Content about Insurance

CHICAGO — Fire, liability or a worker injury is a risk that a coin laundry faces every day. If the business doesn’t have the proper insurance protection in place, an incident could be difficult to recover from. In a worst-case scenario, it could even put it out of business.

American Coin-Op invited representatives from the industry’s major insurance providers to answer some questions that the average self-service laundry owner might have about protecting their business investment.

ACO: What specific coverages do you believe are absolute requirements for any coin laundry, and why?

Adam Weber, president, Irving Weber Associates: There are many coverages that are industry-specific, such as bailee coverage for operations that offer attendant service (as well as those that don’t) such as wash and fold, but may experience an equipment malfunction that damages a customer’s clothing while being processed.

Other important coverages are water damage caused by sewer system backups, signs, general liability, parking lots, and equipment breakdown (including equipment and/or boilers and machinery if present). Also, business property coverage should be considered not just for machinery but also folding tables, TVs, chairs, vending machines, computer systems, card readers, etc.

Anne Hawkins, senior underwriter, NIE: At a minimum, every coin Laundromat should carry these coverages: 

• Building (when owned by the business owner) — If it’s an older building and you wouldn’t rebuild, insure for actual cash value. If you would rebuild, insure for replacement cost.
• Improvements and Betterments (when the business owner is a tenant) — You will need to replace the building owner’s property that is part of the building if you have a loss due to your negligence. This would include flooring, lighting, paint, wallpaper, etc.
• Business Personal Property (at replacement cost) — When you determine the replacement cost, be sure to include delivery, installation and taxes because these are included in the loss amount.
• Loss of Income (for minimum of three days) — This pays your profit and continuing expenses while you are out of business due to a covered cause of loss that occurs at your location.
• Utility Services-Time Element — This pays your profit and continuing expenses while you are out of business due to a covered cause of loss that occurs away from your premises, i.e. downed power lines due to windstorm.
• Utility Services-Direct Damage — This pays for damage done to your equipment due to a covered cause of loss that occurs away from your premises, i.e. when the power comes back on, some or all of your equipment is not working.
• Equipment Breakdown — Even if you do not have a boiler at your location, there are many other pieces of equipment that can fail due to an accident such as a power surge that is not caused by a covered cause of loss, i.e. power company equipment failure.
• Bailee — If you are doing drop-off dry cleaning and/or wash/dry/fold, you need to have coverage for your customers’ items that may be in your store overnight or for any length of time.
• Liability — Coin laundries have high liability exposure due to the volume of customers who enter their store and stay on the premises while doing laundry.

Larry Trapani, president, Brooks Waterburn Corp.: While a Laundromat owner needs many types of coverage, here are what I feel are the most important:

• Business Personal Property (AKA Contents) — This coverage protects your washers/dryers, vending machines, coin changers, basically all your stuff inside the building. Make sure the coverage is valued at “Replacement Cost” rather than “Actual Cash Value,” because if there is a claim, you want what it cost to get new machines, not the value of a 10- or 15-year-old machine. When you buy this coverage, think of how much it would cost you to replace all of your equipment if you had to buy it today.
• Tenant Improvements (AKA Build-out) — This is the cost that you put into the space you are renting. It includes electrical, plumbing, lighting, flooring, etc. Sometimes, these values can be $75,000 to $100,000. It is by far the most overlooked coverage when I review competitors’ policies.
• Liability — This covers slip-and-falls, children running into tables, or any other type of incident that might get you sued. Standard coverage is $1 million but some landlords require $2 million or more.
• Workers’ Compensation — The truth is, the Laundromat industry is a cash business. Many store owners pay workers “off the books.” The IRS is cracking down on small business. In most states, employers are required by law to carry workers’ comp insurance. And classifying employees as “independent contractors” will not fly. More than one of my customers has been caught doing that and paid significant fines. 

Steve Brodie, senior vice president, Wells Fargo Insurance Services USA: Key insurance issues are property coverage and adequate liability protection. Within these two broad segments, you want to make certain on the property side that you have full replacement cost for both equipment and tenants improvements, along with business income protection. Get your distributor involved by asking, “What would it cost to rebuild my store today?” Once you have that answer, discuss it with your insurance broker. Many times, fees (sewer hookups are a good example) do not have to be paid again.

