CHICAGO — As our industry continues to evolve through technological advancements and amid changing customer expectations, it’s never been more important to secure comprehensive insurance coverage for your laundromat or laundry service. From water damage and equipment breakdowns to customer liability and employee safety, operators face a wide range of risks that demand careful attention and proactive management.
Featuring input from four insurance providers with vast laundry industry experience, this article explores the current state of insuring laundry businesses, offering expert insights into the challenges facing the industry, effective risk maintenance strategies, and key considerations when evaluating insurance policies.
(Editor’s note: The information provided here is for educational purposes only. Readers should consult an insurance services professional regarding their specific situation.)
Q: What areas of the average laundry, regardless of business model, have the greatest need for insurance protection?
Larry Trapani, president, Brooks-Waterburn Corp.: By far, the most frequent claim we get are liability/slip-and-fall claims. Even if a laundromat owner does everything right, there is still a strong probability for that type of claim. Unfortunately, these claims are becoming more expensive as the plaintiffs are not settling them as quickly as they used to.
George Ingram, vice president of marketing and sales, NIE: Regardless of business model, all laundromats have these common exposures: business personal property, time element and liability. If you own the building, then you have a building exposure, too.
Exposures are defined as potential risks faced by businesses. “Building” typically means the actual structure described in the policy declarations. Building may include completed additions, fixtures, and permanently installed machinery and equipment. Permanently installed equipment includes items like heating and air conditioning systems. This equipment should not be confused with the installed cleaning equipment such as washing machines, dryers and vend equipment; these are considered business personal property.
The exposures for building and business personal property are easier to understand than “time element” exposures. Time element exposures include losses that increase over time and are not as tangible as the building and equipment. Time element includes business income loss, extra expenses to operate, and spoilage. With the passage of time, these losses increase.
For example, if a business is down for a week due to a small fire to one dryer, the loss would be manageable for most businesses. But if the fire is catastrophic with the business to possibly be shuttered multiple months, then business income loss will be significant. The loss does not only include profit loss, but it also includes continuing expenses like mortgages on the building or monthly financed equipment.
“Liability” exposures refer to claims resulting from injuries and damage to other people or property. A major liability is premises liability. It is the exposure an organization faces if a customer or client is injured on the premises. For example, a machine has been leaking water onto the tile floor for hours unchecked. A customer slips and breaks an arm due to the water. The business owner will be sued and could be held liable for not maintaining a safe space for customers.
This is a mere summary of the many exposures a business faces every operational day. One should be diligent in insurance discussions with a professional to maximize insurance protection.
Lawrence Larsen, owner, Lawrence Larsen Laundry Insurance: The most common claims against laundromat owners involve liability issues related to slip-and-fall injuries coming from customers. Liability coverage is the proper insurance for protection against this type of claim. Depending on the value of the equipment installed, the second most important insurance would cover loss to the equipment, primarily resulting from fire.
It is important for those renting to distinguish between items that laundromat owners need to replace and repair but which they actually have no ultimate ownership interest in, such as water heaters, furnaces, air conditioning, swamp coolers, lights, walls, bathrooms and other items that ultimately belong to the building owner. These items are often covered by the building insurance of the landlord and paid frequently by CAM (common area maintenance) or triple net fees of the landlord.
Jodie Millino, vice president commercial lines-producer, HUB International Insurance Services: The property coverage and general liability coverage, of course, but the trend we are seeing today is in the area of employees. Even if there is a workers’ compensation policy, this does not protect the business owner if the employee files a lawsuit claiming they did not get correct breaks, overtime, etc. This coverage is written under an employment practices liability policy; make sure there is “wage and hour” coverage as part of the form.
Q: Can you describe bailee coverage and why it can be important to laundry businesses that store customers’ clothing in their facilities?
Larsen: Until recently, the issue of bailee coverage seldom was involved to any significant degree in laundromat insurance. Bailee coverage, in which there is potential liability for a merchant to protect the property of their customers during the processing and storage of their goods, was almost never seen in self-service activities of customers in laundromats. The need for this protection is now expanding as more laundromat owners are adding a second business of processing services on behalf of their customers.
Millino: Because the customer is leaving the clothes with the business owner, it is in their care, custody, and control. Bailee coverage will pick up this coverage if a customer claims their clothes were damaged or stolen. Please note that it will pay on an actual cash value basis and not a replacement cost basis.
Trapani: Bailee coverage protects you in the event that customer property is damaged, lost, or stolen while in your care. For laundromats offering wash-dry-fold or drycleaning drop-off, this coverage is critical. A single loss involving multiple customers’ clothing can lead to significant out-of-pocket expenses without it.
In Part 3 on Tuesday: Advice for minimizing claims, where a laundry might fall short in insurance coverage, and protection where electronic data gathering is concerned.
Miss Part 1? You can read it HERE.
Have a question or comment? E-mail our editor Bruce Beggs at [email protected].
