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There is probably no topic duller than business insurance. I had more fun writing my will than discussing insurance for my business. Yet it is a necessary precaution for any business to undertake, particularly as your business grows and liability increases.
What is business insurance? There are many ways to insure a business, and different types of insurance which protect a business against various risks. The most common form of insurance is property and casualty insurance. This is basic liability coverage for the operations of a business.
Another important form of insurance is business interruption insurance. This is critical for retail stores such as coffee shops, restaurants, and manufacturers. It provides coverage for a business in the event it is unable to operate due to fire, flood, earthquake or other disaster. Even though a business is not operating it still incurs costs (payroll, lease, mortgage, insurance premiums, etc.). The insurance provider will help you get back on track and operating your business again.
Worker’s compensation insurance is another critical type of insurance coverage for employers. To protect employers from lawsuits resulting from workplace accidents and to provide medical care and compensation for lost income to employees hurt in workplace accidents, businesses are required to buy workers compensation insurance. Workers compensation insurance covers workers injured on the job, whether they’re hurt on the workplace premises or elsewhere. Workers compensation provides payments to injured workers, without regard to who was at fault in the accident, for time lost from work and for medical and rehabilitation services. It also provides death benefits to surviving spouses and dependents.
Employer-sponsored health insurance coverage is a hot topic in Washington, D.C. Given the escalating costs of providing health insurance coverage to workers, many employers are shifting the burden to their employees. Employees are frequently asked to pay higher co-pays for prescription drugs or visits to doctors. Instead of full, 100% coverage of health care premiums, employers often pay only a portion of the premiums. The remainder is deducted from the employee’s salary.
Different businesses require different types of insurance. Jeff Martins, Seattle manager of Brown & Brown, Inc., recommends that restaurants, coffee shop chains and food manufacturers (and any business serving food to consumers) buy food borne illness insurance. This type of insurance is often an extension of your liability insurance policy. It covers a business in the event that a consumer becomes ill as a result of the food or drink that the business provided that individual. Can you say “organic spinach?”
In September 2006 a food borne illness broke out as a result of spinach being contaminated with the E. coli O157:H7, a potentially deadly bacterium that can cause bloody diarrhea and dehydration. It lead to 199 infections, three deaths, and thirty-one kidney failures by October 6, 2006. The outbreak has been attributed by media sources to a Taco Bell storage facility, and produced by Ready Pac, a Southern Californian grower.
Additionally, 34 people became sick last year with symptoms consistent with E. coli infection after dining at a Taco John’s establishment in Cedar Falls, IA.1 We hope that Ready Pac and Taco John’s had adequate food borne illness insurance. You should, too.
The repercussions of failing to insure your business against risk are severe. For example, in 1971 the FDA discovered the botulism bacteria (botulism is a rare but serious paralytic illness caused by a nerve toxin that is produced by the bacterium Clostridium botulinum) in vichyssoise soup manufactured by Bon Vivant, Inc. of Newark, New Jersey. The FDA released a public warning after learning that a New York man had died and his wife had become seriously ill due to botulism after eating a can of Bon Vivant vichyssoise soup. The company commenced a recall of the 6,444 cans of vichyssoise soup made in the same batch as the can known to be contaminated. The FDA soon discovered that the company’s processing practices raised questions not only about the production lots of the vichyssoise, but also about all other products packed by the company. The effectiveness check of the recall had revealed a number of swollen or otherwise suspect cans among Bon Vivant’s other products, so FDA extended the recall to include all Bon Vivant products. The FDA shut down the company’s Newark, New Jersey plant. Only five cans of Bon Vivant soup were found to be contaminated with the botulin toxin. However, the ordeal destroyed public confidence in the company’s products and the Bon Vivant name. Bon Vivant filed for bankruptcy within a month of the announcement of the recall.2
Do your business a favor by reviewing your current insurance policy relative to your realistic business risks. You may not only be paying too much for some forms of insurance, but also you may be paying too little (or none at all) for other types of insurance.
I hope I have not put you to sleep. My intention is merely to wake you from a potentially costly slumber. With adequate business insurance, you will sleep soundly.
–Peter M. Guyer
Peter M. Guyer is the Founder and President of ATHENA MARKETING INTERNATIONAL (, an international marketing, consulting and business development firm serving food and beverage manufacturers. Tel. (206) 749-9255.
1 Wikipedia, 2006 North American E. coli outbreak
2 Wikipedia, List of United States food borne illness outbreaks