Retail Insurance: Liability, Programs, Costs & More
January 12, 2021
Like every business that supports the retail market, retail insurance programs were affected by the Covid-19 pandemic in 2020. Store closures among chain stores and independent retailers hit all-time highs. Despite such upheaval, there is good news. According to the November 2020 issue of the National Retail Federation's Monthly Economic Review, retail sales have been up in sales in both month-over-month and year-over-year each month since June. The need for retail risk management services remains critical for owners and operators of retail businesses in 2021.
What is Retail Insurance & Who Needs It?
Retail businesses sell physical products and services to consumers. And retail insurance programs are a collection of coverages retailers need to protect retailers from insurable losses, liabilities, and property damage. Any business open to sell its products and services to the public is a prospect for a retail insurance program. Examples include:
● Dry Cleaners
● Sandwich Shops
Printing, and more
The potential risks for catastrophic loss are too high for retailers to operate without adequate insurance protection. Retailers are at risk for:
● Customer and employee injuries
● Crime related losses
● Damage to their property and merchandise
● Damage to the property of others
Lawsuits relating to reputational damage, false advertising, and more
Types of Retail Insurance
The best retail insurance programs offer a range of coverages depending on the size and unique needs of the retail establishments they serve. Minimally, the smallest business retailers need general liability and commercial property insurance. Those with employees also need Workers Compensation. If a retailer uses an automobile, van, or truck in the business, commercial auto insurance is necessary. Smaller companies can benefit from bundling general liability and personal property into a Business Owner's Policy (BOP.) The following information is a guide to retail insurance products and how to properly insure a retailer.
A Business Owner's Policy (BOP) bundles business liability and property damage insurance into a single policy. A typical BOP includes general liability, commercial property, equipment breakdown, and business interruption insurance. While any size business can purchase a BOP, it usually works best for smaller retailers. The large retail operations with more complicated risks will find the optimal retail insurance programs will have individual policies designed for their specific needs.
A BOP offers business protection against losses related to fire, theft, lightning, windstorms, hail, vandalism, and other covered disasters that destroy or cause damage to property it owns, leases, or rents. Coverage includes protection for structures, offices, buildings, equipment, stock, inventory, furniture, and fixtures. It also provides helps to pay for claims of bodily injury, advertising injury, and equipment breakdown.
Additional endorsements available to add to a BOP include:
● Mechanical Breakdown: Covers mechanical and electrical systems, such as HVAC, boilers, boilers, refrigeration, plumbing, piping, electrical machines, and machinery that transmits, generates, or uses mechanical or electrical power.
● Spoilage: Covers perishable items for sale, such as food or florals that require constant refrigeration. It pays to replace food spoiled because of a temperature control system's breakdown due to conditions beyond the policyholder's control.
Outdoor Signage: Outdoor signs that are not attached to the building are excluded from a basic BOP but are available to add as a separate policy endorsement.
General Liability insurance is also called Commercial General Liability (CGL.) It protects against third-party claims of bodily injuries, such as slips and falls claims, property damage, and advertising injuries that include copyright infringement and lawsuits claiming reputational harm, including claims of slander and libel. Lenders and commercial leases require most restaurant operations to have general liability.
Commercial Property Insurance
Retailers with physical locations need Commercial Property insurance. It protects property and equipment against losses from fire, theft, natural disasters, and vandalism. It will help with payments to replace and repair damaged, stolen, and lost business property. Coverage extends to the business's physical locations and includes specified assets, inventory, display fixtures, office equipment, furniture, rolling crates, and electronic equipment such as phone systems, cash registers, and computers.
Factors that affect the premium price are the business's location, occupancy, claims experience, proximity to fire protection, the fire rating of the building's construction materials, if the building or unit is rented or owned, and whether its equipment is leased or owned. Signage, satellite dishes, fences, landscaping, and company documents and accounting records are also covered.
