Knowledge is the key to successful risk management
Business insurance can be confusing and difficult to understand. If it causes you stress and anxiety when policy renewal time rolls around, you're not alone. That's why it is so important to choose a broker who, first of all, is knowledgeable about the specific exposures inherent in the carwash industry; and second, one who is dedicated to staying up-to-date on insurance related legislation and issues that impact you as a business owner. This article is designed to help reduce your stress and anxiety about insurance, and to hopefully give you a better understanding of some of the areas that tend to cause confusion. You may want to consider discussing some of the following items with your broker during your next policy review.
(Example: Carwash/Detail shop)
It is important that the named insured on your policy is correct. The insurance company's obligation is to protect the named insured. A legal concept called insurable interest means the named insured should be the same as is shown on your deed to property, your business operating name, the titleholder name as shown on your vehicles, etc. If the named insured is incorrect it can mean you will not receive the financial protection you believe you have purchased. You also need to include any predecessor company or companies as named insureds for protection from any kind of discontinued operations, or their inclusion in claims that might be presented by a third party claimant and/or first party damages involving them as insurable entities.
If any joint ventures and/or subsidiary companies are or have been a part of the ongoing operations of any named insured, it is imperative they be included as insureds to offer protection for any claims arising out of those operations.
In order to be properly protected, you will want to be sure your insurance agent is aware of all operations that you are involved in. A few examples of the type of things you'll want to discuss with your broker include:
- Do you rent your tools or equipment to others or allow someone to occupy one of your bays to operate their own business? If so, you will need to have protection for their use or occupancy.
- Do you offer pick-up and delivery of automobiles for your customers?
- Do you have a retail or wholesale business on premises or off premises of products for use by others?
- Does anyone else use your business name? Are you part of a franchise?
Whether you are using a product in your business or if you are selling a product for use by others you have exposures for bodily injury and/or property damage that may be caused by the product. Yes, the manufacturer may be ultimately responsible, but you and your business are at risk and any lawsuit filed may include you and your business. Even if you are not found to be legally responsible for damages, you would need to defend the action, and your liability policy is designed to provide that defense coverage along with payment of damages.
It is important to be sure all locations are accurately identified. Have there been any changes in the mailing address or have you had any revisions in your emergency 911 address? The insurance policy declarations page lists the premises address. If you have more than one location, you need to be sure each is identified to be certain your insurance policy will respond should you have a loss. For example: Location one is owned. Locations two and three are occupied as tenants. Leases need to be reviewed to determine any particular insurance requirements, hold harmless and/or waiver of subrogation provisions.
As a business person, it is important that you have accurate records available for yourself and your employees, especially your management personnel. Below is a sample of a simple chart that will give the information in a single location. Your insurance agent may need this information when analyzing your insurance portfolio as it relates to various insurance programs, such as workers' compensation, health insurance programs, key person life insurance, as well as others.
|LIST KEY MANAGEMENT PEOPLE|
|Name/Age||Job Description||Time Held||% Owned|
Better Insurance Rates
Many insurance carriers offer better rates for various business activities designed to evidence your efforts toward business improvement and perpetuation. If you do not already have these programs in place, today is the day to get started. Following is a sample of the type of manuals and written documentation that is needed:
|LIST OPERATION MANUALS|
Are any changes (expansion, retirement) planned in next 5 years? If so, explain.
Premises: (including warehouse, processing, leased property)
- Replacement Cost
- Actual Cash Value s
- Other (Explain _____________________________________________________)
- Special (Open Perils)
- Other (Explain ____________________)
- Last Appraisal Date: ________________
Computerized Production Equipment Coverage – This endorsement is used to extend the policy to include coverage for loss to electronic equipment used in business operations.
BUSINESS INCOME and EXTRA EXPENSE
- Review flow chart to determine critical path of operations.
- Review asset schedule to determine time to replace each item that would seriously affect operations.
- Would the loss of key equipment affect operations? For how long?
- Are spare parts for critical equipment readily available? On premises? Off premises?
- Are there any pieces of obsolete equipment or obsolete facilities?
- Would operation be suspended until repair or replacement?
