Confidence in your insurance coverage

If your general liability insurance is part of a business-owner's policy (BOP), its limits may be low. If you need more coverage, a separate umbrella policy is a good option. You can determine the amount of coverage you need by evaluating your potential risk, the state in which you operate (both its legal minimum and its history of awarding high damage amounts), and your personnel quality.

Is your phone ringing off the hook? If so, that's the insistent sound of your phone with messages from your customers.

Here are a few phone call scenarios:

Scenario No. 1: While on a routine plumbing call to replace a toilet, your employee failed to tighten the gaskets properly. The toilet flooded, ruining the hardwood floors in the bathroom, seeping into the hallway carpet. Water broke through the first-floor ceiling to damage the $10,000 home theater system in the family room below it.

The customer asks, "What are you going to do about it?"

You respond, "My insurance will take care of it."

Scenario No. 2: "Boss, it wasn't my fault," says your service technician who just hooked up a dishwasher at a client's home. It leaked. It damaged the flooring, carpet, dry wall and kitchen cabinets, resulting in a $5,000 bill.

You say to yourself, "My insurance will cover it."

Scenario No. 3: "'Gas explosion kills dog,' this story next on the 10 p.m. news." That's the sound of your business about to test the phrase, "Any publicity is good publicity." You already know that a heating unit you installed leaked and caused an explosion, damaging the home and causing the death of a pet. The homeowner now needs to move to a hotel, they've hired a lawyer, and they are claiming negligence on your part. The customer claims you did not train your employees properly or have any safety precautions in place. Your business name is now in the news, negatively, and you need a plan to restore your name.

You wonder, "Will my insurance cover it?"

These rather extreme scenarios demonstrate the importance of protecting yourself and your employees with a safety plan and a thorough insurance policy, and knowing when to use them. A few thousand dollars to reimburse a homeowner for damaged flooring and furniture is a minor amount and shouldn't have a huge financial impact for you. Insurance is for the large claims that can bankrupt your business. But how do you prepare for these unforeseen bumps in the road?

First review your general liability coverage carefully with your insurance agent. Ask questions. Understand your limits and coverage. Typically, general liability includes three areas: bodily injury and property damage, personal and advertising injury, and medical expenses.

If your general liability insurance is part of a business-owner's policy (BOP), its limits may be low. If you need more coverage, a separate umbrella policy is a good option. You can determine the amount of coverage you need by evaluating your potential risk, the state in which you operate (both its legal minimum and its history of awarding high damage amounts), and your personnel quality.

Keep in mind if you have a $300,000 limit and the settlement claim is $500,000, you are responsible for the difference. Consider a minimum limit of $1 million on your policy. Adding an umbrella policy can be a cost-effective way to increase coverage limits.

Next, implement a safety program. Not only will this increase awareness throughout your company, it will also afford you some insurance discounts and lessen your risks. Ask your insurance agent for safety tips targeted to your business market. You can distribute these tips to employees and technicians in various ways: posting them in your place of business, including them with employees' paychecks monthly, and e-mailing them as part of an internal staff newsletter.

In addition, create a safety committee made up of employees from each department to help you implement safety procedures. This participation gives your employees ownership in the program and fuels their desire to reduce accidents. Hold quarterly meetings of the safety committee. Then, communicate the committee's policies to your entire staff through short, regular safety meetings. Make the meetings mandatory and document attendees.

The key word here is "document." It's important to keep a record of those who attended, as well as the safety tips you discussed and distributed. These records will be pertinent if you receive a claim or legal notice like the gas leak example. If someone is trying to prove negligence on your part, you will have written proof that you took measures to educate your employees on safety.

Your clients place their homes in your custody while you are working there, and they expect the utmost care. If you or your employees make a mistake, the client expects you to make it right. Be prepared and know your options. Making it right is simply good business sense.

Matthew Stangle is an insurance agent with WSMT Insurance and is a member of the Heating and Air Conditioning Contractors of Maryland (HACC) and writes the insurance for several HVACR companies. He provides personalized client service that includes unique ways to get the most from your insurance policy. Visit his website, www.InsureHVAC.com, for details.