Insurance FAQ - Understanding Car Wash Property and Casualty Insurance
By Cindi Helvey
There are several types of property and casualty insurance coverage available to car care business owners, including property and liability insurance which may be purchased separately, in a package, or in a combination policy called a business owner’s policy. Other types include workers’ compensation, employment practices liability, commercial automobile liability (including garage keepers), and umbrella policies.
Following are answers to several frequently asked questions regarding these types of coverage.
WHAT IS PROPERTY INSURANCE?
Property insurance is designed to protect your tangible assets. It covers the building described in the policy and includes any completed additions and fixtures, permanently installed machinery, and certain outdoor fixtures.
Business personal property you own, inside or on the building, and within 100 feet of the premises, is also covered. This includes furniture and fixtures, stock or inventory, and all other personal property owned by the insured and used in the business. In addition, business personal property includes leased personal property that you have a contractual obligation to insure. You’ll want to check your leases to see what coverage you have agreed to provide.
You also can include personal property of others in your care, custody, or control. Be sure to ask your agent if you have this exposure because most policies do not automatically provide this protection.
Several additional coverages or extensions of coverage are provided in most property forms, whether they are purchased separately, in a package, or in a business owner’s policy (BOP). Some examples are:
The cost of debris removal is paid up to certain limits specified in the policy.
Preservation of Property
If you move your property to another location for safekeeping because you are protecting it from an impending loss (e.g., a wild fire is moving toward your premises), any direct physical loss or damage to the property while being moved or stored at another location is covered. This coverage applies only if the loss or damage occurs within the specified period of time, usually 30 days after the property is first moved.
Fire Department Service Charge
This provides a payment that can be made to the fire department (usually a maximum of $1,000) for responding to a fire at your location. No deductible applies to this coverage to encourage you to protect your property from impending danger as a result of a fire.
In addition, newly acquired or constructed property, personal effects and property of others, property off premises, outdoor property, etc., are automatically provided coverage, subject to policy terms and conditions.
How Much Coverage?
How much coverage do you need for business property? You should purchase replacement value coverage for your business property as this eliminates concerns over depreciation. Effectively, this provides coverage to replace your property with new property of like kind and quality. Remember, most policies will pay you the depreciated value of damaged property (also known as actual cash value) and reimburse you for the difference after the damaged property is actually replaced and you provide the insurance company with a copy of the invoice for the purchase.
DO I NEED GENERAL LIABILITY COVERAGE?
Yes. General liability refers to the legal liability arising out of business operations other than auto accidents or employee injuries. The major general liability loss exposures of business firms include:
Defense Costs to Protect from Lawsuits
Even if you are found not responsible for damages, there are considerable costs involved in presenting your case to the court. This is paid in addition to the limit of coverage you purchase. If the damages are equal to or greater than the limit purchased, the defense cost protection will terminate. You want to be sure you purchase limits adequate to protect your business.
Premises and Operations Liability
This arises out of the ownership and maintenance of the premises where you do business. You are legally required to maintain the premises in a safe condition and are responsible for the actions of your employees. Customers are considered to be invitees and you owe them the highest degree of care. You must warn customers of any dangerous condition on the premises and protect them against injury.
Products and Completed Operations Liability
This refers to the legal liability you have for the sale of products or work you perform on your customer’s property. Your policy covers liability losses that occur on premises or away from premises if they arise out of your product or work after you have relinquished possession of the product or the work has been completed.
Personal and Advertising Injury Liability
This refers to false arrest, detention, or imprisonment; malicious prosecution; unlawful entry or eviction; libel; slander; defamation of character; violation of privacy; using ideas that belong to someone else in your ads; and infringement of a copyright or trade slogan in your ads. For example, an innocent customer who is erroneously arrested for shoplifting might successfully sue you. Or, you might be sued because of copyright infringement in your advertising.
WHY DO I NEED WORKERS’ COMPENSATION?
Millions of workers are injured or become sick each year because of job-related accidents and disease. All states have workers’ compensation laws that provide benefits to workers who have a job-related injury or occupational disease. You can meet this legal obligation to injured employees by purchasing a workers’ compensation policy. Or you can be personally responsible to pay the prescribed benefits to your injured employee based on the benefits made available by the statute applicable in your state.
Workers’ compensation insurance provides medical care, disability cash payments, survivor benefits, and rehabilitation services to workers who are injured or die from job-related accidents or disease. These benefits are paid based on the principle of liability without fault. What that means to you is that you are held absolutely liable for job-related accidents and disease, regardless of fault. Workers receive benefits according to state law and are not required to sue their employers to receive benefits.
