California Insurance Agents Cater to Medical Marijuana Clinics

Ever since the Obama Administration said it would not pursue medical marijuana dispensaries, the number of such businesses has exploded in California.

Now, a few insurance agents are catering to them.

Medical marijuana “is a huge, huge business,” says Rich Pitto, a broker at Hayes Insurance Agency, El Sobrante, Calif. “There’s a lot of Johnnies-come-lately. It’s actually getting somewhat ridiculous.”

Pitto, who has been writing policies for these dispensaries for 14 years and whose agency advertises to marijuana businesses, says that at least three in California have revenues of over $20 million a year and hundreds of employees.

Estimates are that California now has at least 1,000 medical marijuana dispensaries, many of which started in recent months. In fact, a number of cities, worried about them popping up like Starbucks outlets, have imposed a moratorium on new ones.

Some suggest that it has been difficult for dispensaries to get insurance because insurers do not want to be associated with a fringe industry. Also, because they have an inventory that is worth a lot, and is perhaps tempting to unsavory types.

But Pitto, who has been writing dispensaries since California voted to allow them 14 years ago, says that is not true. Lloyd’s was the first insurer, he says, but he has written policies with others, including American International Group.

If the businesses were not able to acquire workers’ compensation and other insurance, they would not be in business, says Stuart Richland, a Los Angeles attorney who helps set up dispensaries. “I represent over 200 dispensaries and they all have leases. That means they have to have insurance,” he says.

Nobody really knows how many dispensaries exist. Some estimate that there are between 300,000 to 400,000 medical marijuana users and that $17 billion worth of marijuana was sold in California last year, some of it legally. But many argue about the figures.

What is known is that the businesses are proliferating.

Pitto says he gets many calls and he can tell over the phone who is serious and who is shady, just by the questions they ask. “Some of them do not even ask about the cost,” he says.

But Derek Ross, an insurance broker with C.M. Meiers Co. in Woodland Hills, who has been writing dispensaries for about three years, sees the growth as an indication that the business is becoming mainstream. “I have found the majority of people in this business are just normal business people,” he says.

Topics California Agencies Cannabis