On the liability side, review your lease as a minimum requirement, then discuss your own personal net worth, or that of the LLC, corporation or partnership that owns the store.

Last item of importance, but by no means should it be forgotten, is workers’ compensation. Laws differ in each state based on labor codes. Do not have a person in the store, even if advised by your CPA, that you call an “independent contractor” who is not covered by workers’ comp. If you have that exposure, take out a minimum premium compensation policy, evenif your CPA gives them a (Form) 1099 and classes them as independent. The only time this is questionable is if you hire another company (janitorial, for example). Make sure they supply proof of insurance and a “waiver of subrogation” from their workers’ comp carrier.

ACO: What are the biggest insurance risks in a coin laundry setting, and why?

Hawkins: The biggest risk is the liability exposure due to wet floors and/or damaged floor tiles from water leakage, plastic furniture that can collapse, lack of supervision of children, stools used to reach equipment controls, and improper maintenance of equipment. 

Burglary is another big risk. When someone burglarizes a coin laundry, they usually destroy the coin boxes on each machine and vandalize coin changers. This gets expensive and happens frequently.

Trapani: The biggest risks in a coin laundry setting can be broken down into two areas:

• Property Losses — The largest and most frequent claims are dryer fires. It usually has to do with not cleaning lint traps or ducts. As you can imagine, most fires cause significant damage because the dryers and washers are closely grouped together and the fire easily spreads. A good housekeeping procedure can help reduce these types of claims.
• Liability Losses — While trips and falls are common, lately, I see more children getting hurt in stores. Parents don’t always pay close attention to their kids, who run into things, pull down tables on top of themselves or fall from carts. I always suggest that a store owner bolt down tables to minimize some of the risk.

Brodie: Fire and liability claims are your biggest exposures to loss and cost the most when they happen.

Weber: Fire is probably the most common and easiest to avoid. Fires can easily begin in these businesses due to buildup of lint in dryers/exhaust vents, poor maintenance of heat-limiting safety devices (switches on dryers), combustible material stored near dryers or water heaters, washing materials soaked in flammable liquids such as gasoline, and buildup of oxygen agents (bleach, for example) through overuse.

Additionally, liability claims for alleged slip-and-falls are prevalent with this industry group.

ACO: How does the status of a store—unattended or attended—affect its insurability?

Trapani: The status of a store has a significant impact on insurance premiums. Unattended stores obviously are not as closely watched as attended stores. If something goes wrong, nobody is there to minimize the damage. Insurance companies know this as well and charge accordingly. The premium can be up to 40% more for an unattended store.

A note of caution here: If your store is unattended, make sure your insurance company knows it. If there is a loss, you may have trouble collecting because the insurance company can state that if it had known the store was unattended in the first place, it would not have written the account and thus deny the claim.

Brodie: They are both insurable; the attended store might get a little bit less premium based on someone attending the store during operational hours. Around-the-clock operations, as sometimes can be found in cities like New York and Las Vegas, pose different risks and must be 100% attended, usually with two people on duty at a time.

Weber: Unattended stores are at a higher risk of theft, vandalism and claims in general. Any time a business is left unattended, it is at a much greater risk of incidences that would require the use of your business insurance policy and generally are not as desirable to insurers.

Hawkins: It may depend on the individual insurance carrier. It’s been my experience that the unattended Laundromat pays more premium than the attended Laundromat due to the vandalism issue and the lack of a witness when someone reports an injury.

Check back tomorrow for Part 2!

JOHNSTON, R.I. — Are you prepared should a natural disaster strike your coin laundry? Would it be safe to be in your store? If you run an attended store, what do your employees think?

An overwhelming majority of Americans do not feel their employers are well prepared for, or might not recover quickly from, a natural disaster, according to research reported by property insurer FM Global.

The firm’s Business Risk Pulse Check finds 75% of U.S.-based workers feel their employer is not well-prepared for a natural disaster, and 72% of those polled would not feel totally safe in their workplace during such an event. Additionally, the study finds 71% of U.S. workers are not fully confident their employer could bounce back quickly. The survey comes on the heels of a record year for natural disasters in 2011.

The research, commissioned by FM Global and conducted by global research firm TNS, polled more than 1,300 U.S. workers nationwide to gauge perceptions about natural catastrophe-related risk in the workplace.

