Florida Insurance Network

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I wish I heard this question more often: Do I need business interruption insurance?

The answer is simple: No, unless you can’t afford to lose all your key employees, go indefinitely without income, pay all your ongoing expenses when your business isn’t making any money and go out of business as you wait for repair or reconstruction of your business premises. Otherwise, the answer is yes, you do need business interruption insurance.

Business interruption insurance (also known as business income insurance) is a form of property insurance. In this case, we’re referring to the property more affectionately known as your business revenues and expenses. As a concept this type of insurance is pretty straightforward. The main idea is to provide money for net income and ongoing expenses when your business can’t, usually because some form of covered loss makes it impossible.

For example, let’s say you operate a candle shop. One morning that temp you hired for the holidays moves a cinnamon-apple pillar candle beneath a silk bamboo plant that catches fire, which spreads to a nearby tapestry and quickly converts your entire business to a wax works before you can say, “Did someone burn an apple pie in here?”

Fortunately, your property insurance will pay to replace the tapestry, the silk bamboo plant, your inventory of candles as well as the cost of needed repairs and reconstruction. Your liability insurance will pay for incidental damage to nearby persons and property. But you’re still looking at an extended period of time during which you have no source of revenue to make your monthly loan installment, pay utility bills, equipment leases, your own salary and other expenses that don’t go away just because your business is down. That’s where business interruption insurance comes in.

Where all of this gets confusing, even for insurance representatives, is where you decide how much business interruption insurance you need. The answer really depends on your business financials. In fact, you might even want to consult a CPA before you decide. But the limit of coverage and the deductible are always expressed both in terms of time and money. For example, you could purchase a quarter of your annual qualified expenses to be paid over a period of 90 days with a deductible of three days.

Most insurance reps will carefully avoid suggesting or speculating about whether any given limit of coverage is “enough.” First, unless they’ve seen your books, they really don’t know. Second, plaintiffs lawyers make their bones on mistakes like that. What we can do is provide you with a worksheet that’s designed to help you separate qualified expenses from costs that don’t continue, such as non-essential services and payroll.

Here’s another question: Do I need business interruption insurance in Florida? The answer is the same. Yes, but if your property insurance does not cover losses caused by wind and hail (also known as hurricane coverage) your business interruption insurance won’t either. In other words, you get exactly nada if a Cat 3 forces you out of business for a while. Keep that in mind when your representative asks about “ex-wind” property insurance.

Keep this in mind, too. Business interruption insurance kicks in when your business premises goes down, as a result of a covered cause of loss, and takes your business with it. What happens if your business premises aren’t damaged but access is severely restricted or denied to a point where the material affect on your business is the same? For example, let’s say a flood cuts off all the roads to your shop. In that case, you will want to have made sure your policy included so-called civil authority coverage and ingress/egress coverage.

Be sure to ask your representative for details. And while you’re at it, ask about extra-expense insurance, too. This is especially true for service businesses, such as dentists and lawyers, which can operate from a different location as they wait for their original premises to come back on line. Extra-expense coverage pays the costs of relocating to a temporary location.

Give me a call (727-916-7429) if I can help. Meantime, keep those candles away from the silk plants, please.

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West Palm Beach’s NewsChannel 5, WPTV, committed a factual faux pas on August 23 when its award-winning, multimedia investigative journalist, Katie LaGrone, filed this report about consumer rights.

LaGrone informs us that nothing on the books in Florida requires merchants to tell customers when their personal information (credit card numbers, driver’s license numbers, Social Security numbers, etc.) is lost, stolen or hacked.

Assuming this Florida statute fits the strict, technical definition of  “on the books,” I’m guessing LaGrone won’t win an award this time because the language of the law seems fairly unambiguous

“Any person who conducts business in this state and maintains computerized data in a system that includes personal information shall provide notice of any breach of the security of the system, following a determination of the breach, to any resident of this state whose unencrypted personal information was, or is reasonably believed to have been, acquired by an unauthorized person.”.

And here’s what you risk by failing to comply.

“Any person required to make notification under paragraph (a) who fails to do so within 45 days following the determination of a breach or receipt of notice from law enforcement as provided in subsection (3) is liable for an administrative fine not to exceed $500,000 …”

Still, give LaGrone high marks for reporting news of data risk in the first place. And I give her extra credit for including this …

“Cyber thieves are targeting businesses more frequently. In fact, a recent study by Ponemon Networks and sponsored by Juniper Networks, revealed out of 600 businesses surveyed, 90 percent claimed they had been hacked in the past year.”