- Do seasonal fluctuations in business patterns affect income?
- Any favorable leases that would not be able to be mimicked?
- Would widespread damage geographically, such as that caused by tornadoes, affect the length of time required to recover from a direct loss because of the scarcity of building materials?
- How long will it take to regain customers after an extended shutdown?
- Will extra expenses be incurred to regain customers after an extended shutdown?
- Are alternative sources of key supplies readily available?
OPTIONAL COVERAGE CONSIDERATIONS/DEFINITIONS
Ordinary Payroll limitation – This Business Income endorsement will allow you to exclude or limit the payroll of employees when determining your insurable income values. This reduces the limit of liability that you must carry and results in a premium savings.
Power Limitation Endorsement – This endorsement will allow for the deduction from income all types of utility costs except: (1) minimum power and heat needed to maintain the building and (2) usage obligations under contract. This eliminates the need to include these items among operating costs when determining insurable values thus resulting in lower premiums.
Utility Services – Time Element coverage – This coverage extends your business income and extra expense insurance to protect against loss due to the interruption of services rendered to you by a specified utility that provides your business with water, power or communications.
|Agreed Amount Option||Waives coinsurance at the time of the loss per policy terms|
|Sprinkled||Date of last test
|Alarm System||Type of system
|Fixtures / permanently installed equipment||Need to confirm adequate limits included based on the current cost to replace with like kind and quality equipment|
|Fire Legal Liability||Coverage limit $________
Note: Need to confirm terms of lease or rental agreement, if any.
|Ordinance or Law Coverage||Need to verify current building codes in the area where building is located|
|Improvements / betterments||Need to determine if limits are adequate when occupying leased or rented properties|
|Planned renovation / new construction||Describe and verify value|
|Electronic data processing and / or computerized equipment coverage*||Hardware and / or software
Need to review location of exposures
COMMERCIAL GENERAL LIABILITY AND/OR UMBRELLA
Coverage is designed to protect your legal liability for damages to others including Bodily Injury and Property Damage. The amount of insurance you purchase limits the protection the insurance company provides, but does not limit the amount you may be required to pay to a claimant.
Your insurance agent can give you premium costs for various limits of protection. You may be surprised to find how inexpensive it is to purchase higher limits. You can make a business decision regarding the limits you need to purchase when you have options available.
- Do you need to include additional insureds?
- Do you have more than one location? If so, check about per location general aggregate
- Leased workers (are any used in any location?)
- Pollution exposure
- Mobile equipment (i.e., fork lift, etc.)
- Should any joint ventures/partnerships be named on the policy?
(Owned/Non-Owned and Garage Liability)
- Additional insureds? (Loss Payees/Titleholders)
- Hired & Non-owned Auto Liability
- Vehicles left in your care, custody or control
General Crime Exposures
- Have steps been taken to prevent theft of money, securities, or goods through the computer system?
- Are computer passwords changed frequently?
- Do limits carried reflect amount of money, securities, and other goods that an employee or group of employees could misappropriate over a period of time?
- Should excess coverage be provided for any employees who handle large amounts of money?
- Should leased workers be added for coverage?
- Are you and your employees aware of the need to notify police of crime losses?
- Are you aware that coverage under the employee dishonesty policy may be canceled for any individual once the insured becomes aware that the employee has committed a "dishonest act"?
WORKER'S COMPENSATIONCoverage Considerations
- Statutory limits of __________________ for operating states
- Employers Liability limits __________
- Any leased employees?
- Do you have an effective back-to-work program?
- Has a company-wide disaster recovery plan been developed?
- Are key records (including paper and electronic) duplicated and kept off premises?
- Are critical spare parts available but kept off premises in an easily accessible location?
The value of your insurance program cannot be fully appreciated until you have a loss. And after a loss is certainly not the best time to learn about what's covered (and not covered) by your carwash insurance policy. Take time now to discuss the items included in this article with your insurance broker, because knowledge and understanding are key to a successful risk management program.
Scott Brothers is president & CEO of Joplin, Missouri-based The Insurancenter. Serving the carwash industry for over 25 years, The Insurancenter is the largest writer of carwash insurance nationwide.