“Business resilience is more than just about getting back on your feet, it’s also about doing the right things to make sure you don’t get knocked down in the first place,” says Jon Hall, executive vice president, FM Global. “The findings demonstrate how critical it is that business leaders better prepare for natural disasters and ensure those efforts are understood within the workplace.”

CHICAGO — While buying Laundromat insurance may be a less-than-glamorous task, few things are as important to your survival as a self-service laundry owner as protecting your business. Your investment must be looked after. For example, could you afford to rebuild after a disaster? Gambling is for Las Vegas, not the self-service laundry industry.

Have you changed insurance carriers lately? Have you looked for a better deal? Do you know what questions to ask when shopping for insurance?

Take a moment out of your busy business life, and think about the last time you reviewed your coverage. Are the limits adequate? Think about the laundry. Have you made any changes to the store? Have you added any washers or dryers? All of these things have an impact on your coverage.

There’s another way to look at your insurance coverage. Has your carrier contacted you lately? If not, maybe you should ask yourself why. It’s never a bad idea to give a new carrier a chance. The worst thing that can happen is you get to compare prices and coverages. A new deal may be beneficial for your operation.

Before you rethink your coverage, be prepared. Larry Larsen, an industry insurance veteran, offers tips on how best to shop for Laundromat insurance.

Avoiding Key Mistakes

Insurance shopping poses a unique challenge, says Larry Larsen, a 30-year industry veteran and agent for Crusader Insurance Co., Woodland Hills, Calif.

“Everybody wants to save money in the Laundromat business, but when it comes to insuring your Laundromat, you have to be careful you don’t save so much money that you increase your risk,” he cautions.

The most common mistake Laundromat owners make is the failure to properly value their business, Larsen says. “The starting point of any Laundromat insurance policy is the evaluation of what it would cost to rebuild the Laundromat in the event of a total loss.”

Trying to save money by lowering the amount of your property insurance means there could be major problems if you experience a total loss, Larsen explains. “No insurance company is going to pay you more money than the face value of your insurance policy at the time of a total loss.”

You can carry lower insurance amounts, he adds, when you have made the decision to close down and quit the business if you have a total loss. “This applies to people who only have a short term left on their lease, or are leasing on a month-to-month basis. If your store burns and is declared a total loss, your long-term lease may not be cancelled and it will be your obligation to rebuild the Laundromat.”

Confusion often exists when owners buy replacement-cost insurance with the belief that their store will be replaced regardless of how much face-value insurance they have purchased. It’s quite a “surprise” when an owner discovers that the insurance only covers up to a maximum of the insurance purchased, Larsen explains.

Do you know what it would cost to rebuild your store? Read your lease or look at your other building insurance (if you own the building), he says. “As a tenant, many of the items will be covered by the building owner if there is a loss. Absent a lease provision to the contrary, all fixtures you will be required to leave behind at the expiration of your lease may be covered by the building owner’s policy.” This can include the bathroom, water-heating system, water softeners, heating, air conditioners, swamp coolers, electrical panels, gas lines and interior walls.

The lease plays a crucial role in any shopping experience. No one can give you the proper assistance unless the lease is reviewed, Larsen adds.

“The valuation of your Laundromat is not the responsibility of your agent! Your agent probably has not seen your Laundromat, and is only as aware of the condition of your store as you have provided in answers to a few questions.”

Your agent may be the expert in Laundromat insurance, but you’re the expert when it comes to knowing the value of your own business, he notes.

“The second most common mistake is the failure of owners to take the time to understand their insurance. Most owners spend hours evaluating the income-and-expense potential of a Laundromat purchase, but only spend minutes evaluating their insurance coverage. Spend more time evaluating your insurance.”

How does an insurance “amateur” evaluate coverage? “Read the insurance provisions of your lease, learn the definitions of insurance terms, and discuss your potential insurance with your potential agent,” he advises. “A professional agent has allocated up to one hour for each new client to engage in a question-and-answer session. No question is silly, and any agent who avoids your inquiries should be crossed off your list of agents worthy of your business.”

If you have any questions or comments about this article, contact Larry Larsen at laundromat123@aol.com.

Click here for Part 1.

CHICAGO — If your self-service laundry has suffered physical damage or has sustained economic injury after a disaster, you may be eligible for financial assistance from the U.S. Small Business Administration (SBA). If your store—regardless of size—is located in the declared disaster area, you may apply for a long-term, low-interest loan to repair or replace damaged property.

