knew how to approach our industry,” said Carl Kerwick, chief financial officer of Peace In Medicine, a dispensary in Sebastopol that opened three years ago. “It wasn’t easy, and we paid a premium. Now, advance that three years, and I’ve had many different carriers approach us.”

The level of coverage needed for dispensaries isn’t much different than other retail operations, for instance a jewelry store, said Michael Aberle, national director of Rancho Cordova-based Statewide Insurance Services’ Medical Marijuana Dispensary Insurance. And given the potential economic boon and subsequent proliferation of ancillary businesses, Statewide is aggressively marketing its services in all fifty states, Mr. Aberle said.

Mr. Kerwick’s sentiments were echoed by David McCullick, vice president of Sonoma Patient Group in Santa Rosa, who likened insurance companies’ interest in medical marijuana to the Gold Rush.

“Everyone started making money. It was all the support industries, and frankly that same thing is going on in this industry,” he said. “It’s been quite a boon for that industry, and some, like insurance, are even doing better than the actual dispensaries,” which are largely nonprofits by state and local mandates.

Mr. Aberle wasn’t coy about the potential revenue stream for both the industry and the state, and accordingly Statewide is rolling out a new product today that will provide liability insurance on edibles, a growing vehicle in delivering medicinal marijuana.

“There will be marketing, lawyers, deliveries – take all those ancillary companies, and you really have a solid billion-dollar industry,” he said.

“Someone gets sick, someone gets injured, all of it is covered, just like Pepsi,” Mr. Aberle added. “The edible one is huge – product liability on edibles has never been done."

Part of Statewide’s motivation is to assist in establishing proper regulations that will help further sustain the growing industry, Mr. Aberle said.

“Prop. 19, whether it passes or not, it doesn’t matter because the industry has already sustained itself,” he said.

The lack of regulation does pose a unique challenge, Mr. Kerwick and Mr. McCullick both said, particularly with respect to the edible products, which are often made in non-commercial kitchens at people’s homes.

“So until there are certain standards that are being applied across the board, it puts dispensaries at a disadvantage,” Mr. Kerwick said. “In this particular industry we have to help the manufactures [of edibles]. Not all dispensaries are manufacturers so you rely on patient providers. The quality control is something you can measure, but you don’t have any real regulation.”

Mr. McCullick said Sonoma Patient Group at one point looked into insuring edibles with its current provider, Lloyds of London, but it wasn’t feasible because the insurers said a walk-in safe was needed for storage. But, per Santa Rosa rules, the dispensary is limited to 1,200 square feet and it simply wasn’t worth the effort.

“We’ve always encouraged people to use commercial kitchens, and maybe at some point that will be a requirement. It probably should be, and it does need more stringent regulation,” he said.

Apart from such unique challenges to the industry, including vastly different federal laws, everything else is the same in terms of coverage, with workers’ comp, theft and even directors and officers and crop insurance. Basic auto is also available for dispensaries that deliver to patients.

Mr. Kerwick, who said he receives solicitations for coverage on a regular basis, attributed the increased level of interest by insurers to the glut of dispensaries that opened in the Los Angeles area last year when the federal government said it would relax the level of enforcement on medical marijuana dispensaries.

“It doesn’t surprise me that people would focus on it. Think about two years ago and the explosion that occurred in L.A. There were over 900 that opened, and if [insurers] could capture 100 of them, they could do quite well.”

There are at least a dozen dispensaries, collectives and medical marijuana cooperatives in the North Bay, according to an index by California NORML, which advocates for marijuana reform laws in the state.

Mr. Aberle said Statewide will now offer its services to insurance agencies, which could spur even more levels of coverage in the industry.

“We’re taking our purchasing power to them,” he said.