I want to build on last week’s post about having all your docs in a row when you get started and to cover some of the ideas first raised there in more depth. With us today is Tim Madden, a licensed insurance agent and certified insurance counselor. Tim is a broker with Honig Conte Porrino, an independent insurance agency based in New York City. HCP offers a variety of insurance products, with a focus on business products. Tim is an expert in business insurance, and I have turned to him for a multitude of business products when looking for coverage both for my own stores and for my clients. He has written a number of policies for me, my retail stores, my brands, and my laundromat, including liability, umbrella, and employee dishonesty policies.
Tim has my trust. He also has extensive knowledge in Property & Casualty insurance for real estate properties. Although he has on several occasions marketed my real-estate insurance needs to provide me with a competitive analysis across numerous insurance providers, his options were not viable for a variety of reasons. Still, he continues to answer my questions whenever I call him and to offer his opinion on coverages. He does so because he takes pride in what he does, and he values our relationship as a whole even if he hasn’t won every single piece of my business. Having an advisor like Tim gives me confidence that the advice I’m getting is sound, and I can rest easy knowing he’s asked me the right questions to ensure I have the appropriate protections in place. I’ve called on him to outline the key differences in the types of coverages mentioned in last week’s post and to explain why you might or might not need them.
From Tim:
Let’s begin with a formal introduction. Tim Madden, CIC, CPIA, has been in the insurance business for over 16 years. During his career, he has held a variety of positions in the insurance industry. He has served as a claims adjuster; a captive sales agent for personal auto, home, and life insurance; an employee benefits sales representative; and an independent property and casualty agent serving families and small-to-medium sized businesses across the country. Tim is a Certified Professional Insurance Agent (CPIA), and earlier this year, he satisfied all of the requirements to qualify for another title: He is now a Certified Insurance Counselor (CIC).
For the aspiring entrepreneur with a bright idea, modern-day America is an encouraging place to do business. Simultaneously, it can also be scary. Consider this: eighty percent of the world’s attorneys practice law in the United States. With more attorneys comes greater probability of litigation – Make a mistake that results in an injury, property damage, or has a negative financial impact on a third party and expect the sharks to start circling. Predators aren’t only found in the waters of the private market either, you’ll find plenty of sharks swimming in your local government offices. It is not surprising to find a direct relationship between the size of government and the statutory requirements imposed on business owners. Don’t believe me, check the size of the employer manual from NY State Department of Workers Compensation – it isn’t getting any smaller. Still don’t believe me? Look up the requirements for NY Paid Family Leave, a requirement that didn’t even exist prior to 2016. Failure to provide this coverage or incorrectly identifying an employee as an independent contractor could end up being extremely costly. As if this all wasn’t enough, most often, before a contract or agreement can be executed, entrepreneurs should expect their potential lenders, landlords, and vendors/customers, to have their own contractual requirements indemnifying them for any wrongdoing caused by their business operations.
Fortunately, much of the anxiety caused above can be relieved with the purchase of an insurance contract. A popular option for new business ventures is the Business Owners Policy – also known as a BOP. BOPs were designed to provide a handful of coverages needed for specific industries. The nuances of the BOP vary by industry classification, but the core offerings include general liability, business personal property, and business income. Although the BOP can be a very affordable option for finding coverage, the business owner who is just starting out may not yet have any business property or business income needing. In this case, one may want to seek out a “liability only” policy. Before doing so, one should consider what type of liability insurance they need as there are several – general, professional, employers practices, directors & officers, cyber, etc.
For today, let’s distinguish between general liability and professional liability.
https://honigconte.com/business-insurance/general-liability/
General liability protects a business from financial loss as a result of claims for injury, medical expenses, and damage to others’ property caused by an owner or the firm’s employees. The risk lies in the unexpected: A customer trips and injures himself, for example, an employee compromises your database, or a client sues you for slander or libel. Even if you’re a consultant/freelancer, clients may ask you to provide a certificate of insurance in case you damage something at their office. According to statistics, 4 out of 10 small businesses are likely to experience a property or general liability claim in the next 10 years.
What kinds of businesses need General Liability?
The short answer: any business that interacts with the public or customers or that has a location that is open to the public. But some industries involve higher risk than others. For example, a retail shop open to the public has more risk exposure than an IT consultant working from home. General liability coverage for contractors can be more expensive because their work involves someone else’s property. And if you’re a chainsaw artist carving tree stumps in a public park, coverage could be hard to find.
Many businesses just starting off who do not yet physically interact with the public or their clientele may not initially have a great need for general liability. This is normal for many marketing, consulting, or service-based businesses who are compensated for giving their professional advice. For these businesses, the more pressing need is Professional Liability insurance. Professional Liability, also known as Errors and Omissions (E&O), provides protection if a business is sued for negligently performing their services –failure to do what the business should have done – providing poor advice or not providing advice.
Some businesses have a need for both coverages. Consider a residential real estate brokage for example. Imagine a realtor accidentally turns on a gas stove while performing an open house causing an explosion resulting in property damage and bodily injuries. This would be a general liability claim as the negligence was general in nature. However, what happens if the same realtor knew about an underground fuel storage tank on a property but didn’t disclose this information to the buyer-client because they knew it would kill the deal? This omission would trigger a professional liability claim. Maybe the same realtor recommends to its seller NOT to take an offer from a buyer and ultimately no other offers come in leaving the property unsold? This bad advice could result in a professional liability claim.
Hypothetical claims scenarios are always a bit tricky as there are many details that are considered when a liability claim is approved or denied so please consult with an independent insurance broker before making a decision on what coverage to obtain. Also important to consider is that many factors go into the rating of an insurance policy and not all policies are created equal. Many companies offering coverage also have different forms, resulting in different costs, so just because your brother-in-law who does exactly what you do is insured with XYZ company, doesn’t mean XYZ company is going to charge you the same thing. Sales, zip code, experience level, and many other factors all come into play during the quoting process. The devil is definitely in the details. Don’t let a failure to appreciate that get you burned!
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I want to thank Tim for contributing to this series, and for helping protect my own businesses. He works relentlessly not just to serve my own business needs, but also to retain my business by shopping my policies each year to make sure I have the best protection but for a price that reflects what’s competitive in the marketplace (and from a carrier that’s reliable). I sleep easy knowing he is in my corner if something bad were to happen!
Tim can be reached @ Tmadden@honigconte.com, and his website is www.honigconte.com
***Tim was not paid, nor did he pay to contribute to today’s blog. I am not a licensed insurance agent, and I receive no compensation for his advice. This piece is informational only for people looking to build a business, and it is not meant to be a solicitation or an advertisement.