CHICAGO — Remember playing the game of Risk? You marched your armies into neighboring countries to achieve victory. You placed yourself in strategically sound positions to deal with any of the changing forces coming your way.
Drycleaning business owners face ever-shifting trends, too — rolling across their industry landscape. Some of those risks don’t respect borders. Wirelessly through the air they arrive. Call them cyber villains or cyber liabilities, whatever you wish, but they are here now. They can reach your business through the wired systems, devices and websites linked to sales.
Cyber threats is not the only area to be concerned with, of course, but as dry cleaners look to diversify like never before, and seek out more revenue streams, they need to be aware of rising risks and of insurance coverage choices.
What types of insurance are you familiar with? Maybe you carry environmental impairment liability to cover exposure to chemicals and detergents. You might carry automobile insurance for exposure based on either new routes or an increase in pickup/delivery services. And equipment coverage provides your business with protection from sudden and accidental breakdown.
New opportunities also usher in new coverage needs. For instance, dry cleaners might be looking to grow their commercial accounts as they search out new customers in hotel, restaurant and institutional industries. Other cleaners might be trying to add or expand their restoration services. And the new addition of amenities to the store itself can include more than just beverages and snacks, such as a full café that offers a menu of bistro items. Prioritizing customer convenience is further highlighted by ordering via mobile app or website.
To understand what the insurance picture looks like today, American Drycleaner asked a number of insurance experts who serve the drycleaning industry to talk about what dry cleaners should be aware of when assessing their needs and coverages in order to guard against potential loss.
There isn’t just one risk, of course. There are many risks to consider, and just as many insurance policies to get your business protected properly.
“Cyber liability coverage is becoming more of a necessity to both large and small businesses, including dry cleaners, who often keep personal information on their customers, like credit cards,” notes Adam Weber, president, Irving Weber Associates, out of Smithtown, N.Y. He points out that more and more responsibility for the protection of privacy and personal data has fallen on business owners in recent years and that cyber liability coverage protects the business owner.
“Cyber liability and data compromise coverage offers protection for liability that arises out of unauthorized use of, or unauthorized access to, electronic data within your business,” he says.
This type of coverage, Weber further notes, also provides protection for liability claims for spreading a virus, malicious code, computer theft, extortion, or any unintentional act, mistake, error or omission made by you or your employees while performing their job. Reading the news headlines today, we see stories of businesses large and small that have taken a cyber hit.
John O’Brien, certified insurance counselor with John Devries Insurance Agency, St. Joseph, Mich., comments that, “If you either back up your information on the web or store your information on a server that may host a website, then this creates a new challenge to protect your client data, credit cards and other private information you may have.”
There are many other liabilities to be aware of. There is also employment practices liability, which, O’Brien notes, “Has continued to be a concern for larger organizations, with the Equal Employment Opportunity Commission (EEOC) reviewing employee complaints for wrongful termination, wage, age or sex, race, color, religion, national origin discrimination, and retaliation if you file a complaint.”
Cyber risk isn’t the only new wrinkle going on in dry cleaning, notes Scott Henderson, president, Henderson Insurance, Newport Beach, Calif. “Landlords and business referral sources are becoming substantially more restrictive and specific on their insurance requirements. Dry cleaners now need to pay better attention to the insurance requirement notices than they had to in the past.”
Henderson says that it is common for these entities to add new requirements — such as waivers of subrogation (meaning substitution) or higher liability limits — and not give the dry cleaner clear and lengthy advance notice of the changes.
“And if the dry cleaner does not provide the entity with the proper certificate of insurance one day, seemingly without notice, they may not be allowed access to the desirable corporate office route location that they currently enjoy.”
Concerning equipment breakdown coverage, he adds that policies will protect against “sudden and accidental” breakdown of equipment but “wear and tear” is not covered. Many dry cleaners, Henderson cautions, “read the ‘Equipment Breakdown’ coverage line on their policy and think that it is similar to an equipment warranty, and expect the coverage to repair their broken equipment, regardless of what happens to it.”
“Sometimes, the dry cleaner even forgoes normal customary maintenance,” Henderson points out, “because they mistakenly believe that the insurance company will pay to repair the equipment when it wears out. This misunderstanding causes frustration. The best practice is to properly maintain all equipment, and to realize that when equipment breaks, it is perfectly acceptable to report that breakdown to your insurance company, but to realize that, likely, the breakdown will not be covered.”
Pollution liability is a hot topic right now, too, says Fran Chamberlain, program manager at CLG Insurance, Nanuet N.Y. “As more cleaners convert from perc to other solvents, landlords are looking for protection for claims that may have occurred over the past five, 10 or 50 years,” she says. “Unfortunately, insurers will not retroactively cover any pollution liability claims made on a newly purchased policy. We are working with the National Cleaners Association (NCA) to recommend some alternative solutions for their members.”
Check back Thursday for the conclusion!