The problem with insuring medical marijuana

If your house burns down, you can file an insurance claim for the cost of your expensive artwork and jewelry. But even if you’re a card-holding medical marijuana patient, you probably won’t see a dime if your drugs are destroyed.

Typically, homeowner’s insurance and renter’s insurance policies cover the cost to replace any valuable items within your home, as well as the structure itself. But if you’re a medical marijuana patient, your insurance company isn't obligated to pay damages resulting from the theft or destruction of your marijuana plants, harvested marijuana or growing equipment.

No protection for stolen or damaged assets

Deborah McDonald, a 45-year-old woman with terminal brain cancer who lives in the eastern Washington town of Clarkston, filed an insurance claim after 10 legally grown medical marijuana plants were stolen from her rented home last spring. Her renter’s insurance company refused to pay. After McDonald and her husband, Thomas sued the company, a Washington judge granted summary judgment to Farmers Insurance, stating that because the marijuana plants didn't have a “market value,” the company wasn't on the hook for damages. It isn't known whether the McDonalds plan to appeal the ruling.medical_marijuana-insurance

“This ruling is disheartening, but not surprising,” says Kris Hermes, a spokeswoman for Americans for Safe Access, an advocacy group that promotes legal access to medical marijuana.

Other insurance claims related to medical marijuana also have fared poorly. In May 2012, a Montana couple who leased their greenhouse to a medical marijuana grower was denied a $75,000 claim for property damage after the federal government raided the greenhouse. In another case in 2012, Denver attorney Ann Toney lost her malpractice insurance because she had represented medical marijuana clients.

In Hawaii, a court sided with a home insurer in refusing to pay full damages for the theft of a policyholder’s medical marijuana plants because, while legal under state law, the plants still were illegally possessed under federal law. The plaintiff sought $45,600; the insurer refused to pay more than $8,802.

Gray area

Medical marijuana is legal in 16 states, including Washington, California, Hawaii and Maine. This means that patients who have doctors’ prescriptions are able to legally obtain marijuana from specialized dispensaries, or grow it at home, and are given cards to show that they have the right to use the substance within the state. Doctors may write prescriptions at their own discretion; qualifying conditions typically include cancer, glaucoma, HIV and chronic pain.

However, all marijuana use remains illegal under federal law.

“The federal government classifies marijuana as a Schedule I drug – the most restrictive schedule, which includes LSD and heroin,” says Kamy Akhavan, president and managing editor of ProCon, a nonpartisan charity group that researches controversial issues. According to the U.S. Drug Enforcement Administration, drugs classified as Schedule 1 have a high potential for abuse and have no legal medical use in the United States.

Because of the federal classification, medical marijuana patients are often vulnerable when it comes to civil liberties. “Partly because of the federal government’s stance, there is a heavy amount of discrimination against the patient community,” Hermes says. When states legalized medical marijuana, he adds, many of them neglected to include a patients’ bill of rights that would ensure medical marijuana patients have access to safe, affordable medical marijuana.

Dealing with insurance claims for medical marijuana plants, harvested marijuana or growing equipment “is uncharted territory,” Hermes says. Insurers aren't obligated to cover such claims based on legal precedent — so many of them don’t.

Other alternatives

If you're a medical marijuana cardholder or own a business connected to medical marijuana and want to protect your plants, harvested pot or growing equipment, don’t rely on your homeowner’s or renter’s policy. You may have some alternative methods for protecting those assets, though.

You may want to consider buying a specialty insurance policy that provides such coverage. One option is MMD Insurance from Statewide Insurance, which sells insurance policies to businesses and individual cardholders in states where medical marijuana is legal. “We cover the product from seed to sale,” says Mike Aberle, national director of Statewide Insurance. Dispensaries, for instance, can get $15,000 worth of coverage for $175 a year.

Other specialty insurers include Cannassure and MarijuanaInsurance.net, which sell coverage to physicians, dispensaries and growers.

However, specialty insurers aren't able to offer renter’s or homeowner’s insurance, so they can't cover any valuables that are inside someone's home. Aberle says his group’s policies cover only marijuana-related products that are kept in a separate "grow house.”

MMD Insurance also covers legal fees if policyholders are involved in lawsuits that fall under state law, such as state-run prosecutions against dispensaries. “If they are found innocent at the end of the trial, we can pay the defense fees,” Aberle says.

Because medical marijuana is illegal on the federal level, no insurance polices offer protection against pot raids by the federal government. At least 170 such raids have been conducted in the past three years, according to Americans for Safer Access.

Moving toward acceptance

Unless medical marijuana becomes legal at the federal level, individuals and businesses associated with this industry may continue to confront problems with insurers and laws.

However, advocacy groups like Americans for Safer Access are pushing for legislation to protect medicinal marijuana-related businesses and patients. “We’re working to change Draconian laws in regards to civil rights,” Hermes says.

For the time being, though, it pays to be careful. If you’re concerned about the possibility of theft, consider buying an insurance policy from a specialty carrier -- if you meet its criteria. If not, Hermes recommends beefing up your security with a burglar alarm and other anti-theft measures, and keeping your activities as covert as possible.

“If you’re smart with how you set up the cultivation, you can avoid scrutiny from neighbors, law enforcement or people who want to steal it,” Hermes says.

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