The Business of Doing Business
There have been a number of issues that have come up recently surrounding insurance. For instance, the facility in which we hold the Double Crown Belly Dance Competition, now requires proof of insurance for all vendors as well as Double Crown Productions, LLC. Waivers will not be accepted. As well, in teaching "dance", I am required to carry insurance that will cover me in any location in which I teach, not necessarily by the facility, but as an instructor, I must protect my assets, etc. Many studios, health clubs, etc. that hire the dance or exercise instructor require the instructor to carry liability insurance (if you are a private contractor, not being paid as an employee of the facility - - standard practice).
So, I asked my own insurance agent for an explanation of the why, what, and how to cover yourself and your business. She has been incredibly helpful to my own businesses which include the magazine, dance instruction, home office, and more. For your own benefit, take into consideration this valuable and “freely offered” information.. . . . Zaina Hart
Risk Management Ideas for Instructors, Schools and Vendors
By Katie Kramer, Executive Vice President
BKI Insurance Services, Inc., Vancouver, WA
kkramer@bkiins.com
Every business-owner faces risk. Insurance is a risk management tool. It does not prevent the injury or lawsuit but insurance transfers the risk of financial loss to your insurance carrier. What are some pitfalls you should consider?
Loss #1: You have leased space to a friend to give classes in your studio. During one of these classes a student slips and falls. There was a wet substance on the floor that no one noticed/or knew where it came from. The student requires surgery. The student is the sole support of 3 children and is disabled for 6 months and can't work. She loses her car, job and home. She has surgery and later sues your studio for damages as well as the friend who was instructing the class. You had no contract with your "best friend". Neither of you have liability insurance. The space is in a larger building owned by a landlord. You had signed a contract for leasing the space that contained a "hold harmless agreement".
Now let's take the same loss and say it was at your home. If you are relying on your homeowners insurance to pay the claim - better think again. Homeowners insurance is rated/based upon the occupancy as a residence. Virtually all homeowners policies exclude any liability for business pursuits. They offer very limited, if any, coverage for business contents.
Loss #2: Yyou have $20,000 in costumes/props at your apartment or condominium. The little elderly lady who lives above you has a leak in her plumbing and over a period of time - the water seeps into your closet - and next time you go there - all your costumes are destroyed. The lady has no insurance. Or let's say she has insurance but her insurance carrier will only give you 25% of what you paid - as they are used. (This claim just happened to one of my clients.)
Loss #3: You loaded your vehicle with your costumes and props/inventory to sell and went to a special event. A good friend asked you to also take about $10,000 of their items since you were driving and they were flying. You drive all day and are tired and fall into your hotel bed. You locked your vehicle. You go to your car to leave the next day and guess what? Your entire inventory was stolen. You probably think your auto insurance policy covers contents, right? WRONG. A standard auto policy extends no coverage for contents. Homeowners do not offer any business contents coverage away from the premises.
Loss #4: Your student leaves your class and walks to their car in your parking lot/or driveway. They are attacked and seriously injured. You are sued as you failed to maintain a safe and secure premise.
How can contracts and contractual liability affect the above claims? Contracts are an essential part of doing business in today's world. Contracts are essential in running your business. Whether you are hiring a contractor to work on your facility, arranging for transportation to an event or agreeing to let an outside group use your facilities, a well-written contract can help manage your risk, protect your business/career and create a good working relationship between you and other parties.
You should beware. When negotiating contracts with other parties you may be tempted to use/or agree to their broad contractual wording. If you do you may be assuming responsibility for ALL losses regardless of who is at fault. This could result in catastrophic financial loss to your business.
Let's get back to Loss #1. Why does the owner of a building or the promoter of an event require vendors and participants to carry liability insurance? Why would the owner of the building want to be liable for a claim caused by a tenant, vendor or a subtenant? If a vendor has an unsafe condition that causes an injury to a third party - they want the costs/liabilities to rest with the vendor with the unsafe condition. There should be a clear understanding to all parties involved in an event or involved with use of premises which party is responsible for a particular risk. In the absence of prop-
er insurance for all parties it could be an expensive and time consuming legal situation with a jury making the final determination of liability and damages.
One last parting comment - when you purchase liability insurance - you are also purchasing defense coverage. Ask your favorite attorney if you are sued what will it cost to defend you in court. What is the hourly rate and how many hours could it take in legal charges? Very few businesses can withstand litigation costs.
With careful planning, a good insurance agent, a good accountant and a good attorney you can establish an effective risk management program that addresses your particular needs.
