California Insurance Agents Cater to Medical Marijuana Clinics

By | September 14, 2009

Ever since President Barak Obama came into office and his attorney general said the administration would not pursue medical marijuana dispensaries, the number of such businesses has exploded.

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 medical marijuana dispensaries for 14 years and whose agency advertises to marijuana businesses, says that at least three dispensaries 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 have opened up in recent months. In fact, a number of cities, worried about these businesses popping up with the fecundity of Starbucks outlets, have imposed a moratorium on new ones until they can investigate what limitations might need to be imposed and what requirements they might have. Those cities include Sacramento and Oakland.

Some suggest that it has been difficult for dispensaries to get insurance because insurers do not want to be associated with a fringe, not quite acceptable, industry. Others note that the businesses have on their property an inventory that is worth a lot, and is particularly tempting to the unsavory element of society.

But Pitto, who has been writing policies for dispensaries for 14 years, since California passed a voter proposition to allow them, says that is not true. Lloyd’s was the first insurer, he says, but he has written policies from many insurance companies, including AIG.

If the businesses were not able to acquire the workers’ compensation coverage and other insurance they are legally required to carry, they would not be open and in business, says Stuart Richland, a Los Angeles-based attorney who helps people 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 medical marijuana dispensaries exist in the state. 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 and many others find that aggravating and problematic for the legitimate suppliers. 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 catering to the medical marijuana dispensaries for about three years, sees the growth as an indication the business is becoming mainstream.

“I have found the majority of people in this business are just normal business people,” he says.

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