Battling insurers in the aftermath of lootings: Q&A with California cannabis executive Keith Stephenson

Keith Stephenson’s 14-year-old Oakland cannabis shop, Purple Heart Patient Center, was one of scores that were ransacked the weekend of May 29 during widespread Black Lives Matter protests in California and across the nation.

Having shuttered in March as a precaution during the initial coronavirus outbreak, Purple Heart has been closed for roughly five months, racking up immense sales losses.

For the past two months, Stephenson, Purple Heart’s founder and CEO, has been battling with his insurance carrier so he can repair and reopen his battered store.

It’s an ordeal that other cannabis business owners will want to follow to understand what to expect in such situations.

Marijuana Business Daily spoke with Stephenson about how he’s been handling the situation.

Have you reopened yet?

Not yet. I’ve been closed since March 20 for COVID, and we were just about to open when we sustained this burglary. So I’ve been closed for five months.

I’ve had three adjusters in a matter of three months. There was a feeling like the onus or the burden was placed on me. It was kind of like, “Did we have something to do with this?”

I told the adjuster, “You could either file this claim, or you can file a police report for me filing a false police report. Something’s got to give, because you can tell this is forced entry. Do you think we had anything to do with it?”

I feel like they don’t want to pay – not my claim, but the industry’s claims. It’s quite worrisome.

I would say the adjuster hasn’t been honest in some ways. I just started cc’ing my attorney on all correspondence, and that has changed the momentum of how they’re dealing with this.

It sounds like the insurance company’s been stalling to get out of paying your claim.

We’re not reopened. They say, “Call a contractor and get an estimate.”

They don’t directly say that it’s overpriced, but they say, “Now we want to bring our contractor out.”

So they do that, and their contractor completely lowballs it, and it’s not even apples to apples.

Now you have two bids, and they say, “We need you to get a third bid.”

So you get a third bid, and that takes time. It’s an extremely cumbersome process.

What they’re asking for is not normal, and I think everyone in the industry needs to be prepared to have a team that can assemble these financial records pretty promptly.

What’s your advice to others in the same situation?

You have the insurer trying to find a way to deny as many claims as they can.

And I’d say the most important thing is to cc your attorney on every correspondence.

The adjuster removes our corporate counsel off the correspondence, and I politely ask them, “Please don’t do that.”

Once they understood that I have counsel, then it started going differently.

These are just growing pains our industry has to deal with.

Give them everything they ask for, even if you don’t necessarily agree, because the goal is for them to pay on the claim.

Everyone should be extremely honest. These adjusters have seen everything under the sun, so don’t try to add anything to it. But also, don’t remove anything that needs to be part of the claim.

Is this the first time you’ve had to go through a process like this? 

Yes (it’s the first), but I wouldn’t say it’s been a nightmare. It’s been less than comfortable.

A nightmare would have been if we hadn’t had insurance. Having said that, you really have to hold their feet to the fire and give them what they want, but not toe the line, because everyone who works for them works on behalf of the insurance company.

They’re working to pay the least amount possible to settle the claim.

I have an $850 deadbolt. He wrote up an $85 lock. There were things that were damaged that they didn’t even mention in (the insurance contractor’s) bid.

Don’t expect the insurance company to work for you.

Do you have any idea when Purple Heart might be able to reopen? Could it be a few more months?

I should hope not, but you have so many moving parts.

You have an adjuster who has several other cannabis claims.

And if they’re just looking for a needle in a haystack for each claim, how productive can they be?

Communication hasn’t always been responsive. I’m saying, “I need to pay the rent.”

But they don’t want to take care of anything until they figure out how much they need to pay out and when the forensic accountant gets back to them.

And if you do choose to pay for (repairs) out of pocket, they’re surely going to contest it and say you overpaid for something. You just have to be patient and sit back and let them get through it.

How much is your claim going to be worth once it’s processed?

I have no idea. But I know (one company), their claim is like $2 million. And some of the other (marijuana stores) in Oakland, their claims are teetering on $1 million.

Are you worried at all about the future of Purple Heart?

I’m absolutely confident we’ll be back open for business. It’s just a question of when.

Having been closed since March, any idea how much you’ve lost in sales?

It could easily be $4.5 million.

This interview has been edited for length and clarity.

John Schroyer can be reached at [email protected]

6 comments on “Battling insurers in the aftermath of lootings: Q&A with California cannabis executive Keith Stephenson
  1. Paulo Sobral on

    Keith, appreciate your persistence and passion! You don’t stay open 14 years in this industry without those qualities. I look forward to visiting again.

  2. JB Woods on

    Unfortunately, the experience by Purple Heart Patient Center is not unique. The cannabis insurance carriers will find every reason to deny a claim starting with an analysis of the insurance contract vs the circumstantial facts. The adjusters will interpret the language in their favor twisting the language into a further black hole forcing the client to hire lawyers and seek litigation. Be forewarned, these insurance companies are not here to help their cannabis clients.

  3. Jason on

    We are in a similar position. Burglarized 5 times in 4 days. LAPD response was terrible. We lost everything. DCR wont let us move to a safer location and our insurance provider is dragging their feet to pay claim. We are a social equity business left on our own to bear massive taxes with zero support. Taxation without representation used to mean something. Los Angeles has to be the worst city in the world to do business. We are at risk of losing everything despite numerous pleas to relocate. Bottom line is that none of the regulators care. They are (by and large) grossly incompetent and only concerned with extortive fees and taxes against those that willingly subject themselves to this BS and little to no measurable
    Action against the illicit market. But what should we expect. This is the state that deceives its populous into ballot measures that are egregiously mislabeled on ballots to appease its ever growing public union rolls. Something has to give. All of us licensed businesses need to join forces and let the state/cities know enough is enough. I could go on for hours but it has yet fallen on deaf ears. This isnt my first post. If we get shut down…you know why. Its shameful really.

  4. John Norwood on

    You should hire a public adjuster that understands the process and knows how to deal with insurance claims. Much less expensive and more effective than a litigation attorney

    • Keith Stephenson on

      Yes it was initially recommended by our attorneys, however the adjuster was on concerned with knowing how much our policy coverage was worth. The adjuster wanted 15% of all recovered from the insurer. That was too much.

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