What Laundry Owners Need to Know About Their Business Insurance During These Difficult Times
According to the Small Business Administration, small businesses in the U.S. “are facing an unprecedented economic disruption due to the coronavirus (COVID-19) outbreak.”
Laundromats are no exception. Although vended laundries are considered part of the U.S. “critical infrastructure,” many laundromats have seen decreased business due to shelter-in-place orders issued by various states. With this reduction in business, many laundry owners are left wondering whether their insurance help them through these tough times.
Unfortunately, the answer to this question is not cut-and-dried – and, in most instances, the response is probably not.
Given the complexity of the insurance market, I thought I would share some important information regarding COVID-19 and typical laundromat lines of insurance:
Business Interruption: The most common coverage question we have been receiving from laundromat owners and most business owners in general is: “Will insurance cover business interruption loss due to COVID-19?” Unfortunately, there is likely not coverage for the following reasons:
- Business interruption coverage is triggered by a direct physical loss, damage or destruction to tangible property. As it stands today, the coronavirus does not meet the coverage trigger threshold in and of itself, because it doesn’t cause physical damage.
- Most policies contain a communicable disease exclusion like a virus or bacteria outbreak.
- Many business owners have submitted claims for a business interruption loss, unfortunately many of which have been declined based on the above. There have been several class action lawsuits filed; however, it will take years for the courts to litigate and determine if coverage exists. As a result, we recommend you keep detailed records of your loss of income and consult with your agent about filing a claim.
Liability Coverage: There will likely be liability claims that result from COVID-19. For example, a customer could allege they contracted the virus at your location. We believe there will be no coverage, as most liability policies have exclusions including “absolute mold” and “environmental exclusions” that expressly exclude coverage for damages “related or attributed to, arising out of, resulting from, or in any way caused by any bacteria, virus…”
Workers’ Compensation: Coverage for workers’ compensation will likely be on a case-by-case basis and will depend on the applicable state laws. The laws vary state by state, so it is hard to say if there will be coverage or not if an employee were to contract the virus. The sector that will see the most success with workers’ compensation claims are medical fields.
Insurance Marketplace Outlook
Even before COVID-19, we were already experiencing a hardening of the insurance marketplace, and we expect this will increase in the coming months. We expect underwriters will have tighter guidelines and, as a result, be required to be more restrictive with coverage.
Also, as a result, rates will likely continue to rise for most – if not all – lines of insurance to cover the increased cost as a result of the pending litigation and potential future claims. What does this mean for you? We believe that COVID-19 will likely cause an even tighter insurance marketplace. Here are some ways this could impact laundromat owners:
- There will likely be an increase in premiums across all lines of coverage at your renewal. We recommend getting out ahead of your renewal, discuss your options and formulate a renewal strategy with your broker well in advance of your renewal to avoid any big surprises.
- Before COVID-19, due to unfavorable experience, insurance carriers were already exiting the marketplace. With less insurance carriers to choose from, this will likely result in limited opportunities for you at your insurance renewal.
- Carriers have already started limiting coverage due to COVID-19. We recommend reviewing coverages with your agent, as conditions on the policy have or are likely to change.
- Not all the news is bad. For those using commercial vehicles, you already may have received some sort of return premium from your insurance company. In addition, carriers are flexible with late payments, and cancellation notices are being delayed. We urge you to continuing paying premiums to avoid playing “catch-up” on those payments you missed.
Making Your Store Safer
As you continue to operate your laundromat during this pandemic, there are steps you can take to help make your business safer.
Follow the CDC’s COVID-19 guidance for small businesses:
- Remind employees to stay at home if they’re feeling sick.
- Enhance cleaning at your store, whether that means you or your staff disinfecting the store more frequently, or hiring a professional cleaning/disinfectant company to periodically clean your facility. (If you’re looking for such a company, I can make a recommendation.)
- Encourage social distancing in the laundromat by allowing gaps between the machines that are being used.
- Check temperatures of all employees.
- Ensure that you follow all state or local COVID-19 orders, including mandatory mask wearing, etc.
Consider implementing additional safeguards, including:
- Limit the number of people in your store at any one time.
- Require customers to wait in their vehicles between loads.
- Remove folding tables, and encourage customers to fold at home.
As times are changing rapidly and the future is uncertain, I would encourage owners to do a review of their current policies, as we often find gaps in coverage. At CLA Insurance, we are more than happy to perform an analysis of your coverage, secure competitive quotes and make coverage recommendations.