Retails Sales:

Supply chains and logistics failures. How contingent business income interruption insurance coverage can help cover your loss.

The busiest sales season of the year is fast approaching for retail sales. If store based retailers don’t have sought after products to sell, buyers are unhappy and leave; or they just order online and have it delivered. Unfortunately, they are not buying merchandise from you if you don’t have what they want. So here you are depending on your supply chains and their ability to manage logistics successfully which includes timely delivery of merchandise to you. But what if those companies fail to deliver? Well, you can wait for another type of delivery.

Contingent business income interruption insurance

But chance are slim that the goods will arrive in time and you will most likely loose sales.

However, as a realistic alternative, you could purchase a type of little known insurance. You would think it might be called supply chain failure insurance but it isn’t. It is called contingent business interruption insurance, or CBI which is “an extension to other insurance that reimburses lost profits and extra expenses resulting from an interruption of business at the premises of a customer or supplier.” See https://www.irm.com/articles/expert-commentary/contingent-business-interuption-gettingallthefacts

Usually commercial general liability and business property insurance are the basic types of insurance a business needs along with workers compensation if the business has employees and inland marine coverage if they have specialized equipment. There are also various types of additional insurance coverage, usually added by endorsements, which may be appropriate for your business depending on your specific situation. Two of the available endorsements are business income interruption and contingent business interruption.

Business income interruption insurance is a type of insurance which is not covered by CGL or business property. So an ISO endorsement is needed to cover the loss specifically. This type of insurance covers a direct loss of income at your business location and it can be part of a Business Owners Policy or Commercial Package, if designed in that manner. There are conditions which must be meant for this coverage to kick in, which depend on the loss being directly to the insured’s property and actually sustained. Therefore, a loss which does not impact the insured’s owned property is not covered.

But contingent business income interruption insurance can cover your losses due to a supply chain failure.

This is a separate and distinct endorsement which only applies when the insured is not the owner of the property which suffers the actual physical loss. It specifically applies if the business supply chain is disrupted and income is lost by the insured due to the supplier’s failure to deliver for various reasons such as cargo theft, equipment failure, plant shutdown, cyber-attack or weather-related disasters. A direct business income interruption endorsement will not cover you in this instance. These two types are mutually exclusive and only one can actually apply in any given situation.

In older policies and some current policies, insureds had to purchase both primary direct business interruption insurance and a second specific endorsement for contingent business income interruption insurance using the proper ISO form. The insured business had to have the underlying endorsement for direct business loss of income and the amounts specified in the original direct loss endorsement determined what amount your indirect loss limits were. https://marsh.com/insights/research/business-insurance.html.

But in present times, some carriers, including the Hartford, automatically provide standard loss of business income (BI) in their BOP with a host of additional endorsements available, specifically including Business Income for Dependent Properties (or CBI) in available options, as well as many others. See: https://www.thehartford.com/business-income-insurance.

As dependence on supply chains evolve, claims have become more frequent. Documentation to verify the loss of income has become crucial to a successful claim. Algebraic formulas have been developed to calculate loss and are adjusted to take into account seasonality for retail businesses. http://www.air-worldwide.com/Blog/Supply-Chain-101–Breaking-Down-Contingent-Business-Interruption/

Businesses should be proactive before selecting a supply chain provider and be prepared for any loss.

Ask your supplier these questions before entering into a business relationship:

Does your supplier have a contingency plan to deal with natural and man-made disasters which interfere with delivery of goods on time?
Does your supplier have marine inland which will protect goods in transit and if so ask for a Certificate of Insurance and to be named as an additional insured on their policy? ( This will forestall any policy interpretation that CBI coverage is not applicable because it did not occur at the supplier’s place of business. This issue may not arise as arguably a business conducting a supply chain owns the transportation vehicle and it is the supplier’s property. But it never hurts to be doubly insured.)
Ask for a Certificate of Insurance for the supply chains general commercial liability policy.
Does your supplier have logistics management error and omissions liability policy? If so, also obtain a Certificate of Insurance.
Does your supplier have cyber risk insurance which covers third party losses from business interruption if the supplier is shut down due to a cyber-attack? If so, ask for Certificate of Insurance and to be named as an additional insured.

In closing it is always a good practice to establish a good working relationship with your key suppliers and engage in any working supply chain group to solve problems both before and after they occur.

Image Credit: Pixabay CCO Creative Commons free for commercial use.

3D Jewelry Printing

3D Jewelry Printing Revolution can cause general liability insurance changes

Jewelry making has always been a time honored tradition requiring skilled artisans to create exquisite jewelry pieces. These pieces are sold in jewelry shops, boutiques, antique shops and galleries offering these tiny works of art. Many jewelers have their own shops and sell their own custom designs. Alternately, originals and reproductions are sold in retail stores throughout the country on consignment; after purchasing directly from the artisan, or by obtaining copyright permission from the master artisan who designed and created the piece to mass produce it.

