Blanket Insurance Limits

     So congratulations, if you've come to read about blanket insurance limits, it means you own more than one location. It means you opened one location, learned your lessons, made a few dollars and did opened another. This applies exactly the same to someone that owns two or more apartment buildings as it does to someone who owns two or more of any other commercial building.

    Blanket insurance limits means that a single limit of insurance applies to multiple locations. For example, an appliance retailer owns a total of three buildings, two showrooms and a warehouse. They usually have a total of $2,000,000 in inventory which moves between showrooms and the warehouse. Each showroom is valued at $1.5 Million and the warehouse building is valued at $1 Million. They have a total of $4 Million in insured buildings. They bought an insurance policy with blanket insurance limits for inventory and buildings. So instead of having to split the $2,000,000 of inventory coverage between locations, they have $2,000,000 of property insurance available for the inventory, for any one loss, at any of the three buildings. If they had a large delivery at the warehouse, and then a total loss fire, $2,000,000 would be available to pay for replacement inventory, even if there was still undamaged property at the other locations. It works much the same way for building limit. Since they have a total of $4,000,000 worth of buildings across all locations, They would have a total of $4,000,000 to cover repair / replacement of the warehouse building after the fire.

    So how would this have worked under a policy that listed multiple locations that wasn't blanketed? The insured would have had to select, at the policy inception, the inventory limit to carry at each location. If they said of the $2,000,000 only $1.5 million was in the warehouse, then they would have only had $1.5 million to cover the fire loss. And if they reported the building value as $1 million, thats all they would have had to pay for damage to the building itself.

    Blanketing insurance property limits is a great deal for the insured. It ensures that inventory will still be covered to its full value even if it moves between locations. With blanket limits, the insured can be comfortable that their building will be fully covered even if their replacement cost is somewhat outdated. So why do insurance companies offer blanket limits? Blanket insurance limits are an incentive that the insurance company can give people that are spending more to insure several buildings. From their point of view, it doesn't cost them extra, because the limits are still the same, just applied differently. And because the insured still has to report property values at each location, the carrier knows what the exposure is. Just like everything else, when you buy insurance in bulk you get a better deal.

Private Label Products

Believe it or not, many businesses assume products liability without ever realizing it. Product liability is the responsibility a business assumes for any property damage or injury their product may cause. On the surface, one would think that only a manufacturing company would have this exposure. But that simply isn't true.

I was just in a small salon the other day that had their own line of hair dyes and hair products. The salon owner thought it really made his business look top notch to have their very own line of hair dye, but he got much more than just a label with his personalized dyes.

I asked him if they were standard colors, or if he had a hand in making them. I think it started to hit him, he really did manufacture something. He told me that a representative came out from the manufacturer, sat down with him and helped him customize everything. From the base, to the dyes, he picked it. It was the same for all the other hair products too. That's just how contract manufactures work. They make products at your specific direction. That way, if something goes wrong, all the responsibility rests on the creator of the formula. But the salon owner isn't a chemist, so how could he have known what was safe and what wasn't?

Well, 99% of the time, there are no problems. The contract manufacturer is going to use standard, well tested ingredients. But sometimes things do go wrong. If the products in his salon injured someone, the salon would be primarily responsible, because their label is on the goods. To top it off, the contract manufacturer was based in another country, making it even harder for them to share responsibility.

The principle holds true for many others, not just salons. Food stores with private label "store brands," paint shops, cleaning companies, electronics, even pharmacies. When you put your brand on a product, even if you don't make it yourself, you're responsible for it. So how do you mitigate this risk? Demand vendor's coverage from your contract manufacturer. This is a certificate that says they will defend you if anything goes wrong with the product and that they have specific insurance to back it up. If they won't give it to you, ask them why.

If need be, your own insurance may include products liability and may help protect your business. Be an informed business owner, and discuss it with your broker. Better yet, give me a call.