A Public Liability Insurance (PLI) policy covers smaller businesses that cannot afford the cost of a more extensive and expensive CGL policy. PLI coverage explicitly protects retailers from losses and lawsuits resulting from third parties claims of injuries or damages suffered while on the retail location premises. Typical PLI claimants include customers, clients, visitors, vendors, and delivery persons.
Although most retailers operate as distributors of products manufactured by others, they are at risk of liability claims that arise from their sales to the public. A retailer's exposure extends to potential lawsuits from buyers, users, and even bystanders, who suffer losses or injuries from products, medicines, food, and other goods bought from the retailer. Regardless of size, businesses that sell or distribute products need product liability insurance.
There are risks retailers cannot anticipate among the products they sell. Consumers and the courts may find defective or malfunctioning products at fault. Inadequate or failure to warn claims also put retailers at risk. Although the best retail insurance programs include a CGL that offers liability coverage in the form of products-completed operations insurance, there are potential exclusions for such events as a food-borne illness. In such cases, a separate product liability policy is advisable.
Providing Workers Comp, as Workers Compensations is widely known, is a mandatory requirement in nearly all states. If a business has employees, it needs to provide them with Workers Comp coverage. It will protect against employee claims of injury, disease, or death while on the job regardless of fault. Most Workers Comp claims by retail employees are for incidences of falls and slips, punctures, cuts, scrapes, overexertion, strains, and sprains.
Workers Comp will pay for an employee's immediate and ongoing medical costs and partial lost wages during recovery. Because it is a mandated coverage, workers compensation insurance has an "exclusive remedy" legal classification. That means businesses that provide Workers Comp for their employees cannot be held liable for job-related injuries except for cases where the retailer is willfully negligent or intentionally causes an injury to their employee.
Personal auto insurance does not cover commercial vehicles. Whether a business owns, leases, or borrows a single car, or has a fleet of trucks and vans, it needs a Commercial Auto policy. The coverage pays for injuries to others and damages to their property caused by retail owners or their employees when operating a vehicle on behalf of the retail establishment.
Commercial Auto helps to pay for claims as follows:
● Auto liability pays for bodily injury or property damages occurring because of a covered automobile accident.
● Medical payments pay medical expenses, up to policy limits, for owners, employees, and your passengers relating to motor vehicle accidents without the assignment of who is at fault.
● Comprehensive coverage pays for damages, minus a deductible, to a business vehicle except for incidents of vandalism, theft, natural disasters, weather events, and accidents involving animals.
● Collision pays for damages, without regard to who is at fault, minus a deductible, to a business vehicle when struck by another vehicle regardless of whether the retailer's vehicle hit another vehicle or object, or another vehicle hits it, or the business vehicle is involved in a rollover accident.
Uninsured and underinsured motorist covers commercial vehicles involved in accidents caused by an uninsured or underinsured motorist. It helps to pay for medical expenses, loss of income, and other damages owed to the retailer, including employee expenses not covered by workers comp and passengers' claims in the commercial vehicle.
Retail Insurance Costs
Retail insurance programs extend well beyond retail insurance basics. Retailers range in size from one-person operations to international brands with thousands of locations. Given the wide range in the size, geographical areas, and unique aspects of the retail marketplace, it's impossible to project the average costs of obtaining retail insurance coverage. According to Insureon, the annual fee for a BOP policy runs on the low end of $500 for finance and accounting businesses to $1608 for food and beverage operations at the top. Retailers rank near the top at $788 per year.
Best Retail Insurance Programs
When you are looking for retail insurance programs for your clients and prospects, you'll find the Program Businessdirectory makes your job easy and convenient. Use it to do quick work to answer, "what kind of insurance does a retailer need?"
For your Workers Compensation needs, be sure to check out Ironwood Brokers and Insurance Marketing. It is an insurance wholesaler specializing in workers compensation products. Ironwood is available to licensed retail insurance brokers in California and Arizona. You'll find it works for you, and its staff of professionals is eager to provide you with quick and accurate quotes, focusing on the middle market and large risk cases.