WHAT IS EMPLOYMENT-RELATED PRACTICES LIABILITY?
Employees and potential employees frequently sue employers because of wrongful termination, discrimination, sexual harassment, failure to promote, failure to hire, and other employment-related practices. It doesn’t seem to matter how large or small the organization is; if you hire an employee, you have a risk of being sued because of something you are alleged to have done (or may not have done) in that process.
In recent years, the number of such suits has increased substantially, and the awards for damages also have increased. General liability insurance policies typically exclude or offer limited protection against liability arising out of the employment practices of employers.
The insuring agreement for this type of policy may define a covered condition as an injury or wrongful act involving actions taken, including refusal to employ, termination of employment, demotion or failure to promote, reassignment, negative evaluation, and defamation or humiliation. Another is coercing a person to commit an unlawful act or omission within the scope of employment. Also included are work-related sexual harassment and other work-related verbal, physical, mental, or emotional abuse, such as discrimination based on race, age, or gender.
Managing people is a complex task, creating numerous opportunities for mistakes. In addition to employment-related practices liability, you also should consider employee-benefits liability, which protects against mistakes in the implementation of your benefits program. It includes, among other benefits, workers’ compensation, health plans, and vacations.
WHAT DOES COMMERCIAL AUTO LIABILITY PROTECT?
Legal liability arising out of the ownership of an auto is easily understood. Even if you don’t own any company vehicles, you can be held responsible for the use of an auto in your business. If you or one of your employees is using a personal vehicle to run errands, etc., on behalf of your business, there is a possibility of legal liability.
You are covered for a bodily-injury or property-damage claim to which the insurance applies and that is caused by an accident resulting from the ownership, maintenance, or use of a covered auto. Again, defense cost is one of the more important benefits of this policy, as the insurance company will pay the cost to defend the lawsuit in addition to the limit of coverage you have purchased.
The garage coverage form is a specialized form for people in the auto business. This includes, for example, a car wash or lube shop. The insurance company agrees to pay all that you might become legally obligated to pay as damages because of bodily injury or property damage to property that you do not have in your care. If there is damage to a customer’s car you need another specialized coverage called garage keepers coverage.
This would pay what you might be legally required to pay as damages for loss to the customer’s car if it is left in your care while you are attending, servicing, repairing, parking, or storing the vehicle as a part of your operation. You can, for an additional premium, broaden this coverage to pay for damage to customers’ autos without regard to legal liability. You may want to consider purchasing this additional benefit as a form of public relations protection.
WHAT IS A COMMERCIAL UMBRELLA POLICY?
A commercial umbrella policy can provide protection against catastrophic liability judgments that might otherwise bankrupt your business. In today’s litigious society, you are likely to be sued for large amounts, which may not be adequately insured under standard liability policies. Just like the liability policies discussed above, this policy usually pays the cost of an attorney’s defense in addition to the limit of coverage you purchase.
If a loss is covered by your primary liability insurance, the umbrella policy pays only after the underlying limits are exhausted. If the loss is not covered by any underlying insurance, but is covered by the umbrella policy, the insurance company would pay the damages up to the limit of coverage you purchase after you have met the self-insured retention (SIR), which is something like a deductible in that you must pay it before the insurance company will pay any benefit.
WHY DO I NEED CYBER/DATA BREACH COVERAGE?
We have all seen the headlines, and the sad reality is that the threat of a hacker gaining access to customer information and corporation information is greater than ever. These events are increasing within the car wash industry. Regardless of whether you retain customer credit card information or utilize a third-party vendor, you may still be held legally liable for all or a portion of any monetary losses incurred through a data breach or cyber event.
Cyber coverage would assist if your business incurs significant financial loss if your computer systems were compromised through an intentional attack or virus.
Data compromise would assist you with coverage for monetary losses you may incur through accessing legal and forensic-information services, notifying affected individuals, servicing affected individuals (e.g., credit monitoring, identity restoration), and PR services in the event your car wash business is responsible for the release of your customers’ personal identifiable information.
If you have additional questions that aren’t included here, you should be able to rely on your insurance advisor for answers. A good agent not only understands the complexities of commercial insurance but also understands the exposures involved in the car care business. Don’t wait until you have a claim to ask questions. Get answers now. It won’t cost to ask, but it could cost you your business if you don’t.
Cindi Helvey, CISR has been with The Insurancenter for over 30 years specializing in all types of car wash insurance. She can be reached at Chelvey@carwashinsurance.com or by calling (800) 444-8675. You can visit the company website at www.carwashinsurance.com.