"This is the dawn, the birth, of a new industry. We rarely get a seat at the table when a new industry is created, but we have one now. California has set the pace for the rest of the states, and the insurance industry is playing a huge role in how it develops," said Aberle, the national director of Rancho Cordova, Calif.-based Statewide Insurance, and the developer of the agency's MMD Insurance Unit.
Fourteen states have legalized marijuana for medical use, and another 10 states have medical marijuana initiatives on the ballot this year. Meanwhile, voters in California, the first state to approve medical marijuana, will vote on whether to make marijuana legal -- and taxable -- even without a medical prescription this November.
Billions of dollars are at stake. Marijuana is the biggest cash crop in California, where it brings in $14 billion a year in sales. That's almost twice the amount brought in by the state's second-largest agricultural commodity, milk and cream, which brings in $7.3 billion a year, according to the most recent USDA statistics.
As marijuana moves from the counterculture world into the mainstream, a new wave of businesses -- including growers, suppliers, manufacturers, transporters and dispensaries -- is emerging, and the insurance industry has taken note.
The medical marijuana businesses that survive "will have followed standardized business models, which means they will be loaded to the gill with insurance to hedge risks," said Allen St. Pierre, executive director of the National Organization for the Reform of Marijuana Laws. "In the last three years, almost all types of insurance have been touched or approached by an entrepreneur looking for coverage."
Gus Escamilla, founder and chief executive officer of Greenway University, a state-approved medical marijuana business school in Denver, said he's consulted with more than 200 new dispensaries in California and Colorado, and in doing so, saw there was a tremendous need for insurance.
Working with a local broker, Escamilla helped to develop Greenway Insurance, which provides coverage for a number of marijuana-related businesses. "Theft, fire, building coverage, workers' comp, crop insurance -- that's how far our industry has come in relation to it being legitimate and viable," Escamilla said. "Getting crop insurance was really a game changer."
The crop insurance is not part of the federal crop insurance program, and works more like a property insurance, and does not include perils such as mold, disease and insects, Aberle said.
Robert Collimore, a broker who started Kuffel, Collimore & Co. in 1965, is based in Aurora, Ill. -- a state that has not legalized medical marijuana. But, when his son-in-law, an attorney in Colorado who works with medical marijuana dispensaries, told him about clients who were having problems finding coverage, Collimore saw an opportunity.
"I don't know of any standard carriers writing this business, it's all the excess and surplus lines market," Collimore said.
He declined to name specific carriers, and said it was not because of any stigma associated with insuring the medical marijuana business. "I'd just rather not let other brokers know my markets," Collimore said.
Aberle also declined to name his specific carriers for the same reason. "If we name the carriers, a lot of other agencies would start to sell the policies," Aberle said.
Collimore said he's also able to provide crop insurance to growers, premise liability to dispensaries, and product liability to dispensaries and manufacturers, such as bakers, who produce edible marijuana products.
"The biggest problem is liability insurance," Collimore said. "While a number of companies will do premise liability, many will not do the products liability. That's very important, because it will protect the client if someone makes a claim that their product caused them harm."
Most landlords require premise liability insurance to cover such routine claims as trips and falls, he said.
Property insurance is also important, Aberle said. Theft is a major risk.
"We've taken on a risk management role with clients to show them what the risks are," Aberle said. He recommends clients install security and safety systems.
"So many people are in the dark, still not operating without guidelines and regulations," Aberle said. He said he's also lined up several companies who will write workers' compensation insurance for workers in the marijuana industry, and plans to soon roll out up to $1 million in coverage for armored cars transferring marijuana.
Other clients range from those in the commercial hemp industry to those who create instruments used to smoke marijuana to the doctors, lawyers, labs and accountants involved in the industry, he said. Insurance premiums start at $650 annually, and can run as high as $50,000 to $60,000 in liability alone for larger textile manufacturers.
Aberle said he was even able to line up insurance to cover a medical marijuana expo in San Francisco, which was the first on-site convention to offer medical marijuana to attendees.
Property/casualty insurers aren't the only ones to get on board the medical marijuana bandwagon. Norml's St. Pierre said life insurers, who once refused to cover applicants who openly admitted to using marijuana, have relaxed their standards and will still offer coverage, albeit for a higher premium.
And, it's a matter of time before health insurers cover medical marijuana, St. Pierre said, noting marijuana is cheaper and could be more effective in treating patients in pain, especially those who are terminally ill.
Even homeowners' insurers will be called upon to pay claims if someone's home medical marijuana supplies are stolen or damaged, he said.
"All of this is coming to a point of aboveboard-ness," St. Pierre said. "Who is not going to want and demand insurance?"
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