3D jewelry printing

In modern day many crafters also create jewelry on a smaller scale and sell it directly at art festivals, crafter’s markets, flea markets, mail orders and other means of distribution. In short jewelry sales in all its various forms is BIG BUSINESS. Jewelry sales in 2014 exceeded $68 billion dollars according to the 2014 US Jewelry Market Report.

3D jewelry printing will revolutionize the jewelry making business.

3D printing will have a compound effect upon the industry as new methods will require different types of insurance to protect the artisans who make and sell jewelry. 3 D jewelry printing is actually one (1) form of seven (7) categories of additive manufacturing. This process allows artisans to create an original piece of jewelry using additive manufacturing and replicate the jewelry in mass. Jewelry makers will no longer be required to design each original piece using traditional lapidary and hand tools to chisel and polish gem stones and settings. Instead they can use 3D jewelry printing.

Additive manufacturing (ADM) methods used to make jewelry differ. There are several viable options. American Pearl has built the “Jewelry Replicator” which can duplicate any piece of jewelry or create jewelry pieces from a photo or a drawing. As a result antique jewelry can be recreated when a piece is lost or broken beyond repair. 3D photo files can be created using software designed for jewelers such as “Rhinogold” to control the printer and design the actual jewelry. Jewelry made with rare metals and jewel can be created using a combination of techniques based on the jeweler’s preference.

3D Printers, other related equipment and the components for making the jewelry in house using ADM must be put in place; which means an initial investment in the equipment, supplies and chemicals used in the process. These items may be a great deal more expensive than traditional hand tools used in the past, but can be offset by the reduction in amount of time it takes to make the piece or pieces. Or, jewelers have the option of sending a 3D software file to an outside printing service to print the jewelry piece rather than purchasing the printing equipment.

Ultimately, after the jewelry making process is chosen and the machinery and equipment are in place to replicate the jewelry, it may radically reduce the cost of producing the jewelry. The ability to reproduce from a drawing or photo may diminish the need for galleries and show rooms and cause the retail value of some types of jewelry to fall as the supply of the product will increase.

On the other hand, it should lessen the costs of producing, copying and distributing the jewelry which will mean a bigger profit for the maker and seller.

Insurance coverage for Retail Jewelry Stores will need to be expanded.

Types of insurance which are available for Jewelers are:

Jewelers Standard policy
Jewelers Block Policy
Business Owners package designed for jewelers
Commercial Insurance Package designed for jewelers.

All of the above can be customized to fit the needs of any particular jewelry business.

Retail jewelry stores generally need the same types of insurance as any other business including general liability, worker’s compensation and standard business property coverage.

Jeweler’s also need property coverage for their building, fixtures, tools, equipment, molds, designs and original art work used to design jewelry. Other recommended insurance riders or supplements include, marine inland, Bailee’s insurance, and employer’s liability.

A jeweler’s property insurance must cover raw inventory, including stones, rare jewels, gold, copper, silver and other types of metal and elements used in jewelry making and design as well. Most of these coverage needs will not need to change due to additive manufacturing.

Insurance needs will change for:

general liability for new processes
new types of equipment,
products and environmental liability,
and, workers compensation.

Retail sales of jewelry are insured for general liability pursuant to the Class Codes depending on which of the 4 general classification codes are used to obtain a quote. For example. if using NAICS, retail jewelers fall under the Industry Group 44813 and the basic NAICS class code for a jewelry store is NAICS 448310. However, if the store is considered a department store that sells a wide array of products, including jewelry it could be classified differently, but it is unlikely that a department store will engage in replicating 3D jewelry.

General liability policies for retail jewelry sales should fall under this class code (or similar code) for jewelry making, But the additional class code for additive manufacturing will be come applicable for 3D jewelry printing services. So the general liability policy would need to be amended to add this code.

It is critical to your coverage that any needed class codes be added as you are adding new tasks which may not be covered at all under jewelry sales.

As 3D printers were not historically used as equipment, jewelers will have to add coverage for a commercial 3D printer including coverage for repair or replacement and may need to increase or add loss of income if the machine is down for a stretch of time. Jewelers may also need insurance for loss of production when electrical outages occur. Increases to the amount of coverage for fire may be needed due to the technical requirements of the printer and the temperature reached during the process.

While there is little certainty about the future of products liability litigation regarding 3D jewelry printing in general, liability may arise. http://www.industryweek.com/emerging-technologies/3D-printing-and-its-uncertain-products-liability-landscape. Thus, it is prudent to explore what options are available through your agent to protect you from a products liability claim in case a client suffers injury directly from a product you created or from exposure to a component used in the 3D process.

Workers compensation insurance codes may need to be added to your policy as workers may be exposed to new risks during the 3D process. Byproducts of plastic and metal powders used in the additive process may also be an environmental pollutant and a workers compensation risk which may raise premium cost and increase your risk for pollution liability. Pollution is generally an exclusion under a general liability policy so you do need to examine you policy to determine if excluded, and determine options to obtain pollution coverage. The best way to address rising premium costs is to implement a safety plan for the business designed to combat these concerns and protect your worker’s health. The plan should also address disposal of byproducts and chemicals. See: http://www.lawnandlandscape.com/article/ll-071317-insurance-safety/

It may be necessary to protect 3D jewelry printing software files by adding or increasing cyber liability insurance. Patents, trademarks and copyright insurance should be added or enhanced especially if you are replicating jewelry produced by another artisan, or in case someone steals your designs electronically.

