Are You Properly Insured?

An ounce of proper liability coverage is worth a pound of claims. If it's been a while since you’ve examined your policy, read on.

Loss prevention. Discrimination. Pollution liability.

If these terms manage to simultaneously glaze your eyes over and send shivers down your spine, you're not alone. Many shops in this industry don't have the proper insurance coverage they need to protect them against common claims. With all the demands of running a business, insurance is just something to cross off the list when the premiums come due. But blindly paying for a cookie-cutter package can be a huge mistake.

"As the industry gets more competitive, there are more people out there soliciting quotes," says David Willett, general manager and vice president of Chicago-based Zurich Direct Underwriters (formerly Universal Underwriters Group). "The most important thing for shop owners to do is get someone who knows this industry. You don't want someone who is writing practically the same policy for a flower shop, a bakery and an auto repair shop. And you want knowledgeable people not just selling the policy, but in the claims department, too."

To find a reputable insurer, Willett advises owners to ask around: "Get references from others in the industry. This is something that is often overlooked when owners shop for a policy, but it's important. You need someone who is familiar with the liabilities in the industry."

Charles Bryant, executive director of the Alliance of Automotive Service Providers of New Jersey, agrees that insurance is an integral, but often overlooked, part of business. "It is a known fact that the majority of people do not even read their policies until there is a loss — and then they find out that what they thought was covered is actually excluded, and has been from the start," he says. "Had they read the policy in the beginning, they would have at least been aware of it from the start and may have been able to get coverage in the area of concern."

Bryant offers as an example the coverage for completed operations in the standard garage policy: "Based on my review of many such policies, coverage is specifically excluded for aftermarket parts," he says. "It's almost comical, because the same company that the shop bought the policy from often requires the use of, or limits payment to, an amount that will only cover the cost of aftermarket parts when they come to the shop to negotiate the repair of a damaged vehicle being repaired by the shop — when the vehicle is covered by the same insurer the shop bought its insurance from."

Betty Jo Young, AMI, is owner of Young's Automotive Center in Houston and a committee member of the Automotive Service Association's (ASA's) national insurance committee. She notes that many shops still aren't carrying liability coverage at all — and that's a mistake.

"In my opinion, shop liability is no longer an option. We have to have it," she says. "Our customers deserve it, and it has to be part of our doing business in a society that will sue over anything. When there is an automobile accident, many times the first question to the policy holder is, 'Who worked on your car last, and what did they do?' Then a lawsuit is brought against the shop that worked on that vehicle last, no matter how much they have to stretch to connect you. We have to have someone on call to look out for us; that is where liability insurance comes in."

CHANGE YOUR COMPANY, CHANGE YOUR POLICY

As your company grows, so should your insurance coverage, advises Willett. "Most insurers offer an annual review, and I strongly suggest you take advantage of it," he says. "If you have more employees, you're more likely to incur loss, for example."

Discrimination coverage, which covers shops for wrongful termination and sexual harassment, among other claims, is another important coverage aspect. This is particularly true for shops as their employee base grows. "It's the fastest-growing claim segment," Willett says. "Our data finds that you are 11 times more likely to have a discrimination claim than a fire loss."

In addition to discrimination coverage, Young points out several areas that she has learned to look for in a policy in her 35 years in business:

CRIME COVERAGE: This covers you from employee theft and other petty crimes. "If you keep a lot of money on hand, this might be a consideration," Young says.
TECHNICIAN ERROR: If one of your techs forgot to put the oil back in the car, are you covered?
KEY MAN INSURANCE: Coverage if your key technician is out for an extended time.
LOSS PREVENTION: Young recommends checking out whether your carrier offers a loss prevention inspection at no charge. She also notes that it's worth finding out whether the carrier offers discounts to association members. Willett agrees, and adds that other discounts, such as that for safety programs in place, might be yours for the asking, depending on the carrier.

Young stresses that shop owners should not just look at the bottom line for policies. "Know who to call in an emergency. Ask other shops who they have, have they had to file a claim, and how they were treated.

"We have been blessed that we've only had a few claims over the years, but last year we had a break-in at the shop," she continues. "I called my agent and was amazed at how quickly and professionally it was handled. I complain every month about the cost of insurance, but I sleep much better knowing that if I need help, it is a phone call away."