You are here

Insurance Coverage Evaluation (Part 1)

Impact of industry changes, important coverages

CHICAGO — If 2020 has confirmed one thing, it’s that the unexpected can, and will, happen.

While no one plans on having an emergency, it makes sense to have a plan to recover costs and other expenses in just such an instance. That’s where insurance comes in.

And with all the changes that have taken place in the laundry industry (and the world), it’s a good time to evaluate and update insurance coverage.

For expert advice on laundry and linen services insurance needs, American Laundry News contacted Steven Wright and Larry Trapani.

Wright is vice president of business development for Irving Weber Associates, which provides programs for the textile and linen care industries, based in Overland Park, Kansas. Trapani is president of Brooks-Waterburn Corp., a business insurance provider based in Farmingdale, New York.

In Part 1, they examine industry changes and important coverages.

INDUSTRY CHANGES IMPACT INSURANCE

One factor that has changed in the laundry and linen services industry is technology.

Trapani notes that there is a greater reliance on technology in the industry, and more laundries are investing in technology to improve the operations.

“As technology has emerged, the value of machinery has significantly increased,” adds Wright. “As consolidation occurs within the industry, plants are adding more routes to their operations, requiring more trucks, drivers, and hours driven.”

And operators need to be sure their insurance policies cover the level of their technology.

“It is important to note that most standard business owner policies have a special limit for computer equipment,” Trapani points out. “This is more than laptops. It includes servers, printers, cameras, as well as software. Take a look at your policy to be sure you have sufficient coverage for all your gadgets.”

Laundries even need to be aware of cyber liability in this day and age.

“What if somebody hacks into your payroll software and decides to give themselves a big bonus?” posits Trapani. “Cybercrimes are far more likely to happen to a small business that does not have the sophisticated security a larger firm has.”

Beyond computer technology, improvements in laundry equipment, chemistry and other materials have changed insurance needs.

“As improvements have been made in all areas, you can see the differences in a new plant floor plan versus an older plant,” says Wright. “Older plants run in tighter spaces with more risk; newer plants tend to have more space, run cleaner, and have fewer losses on the floor.

“Operators are now finding buildings that conform to their layout versus altering the flow of processing to fit an older, poorly designed building.”

In addition, he says that with a rise in litigation, his company is seeing more property owners and property managers require very specific insurance demands from operators entering the premises.

“Policy language for additional insureds and waivers of subrogation has become more common,” shares Wright. “Standards for hygienically clean goods will also continue to rise.” 

IMPORTANT COVERAGES

When it comes to important insurance coverage in the industry, Wright says that fleet management and workers’ safety remain the highest areas of risk.

“These areas require a commitment from leadership with dedicated supervision toward ongoing best practices to keep workers safe and productive,” he says. “Operations that make safety a high priority tend to run more smoothly and profitably.”

Trapani says that while there are hundreds of types of coverages in an insurance policy, regardless of the laundry type, the most important insurance needs can be divided into five main categories:

  1. Business Personal Property: Business personal property is probably the most important coverage for an operation. Basically, it is protection for washers, dryers, water heaters, etc. He recommends having coverage for “replacement cost.” An operation should have enough coverage so that if the entire operation is destroyed, there will be enough coverage to rebuild.
  2. Business Interruption: If an incident, such as a fire, takes place and the business is closed for several months, this insurance pays for continuing expenses such as rent, loan payables and more.
  3. Tenant Improvements: Tenant improvements covers items such as floors, walls, electrical, plumbing, heating, etc.—improvements a business made at its expense.
  4. Liability Coverage: Basically, this insurance covers an operation in the event it is sued for claims like “slip and fall.”
  5. Workers’ Compensation: Most states require employers to carry workers’ compensation for their employees. It protects them in the event they are injured on the job. It pays for medical bills and lost wages for injured employees. Premiums are based on payroll—the higher the payroll, the higher the premiums. 

Check back Thursday for the conclusion.