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Potential Gap in Your Business Coverage

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For the better part of three decades, Jon Stoltz thought his family’s Plainsville, Ohio K & S Auto Body Inc. had all the business insurance it needed.

Thank God for the sharp local agent who “just happened to stop in one day” — a few short years before a young arsonist and $2 million in fire damage could have sunk Stoltz’ shop on Sept. 13, 2006. Some 28 customers’ vehicles were destroyed in the blaze, which was started in an adjacent waste shed and burned the entire 13-employee, 11,000-square-foot facility to the ground.

“It was just by chance that the agent came in and explained a lot of things we didn’t have,” says Stoltz whose father founded the shop 32 years ago. “And it turned out that by no means did we have the right coverage.”

According to David Willett, general manager and vice president of Zurich Direct Underwriters business unit (formerly Universal Underwriters Group), the company that picked up the Stoltzes’ policy, the autobody industry’s overall business insurance coverage has significantly improved over the last 10 years or so. Still, Willett says, serious coverage gaps remain that often are not even on shop owners’ radar.

Major lifesavers in Stoltz’s policy: business interruption and tool-replacement coverage, which, among other things, helped the family set up quickly in a rented temporary facility, keep the payroll rolling as usual and replace the shop’s repair lifeblood: $350,000 to $400,000 worth of technicians’ tools.

Willett adds the following among potentially crucial coverages that are often overlooked:
•No aggregate limit on liability. These days, even $1 million liability coverage limits can produce a false sense of security that can disappear in a heartbeat if the unexpected happens. “Let’s say you have a claim, and you have to purchase more insurance to take care of it,” Willett explains. “The most expensive time in the world to buy insurance is after you’ve exhausted your current coverage.”
•Adequate property. “Is your building properly valued? If you’re not sure, you should have an appraisal,” Willett says. “But what really scares people like me is the contents of the building, which are often undervalued too — and property, in a basic insurance policy, is usually only a nominal portion of the total cost. Remember: This is one of those areas where the risk can be total loss. It’s crucial to have the correct amount.”
•Discrimination. In this litigious day and age, Willett notes, you’re more likely to have an employee discrimination claim than you’re likely to have a fire claim. And while a discrimination claim might be completely unfounded, it can still have a significant impact. “It affects you two ways — both the claim itself and, even more importantly, your reputation and the trust your customers have in you. Plus, whenever you have one of these claims, you’re likely to have others. That’s unfortunately just where we are now as a society, and that’s why it’s so important for discrimination coverage to be included in an umbrella policy.”
•Extended theft or “false pretense.” This will protect you if you mistakenly give the keys to a repaired car to the wrong person who might not have the best intentions in mind, which Willett notes can be more common than you might imagine. “Let’s say you have a couple that’s been coming into the shop forever,” he says. “But now they’re divorcing, and maybe it’s not very amicable. But you might not know the details, and one of them appears at the shop and asks for the keys to a repaired car. When you comply — by giving someone the keys and letting them drive off — you might be taking a bigger risk than you think.”

Willett also lists mechanic’s error/omission and aftermarket parts as coverage areas to consider.

The peace-of-mind payoff from effective business insurance planning in advance of the Stoltzes’ 2006 fire: K & S Auto Body will be moving to a new, expanded 16,000-square-foot headquarters soon, perhaps as early as this month.

“So, in the end, the fire went from being a real shocker to something that makes you say, ‘Wow, look what they could do for us,’” Stoltz says.

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