Most of us think of spring as a time of fresh starts or bringing new life. How about applying that to your business and the insurance plan that protects it? 

The old saying, “An ounce of prevention is worth a pound of cure” can most assuredly be applied to your business plan. After a major loss, we often hear, “I can’t imagine how this happened,” only to discover a series of similar incidents had resulted in near misses. Safety researcher, H. W. Heinrich, advanced this severity rule, “Your safety efforts should be designed to reduce frequency, and by reducing frequency, you absolutely reduce severity.”

As more and more incidents occur, one of those minor problems will turn severe. The timing, the people, the equipment, the situation — something will be just a little different and someone will be seriously injured or major property damage will occur.

What action can you take to reduce frequency and thus, minimize or otherwise reduce the chance of a severe bodily injury or property damage event? Employee training is a good place to start. Teach the risks of taking shortcuts. Look at the benefits of good work habits. Any employee who shows at-risk tendencies through minor incidents should be monitored, taught and evaluated. When an employee doesn’t operate in a safe manner, it should be no surprise that their minor incidents will go from near misses to disasters, and this is an event you can ill afford.

An even more obvious clean-up area is the location you occupy. A good top-to-bottom cleaning will help reduce the likelihood of both liability and property losses. The best place to start, believe it or not, is doing a complete walk-through of the facility. Look at it as though you were either checking it out to buy the business or enter into a longterm agreement to use the services you offer.

Look at the building and equipment. Are they clean? Are the walkways open and well-lit? Does the premises show pride in ownership? Has the equipment been serviced and are safety guards in place? Look at sidewalks, floors, stairways, etc. Are there any uneven surfaces? If so, have they been identified by safety signage and lights? Is there any evidence of water or oil spills? Be sure to check the plumbing. Are the fixtures appropriate for their intended use? Is the hot water heating equipment in good repair and the proper size for the business? Check the electrical service. You don’t have to be a certified electrician to see if there are any obvious signs that the current service is inadequate for the business. For example, are there a lot of extension cords being used? These create trip and fall hazards, as well as potential fire danger if they should become overheated.

The idea of a spring cleaning of your employee habits, as well as building and equipment, certainly is not new. It is, however, extremely important to the fiscal well-being of your business operation.

Beyond the Surface

How about your insurance program? Did you ever think that maybe it, too, needs to be looked at and cleaned up? Here are a few specifics that you can use with the help of your insurance agent to make sure you reduce the possibility of surprises when (not if) you need to use the protection afforded you and your business by the insurance policies you purchase.

General Information

Named Insured
If you have ever operated your business under a different name, you need to include any predecessor company as named insured to protect yourself from claims that might be presented by a third-party claimant and/or first-party damages involving them as insurable entities. For example, you leased equipment when you were operating as an individual sole proprietor, but have now created a corporation — but left the original equipment lease in place under your individual name. Would your policy respond for damages if the policy is in the name of your corporation, but the claim for damages is brought against you as an individual?

Location
Have you gotten a new address, such as when the 911 system went into effect, but you didn’t actually move? Does your policy have the correct, current street address? This will help avoid unnecessary stress at the time of a loss when you are verifying the location of your insured premises.

Commercial Property
Are the items of real and personal property titled in the same name as the Named Insured shown on your policy? Remember, the policy only protects the financial interest of the Named Insured. Is your property titled in your name individually but your policy shows your corporation, partnership or LLC as the Named Insured? At the time of a loss, the adjuster will be checking to see who legally owns the damaged property and will only be able to indemnify the Named Insured.

What are the terms and conditions of the policy? Some of the special areas of interest you should consider include:

• Is the policy written on Actual Cash Value or Replacement Cost basis?
• What perils are insured? Basic, Broad or Special?
• What is the coinsurance percentage? And, are the values insured adequate to be equal to or greater than the value at the time of the loss, multiplied by the coinsurance percentage shown on the policy declarations?
• Are you planning any renovations or new construction? If so, have you told your agent, so your coverage can be updated accordingly?
• Have you included protection for the Loss of Income that would result if your business is damaged and you are unable to operate while repairs are made to the building and/or replacement equipment is being ordered, shipped and installed?

Boiler and Machinery
(Mechanical Breakdown and Electrical Current Coverage) Because of the special nature of your business, you have key machinery, motors, pumps, compressors, water-heating and electrical equipment that may be excluded from your standard property policy. Have you secured protection?

In addition to the actual damage to the equipment, loss of use of this equipment may cause shutdown of your business operations. Have you included coverage for business interruption? Ask your agent about Business Interruption and Extra Expense coverage.

General Liability
Are your policy limits adequate? Determining how much liability insurance to buy is a little like asking, “How high is up?” It may surprise you how inexpensive it would be to increase your limits. Check around in your area — when a legal action is brought against a business owner, has the amount of damages sought by the plaintiff increased substantially since you last increased your own limits? Chances are the answer is yes. When you are cleaning up your insurance program, it would be an excellent time to increase your limits or secure the additional protection of an umbrella policy to increase the protection available in the event of a catastrophic event.

Do you need to have any additional insured named on your policy? Lessees or owners of property will oftentimes require in your contract that they be included as an insured for liability under your policy of insurance. Others who may have required you to include them for protection could be vendors or lessors of mobile equipment. If you have more than one location, ask your agent about the possibility of including a per location aggregate, meaning that your maximum limit of protection during any policy term would be applied at each location — in place of including all locations in a single limit of protection.

Other areas of coverage that you and your agent will want to dust off when you are spring cleaning your insurance program include: Workers’ Compensation; Employee Benefit Liability; Employment Practices Liability; Commercial Automobile, including coverage for automobiles that might be left in your care, custody or control as a part of your operations; and Crime coverage, for example, money and securities coverage and/or Employee Dishonesty coverage. If your business is a corporation, you may want to check into Directors and Officers Liability.

Spring-cleaning can add sparkle to your business, and peace of mind to you as a business owner or manager. But remember, it is more than surface cleaning and not something to be put off.

Scott Brothers, CIC, is the president and CEO of Joplin, Mo.-based The Insurancenter. The company has been insuring the car-care industry since 1986 and is one of the leading writers of insurance for the industry nationwide.

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