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How’s Your Insurance IQ? (Part 2)

Some myths have mistakenly come to be accepted as fact, experts say

CHICAGO — A self-service laundry faces risk—fire, liability, a worker injury and more—every day. Without the proper insurance protection in place, an owner might have a tough time recovering from an incident. A worst-case scenario could close the doors for good.

American Coin-Op invited four insurance providers with laundry industry experience to answer some questions the average store owner might have about protecting their investment.

Q: Are there any small-business insurance “myths” that have mistakenly come to be accepted as fact?

Larry Trapani, president, Brooks-Waterburn Corp.: One of the biggest “myths” that many Laundromat owners believe is that their workers can be classified as a contractor or “1099” status. By any standard, your employees are just that, employees. They do not fit the IRS definition of 1099 and therefore are subject to workers’ compensation benefits.

Adam Weber, president, Irving Weber Associates: A common myth held by the majority of policyholders is believing that “everything is covered,” that their property, their liability, and perhaps even their customers’ property, are all covered by their business policy. The fact is, coverage can only be “triggered” by a covered cause of loss, and the included and excluded triggers are spelled out in the policy. Policyholders should carefully review their policies to ensure that their exposures are adequately insured.

Another myth is that property limits remain adequate from year to year. These limits should be reviewed every year (at renewal or when adding/replacing property) to ensure they represent adequate values per the policy provisions. For example, if your policy includes a “replacement cost” provision, the property limits should represent the cost to replace the property in the event of a total loss. If the policy includes a 90% co-insurance clause, the property limits should represent a minimum of 90% of replacement cost value to satisfy the policy provision. Property limits deemed inadequate at the time of loss will likely affect how the loss will be settled, and penalties will be applied.

Yet another myth that becomes reality would be that small-business owners are receiving adequate attention from their insurance reps (brokers or carriers). Often, due to premium size, small businesses are neglected for larger, higher-premium customers who garner more of the broker’s time and expertise.

Ann Hawkins, vice president, NIE Insurance: One small-business insurance myth is that all insurance companies give credits for burglar alarms and video surveillance. I find that not to be the case because when a loss occurs, often the surveillance and/or alarms were not on at that particular time. However, more recently, owners seem to be able to retrieve their video surveillance in more slip-and-fall claims. This is very helpful, especially if it shows the actual event.

Larry Larsen, California Laundromat insurance broker: Lots of “myths” exist because people do not read the terms of their insurance policy, which is a contract, until they have experienced a loss. Two common myths include the belief that Americans with Disabilities Act claims are covered by a Laundromat policy. A second one is that the money inside bill changers and coin boxes is automatically covered in a Laundromat insurance policy.

Q: Where are the greatest areas of risk in and around the average vended laundry?

Weber: When looking at the risks involved in operating a coin laundry, probably the biggest risk would come from liability, meaning someone getting hurt on the premises due to negligence, such as someone slipping on water on the floor, or mats causing tripping, etc.

Also, large storms can be a problem, causing damage to the premises, glass and signs as well as causing the business to be closed for a time, with loss of income.

Hawkins: The greatest areas of risk in and around a vended laundry are, of course, slip-and-fall or trip-and-fall, and dryer fires. The former can be minimized by keeping all floors clean and free of water, debris, broken floor tiles and crinkled rugs or mats. Post “Wet Floor” signs when necessary, such as during a rain or after mopping. Keep machines in good working order so they do not leak. Also, keep the sidewalk and parking lots free of debris and potholes.

Dryer fires can be minimized by removing lint on a daily basis and cleaning vents and the area behind dryers weekly. Also, post warnings about not drying oily rags or uniforms, and cleaning pockets before drying.

Larsen: Poor management related to operations includes improperly done self repairs, improperly installed equipment, and leaking or non-functioning equipment, the latter of which can lead to water leaks and the most common liability claim in Laundromats, a slip-and-fall accident. Failing to properly remove lint can lead to dryer fires, with fires being the most common property loss claim for Laundromat policy holders.

Trapani: In the Laundromat industry, there are two major types of claims:

Dryer Fires — Almost every property claim we have is a result of dryer fires. They occur for two main reasons. The first is customers putting flammable items in the dryer. For example, greasy towels or rags catch fire, especially in the heat of a dryer. The second reason is poor maintenance on the dryer ducts. With a buildup of lint over time, it doesn’t take much heat to cause a fire.

Slip-and-Fall Liability — Almost every Laundromat owner has had a customer slip and fall while in their store. These can be either a minor situation or they could be injured more severely. Either way, in most cases, it involves making a claim to the insurance company. Too many of these claims will result in a higher premium or, worse, a non-renewal of your policy.

Check back Tuesday for the conclusion!

Miss Part 1? You can read it HERE.