Even if your property was not damaged and you are a small-business owner, you may apply for a working capital loan from the SBA to relieve the economic injury caused by the disaster.

Physical Disaster Loans

Businesses of all sizes may apply for a physical disaster loan of up to $2 million to repair or replace damaged real estate, equipment, inventory and fixtures. The loan may be increased by as much as 20% of the total amount of disaster damage to real estate and/or leasehold improvements, as verified by SBA, to protect the property against future disasters of the same type. These loans will cover uninsured or underinsured losses.

Economic Injury Disaster Loans

Small businesses of all sizes suffering substantial economic injury may also be eligible for an economic injury disaster loan of up to $2 million to meet necessary financial obligations—expenses the business would have paid if the disaster had not occurred.

Interest Rates

The interest rate on both of these loans will not exceed 4% if you do not have credit available elsewhere. Repayment can be up to 30 years, depending on the business’ ability to repay the loan. For businesses with credit available elsewhere, the interest rate will not exceed 8%. SBA determines whether the applicant has credit available elsewhere.

Application Information

Businesses may apply directly to the SBA for possible assistance. The SBA will send an inspector to estimate the cost of your damage once you have completed and returned your loan application.

The most frequently asked questions about disaster loans, according to the SBA, are:

• What information must I submit for a disaster loan?
  
  Submit a completed loan application and a signed and dated IRS form 8821 giving permission for the IRS to provide the SBA your tax-return information. The SBA needs current financial information such as a personal financial statement, a current profit-and-loss statement, balance sheet, and a list of debts.
• Can I use the disaster loan to expand my business?
  
  The disaster loan helps restore property to pre-disaster condition, and, under certain circumstances, protects the structure from future disasters. It cannot upgrade or expand a business unless required by local building codes.
• I already have a mortgage on my business. Can the SBA refinance my mortgage?
  
  The SBA can refinance all or part of a previous mortgage in some cases when the applicant does not have credit available elsewhere, has suffered uninsured damage (40% or more of the property value), and intends to repair the damage. SBA disaster loan officers can provide additional details.

ST. LOUIS, Mo. — I’m no meteorologist, but I can see what’s been happening since the year began: We’ve been hit with record ice and snowstorms in places that rarely receive it.

And this troubling weather “report” doesn’t end there. The country has experienced more than double the usual number of tornadoes, record-breaking rainfalls and hailstorms, and flooding. And hurricane season only recently began!

Since we have no idea if these weather occurrences will continue or subside, it’s better to be safe than sorry when it comes to taking care of your self-service laundry.

Have you thought about cutting back on your insurance due to economic conditions? Well, now may not be the time to make any insurance changes.

If you’re thinking about cutting back on insurance, here’s a question that needs to be asked: What would you do if one of these disasters hit your community and you lacked the proper insurance coverage?

Three Items to Review

If you want to feel a bit more secure about your store as it pertains to dealing with a potential disaster, take a look at your policies and check these items: policy limits, deductibles (including any special deductibles for wind or hail), and exclusions.

Now decide if you can live with the coverage you have.

Let’s start with limits. Insure your building and personal property for replacement cost. If your limits are too low, you will be out-of-pocket on a loss. A few dollars in premiums can get those limits up, and save you thousands in the long run.

Regarding deductibles, you may think you will save a great deal of money by increasing your deductible, but that is not always the case. Of course, explore this with your agent, but don’t be surprised if the savings aren’t what you had anticipated.

Remember, with wind/hail deductibles, the percentage applies to the limits, not the loss. So, for example, with a 5% wind/hail deductible, if you have a $100,000 wind/hail loss on your $500,000 building, your deductible will be $25,000, not $5,000. Many people do not realize this until after the loss.

Regarding exclusions, read them over so you know what property and what perils are not covered. If you have any questions, call your agent. If you want coverage that is excluded, ask your agent to supply a quote. You will discover that many exclusions can be covered for an additional premium, and sometimes that additional premium is not as expensive as you might think.

If you’re looking for an example of exclusions, consider a fence around your self-service laundry. Did you know that fences are not covered? However, you can add them to your coverage for a small, additional premium.

Tomorrow: Loss-of-business coverage is not enough…