New type of insurance covers ‘pot raids’ at medical marijuana joints

Has your medical marijuana business been raided by the cops? If so, a new type of insurance aims to make sure that your business doesn’t go up in smoke in the aftermath.

Statewide Insurance Services’ MMD Insurance Group now sells “pot raid” policies for medical marijuana businesses. This insurance covers medical marijuana dispensaries, collectives and cooperatives, as well as people who grow medical marijuana for a living and people who care for patients using medical marijuana.

However, the “pot raid” insurance isn’t a “get out of jail free” card. The coverage is designed to protect a medical marijuana operation if it’s raided by authorities. The “pot raid” coverage kicks in only if that operation is adhering to all state and local guidelines regarding medical marijuana and if the operation is found innocent of any criminal charges related to the raid.

Several medical marijuana operations have been raided around the country; while medical marijuana is legally recognized in more than a dozen states, the federal government still considers marijuana an illegal drug.

Medical marijuana businesses now can buy insurance that covers them in case of a police raid.

Among the things covered by the “pot raid” policy are a medical marijuana outfit’s legal and investigative costs in defense of criminal charges. Once that outfit is out of legal limbo — the charges have been dropped or the defendant has been acquitted — the policyholder’s insurance claim will be paid. If the policyholder is found guilty, not a penny will be paid.

“We cannot insure against illegal acts,” says Mike Aberle, national director of Statewide Insurance Services’ MMD Insurance Group in Sacramento, Calif.

The insurance coverage is available only in the 15 states where medical marijuana is legal, Aberle says. If more states approve medical marijuana, people in those places will be able to buy “pot raid” insurance, he says.

“We believe that business owners might require some financial assistance after a raid to get their operations up and running again,” Aberle says.

Other types of medical marijuana coverage offered by Aberle’s company include:

• General liability insurance.

• Property insurance.

• Grower’s and cultivator’s insurance.

• Auto insurance (for cars used to deliver medical marijuana).

• Crop insurance.

At MMD, a general liability policy provides coverage of up to $1 million per occurrence or $2 million during the time the policy is in effect. A premium for that coverage runs about $825 to $2,000 a year, Aberle says. Meanwhile, a property policy has no payout limit. A premium for that coverage ranges from about $600 to $1,000 a year, he says.

MMD isn’t the only player in the insurance market for the medical marijuana industry. Other sellers of this coverage include All Green Insurance, Four Twenty Insurance Group, Gaslamp Insurance Services, Green Point Insurance and Premier Southwest Insurance Group.

In a presentation to the Colorado Law Institute in 2010, Green Point Insurance co-founder J.B. Woods — dubbed the “guru of ganja insurance” by the Denver Post — said the majority of his clients are “very sophisticated individuals.” By and large, people who buy insurance from Green Point want to operate legitimately, he said. But a few potential clients have told Woods: “I just want to sell weed.”

–Brittany Hutson