Who's Got Your Back?
August 9, 2011
Every once in a while we get that call from a local customer who we know has very deep pockets. And we know a call from them means a really great week for us.
Every once in a while we get that call from a local customer who we know has very deep pockets. And we know a call from them means a really great week for us. But if we’re not careful business planners, that big job could turn into a big nightmare if we find out the hard way we don’t have proper insurance coverage.
The thing about that really big customer is she tends to have really nice stuff. Since accidents can and will happen on any job-no matter how careful you are-you’d better make sure your insurance company has your back before you step foot in her home.
A few weeks ago we got one of those calls from a customer with the deepest pockets in our town. The value of the property we were called work on was in the tens of millions. We had done work for him in the past, but never on this scale.
He wanted all three floors of the entire house cleaned-all carpet, rugs, and upholstery (including the upholstered walls!) We were glad to oblige. While lots of careful planning and scheduling went into the job, the point of this discussion is to explain the various insurance coverages that applied to this job, and how we adjusted them to protect ourselves.
When you purchase insurance for your business, you are entering into an agreement to receive compensation for sudden and unexpected losses during the course of your operation. Of course, your insurance company sets limits on the compensation based on the annual premiums you can afford. Your agent should help you set those limits according to the normal, everyday operation of your business.
When you encounter a job outside your normal scope of work, you should consider purchasing an insurance rider. An insurance rider provides you with extra protection beyond the standard provisions and limits contained in your conventional policy.
While I wish our aforementioned customer was the “norm”, his property value and needs fell outside the scope of our everyday operation. The solution was a simple email to our insurance representative asking her to secure a policy rider that would protect us during the time we handled his property. Below I’ve outlined our various policy limits and how we adjusted them.
Property at Your PremisesThis part of our insurance protects us from damage or loss to our customers’ property while stored in our warehouse. Part of our service during this job was to transport 12 oriental rugs to our warehouse for cleaning. In the event that our warehouse burned to the ground while the rugs were stored there, this part of our policy would provide compensation to the customer for their loss.
According to the customer, these 12 rugs were valued at just under $900,000 dollars! Did I speculate on these values? No. Should you question your customer regarding their property values? It depends. Just use your common sense. Usually they have no reason to exaggerate values to you because your insurance company will question them later if a claim is filed.
My Standard Limit: $175,000
Value of Customer’s Rugs: $900,000
New Temporary Limit: $1,075,000
Notice that I still maintained my original $175,000 in coverage because I had plenty of other customer property stored on site.
Property in TransitNotice in the previous section that we were responsible for pickup and delivery of these very beautiful rugs. Well, according to my insurance policy, that’s separate coverage with a separate limit.
Property in Transit specifically protects me from damage to items that are being transported in one of my owned or rented vehicles, and no other part of my policy will cover an event during transport. In the event that my truck and trailer are involved in a serious accident during the 20 mile trip, I need to know that my customer’s rugs are protected by my insurance company.
My Standard Limit: $35,000
Customer’s Rugs: $900,000
New Temporary Limit: $900,000
The new limit was set according to the property being transported. Unlike the Property at Your Premises coverage, I would not be transporting property belonging to multiple customers.
Property at Premises of OthersThis part of my policy protects me from damage to customers’ property that I am handling in the conduct of my business. Essentially, the items I am cleaning. This particular customer owned some very valuable upholstered items that we had been hired to clean.
My Standard Limit: $50,000
Value of Items Cleaned: ????
New Temporary Limit: $50,000
In this case I did not adjust my limits with a rider. I have very experienced technicians who know how to handle delicate fabrics. Of course accidents can and will happen, but based on conversations with the customer regarding the value of each item, we didn’t see the need the need to increase our coverage. My technician would have had to damage multiple items during the course of cleaning to exceed the $50,000 limit.
General LiabilityThis part of my policy protects me from damage to any other part of my customers property not mentioned above. If my technician had damaged a $10,000 chair during the course of cleaning, the above coverage would apply. If he knocked over a $75,000 vase after tripping over his solution line, that’s where my General Liability would protect me.
My Standard Limit: $1,000,000
Value of Items We Could Potentially Damage: ????
New Temporary Limit: $1,000,000
Again, I didn’t increase this limit. If my clumsy technician has the potential to create more that $1,000,000 in damage, I never should have hired him in the first place. Plus my Umbrella coverage limit is $5,000,000, so I felt pretty safe with my professional staff working around grossly expensive items.
In the end you know your business best. Establish a good relationship with your insurance agent, and ask him to explain the nuances of your policy. When you’ve established a good reputation around town and are fortunate enough to get hired for these big jobs, make sure you handle it like a professional. Work together with your customer and your insurance agent to make sure everyone is protected.
We received over $21,000 from this customer for a week’s worth of work in his home. Our insurance only charged us $275 for the temporary increases-about 1.3% of the total job revenue. Was it worth the investment to protect ourselves? Hopefully you’ll get the chance to decide for yourself one day.