There are several types of insurance coverage available to car wash business owners, which may be purchased separately, in a package, or in a combination policy called a business owner’s policy (BOP). Policy types include property and casualty, general liability, workers’ compensation, employment practices liability, commercial automobile liability (including garage keepers), umbrella, and cyber liability policies.
Following are several frequently asked questions (and their answers) regarding these types of coverage.
What is Property Insurance?
Property insurance is designed to protect your tangible assets. The form 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 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, which 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 wildfire 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, usually 30 days after the property is first moved.
Fire Department Service Charge
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 for, subject to policy terms and conditions.
How Much Coverage Do I Need for My 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 you 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 arise 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 refers to the legal liability you have for the sale of products or work you perform on your customers’ 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 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, you might be successfully sued by an innocent customer who is erroneously arrested for shoplifting. Or you might be sued because of copyright infringement in your advertising.
Why Do I Need Workers’ Compensation and What Does It Pay?
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 responsible personally 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 and Who Needs It?
Employers are frequently sued by employees and potential employees 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 possibility 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 award for damages has also 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, 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.
The management of people isa 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, and Why Would I Need This Protection?
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.
What Is Cyber Liability Insurance, and Do I Need It?
Every type of organization, from global companies to mom-and-pop-owned businesses, any company that uses technology to do business, faces cyber risk.
As technology becomes more complex and sophisticated, so do the threats that businesses face. Therefore, every business and organization needs to be prepared with both cyber liability insurance and an effective cyber security plan to manage and mitigate cyber risk — pre-breach and post-breach.
Cyber liability insurance is an insurance policy that provides businesses with a combination of coverage options to help protect the company from data breaches, ransomware, and other cyber security issues.
Does your car wash business collect, store, send, or receive personally identifiable information (PII) of customers, club members, and/or employees? If you answered yes, your business needs cyber liability insurance. Because it is not a question of if your business will suffer a cyber-attack, but when your business will suffer a cyber-attack.
If you have additional questions that have not been dealt with here, contact your insurance agent for answers. A knowledgeable adviser not only understands the complexities of commercial insurance but also understands the exposures involved in the car wash business.
Don’t wait until you have a claim to ask questions. Get answers now. It doesn’t cost to ask, but it could cost you your business if you don’t.
Kimberly Grizzle, AAI is the marketing and business development director for The Insurancenter, founded in 1895 as a full-service independent insurance agency.
A national car wash insurance program was introduced in 1986. The agency has been the largest writer of car wash insurance for over 35 years. Kimberly can be reached at email@example.com or visit www.carwashinsurance.com.