A successful businessman with a growing footprint in several states says he was shocked when he was refused a personal life insurance policy by Mutual of Omaha, one of the nation’s largest insurers.

The company informed Derek Peterson, CEO of Terra Tech Corp., in a letter dated June 13 that “we cannot accept premium[s] from individuals or entities who are associated with the marijuana industry.”

Peterson had, like other state-legal cannabis businessmen, lost bank accounts when compliance officers decided the burden of abiding by federal rules was too much, but denial of a personal insurance policy is not a common industry complaint.

“This was to get some additional coverage for me personally, my family,” he says. “On a personal level, to have something like this happen, where I can’t get protection for my family … it just seems ridiculous and archaic at this point.”

Peterson’s business interests include a large medical marijuana cultivation and retail facility in Oakland, California, ordinary horticulture on the East Coast and a developing network of cannabis cultivation and retail facilities in Nevada.

It’s unclear why exactly Mutual of Omaha denied Peterson’s application and why it would have a policy denying marijuana business employees.

“It is our practice not to comment on individual underwriting decisions,” said company spokesman Jim Nolan in response to an inquiry about company policies.

The poorly edited letter sent to Peterson contains part of a second sentence to justify the rejection. “We are regulated by agencies of the.” it says, which, although incomplete, suggests some fear of government regulators.

Experts suspect the motivation is an overabundance of caution. Even though 25 states have medical marijuana laws and four have regulated recreational marijuana markets – all largely tolerated by federal authorities – cannabis remains federally illegal and hypothetical risk remains.

Julie Hill, a financial industry expert at the University of Alabama School of Law, says she believes the company may have concern about violating laws against money laundering.

“These and other laws make it very risky to accept any money that you know comes from a marijuana business, regardless of whether you are a bank,” she says. Among the prohibitions are "knowingly engag[ing] in a monetary transaction in criminally derived property of value greater than $10,000."

“This is one account that probably won’t make them much money, yet it could potentially be a really large headache,” she says. “It’s easier to say ‘No, thank you’ than to try to figure out if it would actually cause negative repercussions.”

Peterson says he admitted in an application he uses marijuana and that he suspects Mutual of Omaha did some research on him and learned about his business interests.

He already confronted difficulty securing health insurance from visiting salesmen for his more than 60-person Oakland workforce and says he suspects it now will be difficult to take out a separate “key person” life insurance policy that would benefit his company.

Taylor West, deputy director of the National Cannabis Industry Association, says she hasn’t heard of issues quite like Peterson’s personal life insurance rejection but that it’s not unusual for cannabis businesses to run into problems dealing with financial entities, such as in setting up employee payrolls or retirement accounts. The Marijuana Policy Project, an advocacy group, last year was asked to move its retirement plans elsewhere when the word “marijuana” caused concern.

Seeing a gap in the market, some companies now specialize in offering insurance to the multibillion-dollar cannabis industry. CannaSure and Premier Dispensary Insurance are among the leaders in the niche sector.

Doug Banfelder, who helped sell insurance policies for five years at Premier Southwest Insurance Group, the company that runs the Premier Dispensary Insurance program, says he understands Peterson’s frustration.

Banfelder, now preparing to launch a cannabis risk management firm, says he helped a large number of Arizona cannabis businesses get general liability and property insurance, including crop insurance policies.

Premier Dispensary Insurance took off, he says, expanding from Arizona nationwide, reaping a customer windfall from state-legal businessmen confronting what he calls “cannabigotry.”

Mutual of Omaha’s policy, he speculates, may have something to do with perceived reputational risk.

“While absurd to anyone at all familiar with the public's rapidly increasing acceptance of legal cannabis and the subsequently changing political environment, this is a reminder that many companies, especially those in more conservative industries, are slow to adjust to rapid social change,” he says.