How much do you really know about your insurance coverage? Can you explain your policy in detail? Some of you may shrug off these questions, but while you may not enjoy focusing on insurance, having the right coverage for your self-service laundry is essential to protecting all your hard work.American Coin-Op has invited representatives from two insurance companies who have been dealing with self-service laundries for many years to answer some questions.Jodie Millino is with Wells Fargo Insurance Services. Steve Brodie assisted with the responses. The two have insured self-service laundries nationally since 1970.Ann Hawkins is vice president at NIE Insurance. NIE Insurance has serviced the drycleaning industry since 1915. The company has been insuring self-service laundries for more than 35 years.Q: What insurance coverages are necessary?Millino: There are two critical coverages, providing you don’t own the building: personal property (including tenant’s improvements) and adequate liability. Most of the time, leases dictate limits, but you should also consider limits that might be above what is required from a landlord. There is no set formula for insuring any business. Each situation is governed by the individual needs, loan requirements and your lease. It’s critically important to deal with someone who is familiar with the laundry industry.Hawkins: Coverage musts include:
- Building (when building is owned by laundry owner)
- Business personal property
- Loss of income
- Liability
- Crime
- Workers’ Compensation
- Bailee (when doing drop-off work)
- Equipment breakdown
The limits of insurance are up to you, but we strongly suggest using our building-replacement cost survey for the building, and our equipment-replacement cost survey for business personal property. When calculating the amount of business personal property insurance needed, the owner must include improvements and betterments, delivery, installation and taxes plus all operating supplies. These items are often left out when the owner is giving his agent the desired limit of insurance, but they are all covered under business personal property.Q: What are some unique laundry risks?Hawkins: Some of the risks are the ones you might expect with public operating of washers and dryers:
- Wet floors from leaking washers
- Uneven floor surface due to drains located near customers
- Dryer fires due to greasy fabrics, excessive lint, plastic, or other combustible items left in the clothing
- Children playing with equipment and running around
- Tables and chairs that are connected with little support
- Tanning beds
- Pool tables
- Kiddie rides
- Climbing toys
Millino: There can be injuries related to washers and dryers. There also is insufficient maintenance of dryers and duct work; removal of safety guards on equipment; failure of interlock devices; changer theft (if no alarm); and water issues that can cause slip-and-falls.Q: Is fire the biggest risk?Millino: Fires and liability claims are the most costly ones in the laundry business. Vandalism and glass problems are typical on a frequency basis, but fire and liability are the worst on a severity scale.Hawkins: Fires are the biggest risk in the sense that they can cause the most devastation. However, the most frequent risk is trip or slip-and-fall. People come to the laundry in flip-flops, slippers, and a variety of other shoes that can contribute to a fall. People are of various size and age, which can also have an effect on the seriousness of an injury.Q: What weather-related risks can operators face? Hawkins: Weather-related risks include hurricane, tornado, flood, windstorm, hail, and just simply heavy rain. Every area of the country is subject to weather-related losses, not just coastal areas. It’s wise to purchase a coverage that is an extension of loss-of-business-income coverage known as Utility Services-Time Element. This will apply to a loss of utility service that happens away from your premises, but affects your premises with loss of power or water supply. It will pay for the income you lose due to this event. There is normally a waiting period before the coverage applies, usually 72 hours.There is another coverage called Utility Services-Direct Damage which would apply if, after the utility comes back on, there has been damage to your equipment from the power surge.All of the weather-related risks I’ve listed are covered under your commercial policy, with the exception of flood. Flood coverage can only be purchased through the National Flood Insurance Program (NFIP), but most insurance agents would be able to get a quote for their customer. Remember, floods occur everywhere, not just near the ocean or river.Also, in coastal areas, windstorm and hail are covered with a 2- or 5-percent deductible. This deductible applies to the limit of insurance and not to the amount of the loss, as some may think.Q: Do unattended stores or 24-hour stores pose problems?Millino: Yes. Very few stores are 24-hour unless they are in areas like Nevada, New York, and a few other states that have large, night-life exposure and areas where the “city never sleeps.” These stores normally must be attended; if not, other costs could be involved depending on the exposure.Hawkins: Unattended and/or 24-hour stores do pose a greater risk than a store with normal hours or one with full-time attendants. A fall can seem much worse if no one is there to witness it or to assist the injured person with the care that is needed. Vandalism often occurs in unattended stores, especially during late-night or overnight hours. There is usually an additional cost for liability when the store is open 24 hours and/or unattended.Q: If owners operate extra-profit centers such as kiddie rides, tanning beds, etc., does this affect insurance coverage?Hawkins: Extra-profit centers bring additional risk. Owners must weigh the risk with the profit it generates, and decide if the additional profit is worth the risk. Tanning beds, pool tables, kiddie rides and food sales may also bring additional cost of liability insurance, often quite high. Some carriers may even decide not to write the risk because of these additional hazards.Millino: Additional exposures such as kiddie rides and tanning beds must be addressed. Just as long as we know the exposure exists, it can normally be dealt with.Q: What about business-interruption insurance?Millino: Most property-issued policies cover some form of business-income loss (net income plus continuing expenses). Depending on the way each business is run and for what purpose someone buys a store, actual loss is hard to prove, especially if a store is purchased to shelter personal income and used for large and fast depreciation.Hawkins: Laundromat owners who have business-interruption insurance use it when they have a severe loss such as fire or hurricane. However, the coverage applies to any covered loss, such as a small fire that only puts some of your machines out of service. The loss of income from those few machines can be claimed after the waiting period has been met. Remember, there must be a direct physical loss at the premises for the coverage to apply.Q: What additional coverage should be considered?Hawkins: There are many optional coverages. Some of these are:
- Sign (attached and detached from building)
- Awning
- Computers
- Loss of rental value (for those who own the building and lease to tenants)
- Valuable papers
- Accounts receivable
- Increased cost of construction
- Fences
- Shrubs
- Retaining walls
Millino: This varies by risk; certainly, high liability limits should be considered if employees drive their vehicles for the owner. Tell the agent so he can add the employee’s nonowned auto. Fidelity coverage can be missed at times, along with employment practices liability (wrongful-termination-type claims).If you have any questions or comments about this article, contact NIE Insurance at 800-325-9522 or visit nie.biz; or contact Wells Fargo Insurance at 800-829-1330 (ext. 210 or 209) or visit laundryinsurance.com.Click here for Part 2 of this story!
Have a question or comment? E-mail our editor Bruce Beggs at [email protected].