And this …

“”The frequency and sophistication is growing so fast,” said Stuart Galup, a cyber security expert who teaches IT security at Florida Atlantic University.

Galup says even businesses with safeguards in place are becoming vulnerable to creative business hackers.

“There are so many areas to which a breach can occur, that you really can’t say 100 percent that a breach can’t occur,” he said.”

I love it when academics agree with me. It just goes to show that I’m not spewing cheesy, scare-tactic sales blather when I say data breach is like fire, flood, vandalism or almost any other peril. You can’t guarantee it won’t happen. You can only try to prevent it and buy insurance, in case it does, because the losses can be just as costly as fire or flood.

Now, back to Katie. I sent her an email. I told her I liked her story but that she got part of it wrong. And, I said this …

“Florida is among the worst states in the country for ID theft. Yet I meet dozens of business owners every month of which very few are aware of Florida’s breach-notice law, much less the magnitude of their own exposure to data loss (as noted in your report). Inside jobs, indifference and human carelessness are an even bigger threat than the sophisticated hackers you mentioned.”

I said this, too …

“Florida’s law exists primarily to help consumers react in time to spare themselves from identity fraud. But what good is it, if businesses ignore it and the state does nothing to enforce it? It seems to me that this is the issue you ought to be investigating and reporting.”

To my surprise, she wrote back. Even more surprising, it wasn’t to tell me to go to Hell. She was very nice. Here’s part of what she said.

“Thank you so much … I think your story ideas to further expand on this topic are certainly worth our attention. I will keep you informed with what I find.  What is your interest? The reason I ask is, if we pursue more stories on this topic, would you be available for an interview on the topic?”

Yes.

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Answer: A BOP.

That would not be BOP deluxe, for you fans of 70s progressive rock. Just BOP.

BOP stands for business owner’s policy, which is way less cool than progressive rock, unless you’re into saving hundreds or even thousands of dollars on commercial insurance. In that case, it’s still less cool than progressive rock.

BOPs are the El Caminos of small business insurance (another  70s thing, yes, but if you don’t know what an El Camino is … well, I feel sorry for you, man). It’s not a car. It’s not a pickup truck. It’s a little of both.

Insurance people refer to the “gestalt of El Camino” to explain BOPs. No they don’t. I’m probably the first. The point is that BOPs come from the insurance factory with a little bit of this and a little bit of that for businesses that don’t need a lot of either.

Sometimes, commercial insurance comes in packages. Insurance people refer to these as “package policies.” Seriously. They do. You can buy package policies a la cart to insure buildings, inventory, business liability, crime, commercial autos,  etc.

A commercial package policy lets you include forms of insurance that you need and exclude forms you don’t need. Package policies are the antithesis of El Camino because you can make them more car than truck to avoid wasting money on unnecessary forms of insurance.

For example, if your business is selling used mattresses out of a leased storage unit, then I definitely won’t be buying my next bed from you.

That’s a story for another day. But let’s say that is what you do and you want to insure your business liability, commercial auto and your inventory of used mattresses. You don’t need insurance for crime or valuable papers or business interruption. So, you could buy a package policy to insure only what you need to cover.

BOPs are similar in that they come packaged with different forms of insurance. The main difference is that they come packaged with certain kinds of coverage whether you want them or not. And the limits for all forms of coverage within a BOP are capped at relatively low numbers.

Now, you might ask, “Why the hell would I buy a business insurance policy that includes coverage I don’t need?” Because I get paid more commission, stupid.

No, just kidding. The real answer is because you probably will pay much less for a BOP that comes packaged with coverage you don’t need than you would pay for a package policy that has only what you do need. Why? Trust me. You don’t want to read that here but it’s a true fact.

And, by the way, I get paid a lot less commission on a BOP than I do for a more expensive package policy. That’s just how much I care.  I really do.

How do you know whether a BOP is right for your business? The answer boils  down to how much insurance do you need? If your business needs just a little bit of one kind of insurance and a little bit of another, a BOP might be right.

Just like an El Camino. Sometimes you need a car. Other times you need a truck. But you never need either one enough to spend the money for both. And so we have the gestalt of El Camino as it pertains to small business insurance.