The Mistake of a Business Owner Regarding Insurance

It is essential that you have the proper insurance coverage in place that will cover you in the event that something bad happens. Not only do you need the proper coverage in place, but you also need the coverage to have policy limits that meet the financial realities of the business, but also includes the proper endorsements. The amount of the insurance premium is based on several factors, including but not limited to the amount of coverage, the type of coverage (how expansive the coverage is) and the type of endorsements. In other words, the least expensive premium may provide you with the worst type of coverage that does not provide the coverage you need.

It is prudent that you are working with a commercial insurance agent who understands your business, the industry, the insurance market, and the type of policies that you need that provides you with the protection that you need in the event that something bad happens (i.e., a lawsuit, a natural disaster, a cyber hack, etc.). If you do not have an insurance policy that covers the event, then those funds are going to come out of your bottom line, which could have devastating consequences for the vitality of the business. Let’s consider the following hypothetical:

Hypothetical:  Sally’s Sewing Empire, LLC is owned by Sarah. The business is in a beautiful turn of the century building that Sarah owns individually. There is no written lease. The business also does dry cleaning. There are 30 employees and the LLC has worker’s compensation insurance, which is a mandatory insurance required by Minnesota law. The employees use their cars for the deliveries.

It is important that there is insurance for the following possibilities:

• A customer slips and falls at Sally’s Sewing Empire, LLC. Most likely not only will the LLC be sued, but so will the landlord, Sarah (who should transfer the building into a separate LLC).
• One of the dry-cleaning product spills. Most likely the spill will draw the attention of at least one government entity that oversees pollution. The LLC is going to need pollution liability insurance. Sarah needs to get a written lease in place that requires the LLC to name the Landlord as an additional insured on the insurance policies that involve the building and indemnify Sarah (or the LLC if the property has been transferred into an LLC).
• One of the employees is in a car accident on a delivery. Most likely not only will the employee be sued, but so will the LLC. If the LLC does not have Hired & Non-Owned Liability, the LLC will most likely be sued by the employee’s insurance company. The LLC also needs to require that employee’s carry personal insurance on their vehicles if the employee is using their personal vehicle for work.

Spangler and de Stefano, PLLP assists business owners with limiting their liability.

The material contained herein is for informational purposes only, and is not intended to create or constitute an attorney-client relationship between Spangler and de Stefano, PLLP and the reader. The information contained herein is not offered as legal advice and should not be construed as legal advice.