Thoughtful examination of your insurance policies will set you on the path to a successful and profitable 3D jewelry printing venture.

Image credit: Pixabay.com, used under Creative Commons CCO, permission from artist or attribution not needed for any purpose.

Shooting for Optimal Commercial Insurance!

Gun Clubs or Shooting Ranges have many similarities, but are really two very different types of facilities. A gun club is usually operated by the membership which pays dues or fees to belong, while a shooting range is operated by the business owner or a group of investors/owners who operate the business. Shooting ranges are usually run for a profit and have business customers, while gun clubs may or may not be for-profit. Gun clubs have members and guests, not clients.

General Liability Class Codes - Find the best info about insurance for Gun Clubs and Shooting Ranges at https://www.generalliabilityclasscodes.com/

Assuming that you operate a shooting range for commercial purposes or you are getting ready to start such a business, you are going to need excellent gun club and shooting range insurance that will protect you and your customers from many perils.

First, shooing ranges have the same insurance needs as most businesses including commercial general liability, and workers compensation if you have employees. Usually these two types of insurance are fundamental for business owners as they are required by law in most states.

Second, you need property insurance to cover damages and repairs to all types of property which the business uses to operate. You should start by making a list of all commercial property that your business owns, similar to an inventory and include all types of property: e.g.

Real estate,
Buildings and their fixtures,
Office furniture and decorative pieces.
Automobiles, trucks, golf carts, tractors and lawn tractors and any other type of moving vehicles you use to care for the premises or in the business operations
Guns and ammo, gun cleaning equipment, and gunsmiths equipment
All other business equipment for instance: gloves, ear protection, protective glasses, archery
Equipment, or any other related items whether you furnish it rent it or sell it.
Signage not attached to the building needs to be specifically included by a supplement or endorsement.
Books of Account, computer hardware and software,

Depending upon how much and what types of equipment your business owns and operates, you may need an additional inland marine policy. Along with property coverage you should consider coverage for loss of the data, should a power or equipment failure damage the data or information stored, and additional protection from a security breach or cyber-attack to cover resulting costs for loss of income during an outage, expenses to make notification to those who privacy has been breached and damages to clients privacy.

Other items owned by the business will depend on what items you offer for sale such as food, drinks, alcoholic beverages, gun supplies, etc. If you sell food you might need lots of other equipment’s such as cooler, coffee pots, stoves, refrigerator etc. You may need a rider or supplement for refrigeration as this is a common exclusion on many property policies.

The key factor when purchasing insurance is to make sure the gun clubs shooting ranges obtain coverage for all property.

Shooting ranges should carry a combination of stand-alone and supplemental policies or a comprehensive business owner’s package with endorsements.

Next you need to consider what liability your business could incur from the operations of a shooting range. First of all you need liability for the use of any type of firearm or other types of sport like archery or clay/skeet. If your business offers instruction or classes in shooting you will need liability coverage and errors and omissions. You will need first and third party liability for these matters. You may also participate in competitive shooting and other events which will require event coverage or firearm related events coverage. If you decide to sell beer or alcohol you will need liquor liability specifically which will usually be an additional endorsement.

You may determine that you want to provide on premises gun repair and, or gunsmith services. In that case you will need products liability and errors and omission or alternately gunsmith insurance which specifically includes these types. You will need Marine Inland or Bailee’s insurance if you store clients’ guns or keep them while you repair the item. You will also want to include Crime Coverage to cover theft of your property or you clients by employees if your property insurance does not specifically cover it.

Shooting ranges may have special insurance needs when nearby residential property or businesses expand until they are closely located to your business. Neighbors and persons who are affected by your activities can sue for nuisance such as noise, pollution, and violation of regulatory and environmental laws and in particular pollution.

Lead pollution is a very serious environmental pollution concern for shooting ranges.

People in close proximity to the lead, which is contained in the bullets and the dust from the bullets when it hits the target, can suffer severe injury especially children. Lead pollution can cause contamination of adjoining properties and waters downstream from you. Lead exposure can lead to injuries to citizens and clients arising from the exposure to the dust and the bullets, as well as employees being injured by exposure. An environmental insurance policy or endorsement is an absolute necessity to battle litigation, fees and fines from regulatory and government agencies. In order to minimize some of your costs you will want to have a safety plan which includes having your ventilation systems monitored, cleaned, maintained and insured as well as your environmental policy. Your employees should take every safety precaution available while cleaning the facility to shield themselves from exposure to the lead dust. Employees are required to have their lead levels monitored by OSHA periodically, which can lead to warnings, fines, medical expenses, remedial action and closure of the business temporarily.

So if you want a bang up insurance policy covering all your needs do some homework, meet with your agent, ask lots of questions and make sure the policy you purchase is right for you.