“With the continued growth of the buy here-pay here dealership business, issues involving customer relations and protection of your assets will continue to evolve.”

“…help the business minimize their most important risk of all; their reputation with their customers.”

Most businesses carry Commercial Property Insurance, but that does not cover all scenarios that may cause a disruption to your business. One of the major risks that are not normally included in your property policy, and not considered by most insureds, are losses caused by equipment breakdown. For any of us that have had a power surge or a lightning strike in our personal homes we are very aware of the damage that electrical issues can cause to all of our appliances. This same type of an occurrence in a business can have major repercussions and it is important that your business be fully covered for these types of losses as well.

Equipment breakdown coverage is meant to fill the gap between your property insurance policy and those risks that may cause business interruption. This may include coverage for refrigeration systems, motors, compressors, computer systems and even security and fire-detection systems. This policy provides coverage for the accidental loss of both mechanical and electrical equipment used for the generation, transmission or utilization of mechanical or electrical power. In the case of auto dealers some of the covered items in this policy may include air conditioners, motors and generators, pumps and compressors as well as computer and phone systems and your shop’s diagnostic equipment. Any loss of this equipment can have a large impact on the business and may not be covered under the commercial property policy. This added Equipment Breakdown Policy provides coverage, not only for the equipment loss, but also the lost income, the expense of getting back in business and any necessary temporary equipment to keep your business running during the restoration period. In addition this policy would help the business minimize their most important risk of all; their reputation with their customers.

Many of the losses reported that would fall under this type of policy involve very costly repairs such as air conditioning compressors and air compressors seizing up due to lack of lubrication or a voltage fluctuation that causes telephone system terminal boards to burn out or automotive diagnostic systems to become inoperable. These losses run in the tens of thousands, even hundreds of thousands of dollars. Half of all equipment failures are caused by surges or electrical noise. With the ever-increasing use of electric technology to run motors and other equipment, the cost of repairing these systems has been escalating at a rapid rate. A loss to a central air conditioning system caused by an electrical surge cost an insured over $12,000 dollars just for system repairs, not including loss of employees’ time and customers. A service station owner incurred a loss to its diagnostic equipment and phone and security systems in excess of $40,000 caused by a power surge to his building.

The advantages of having an Equipment Breakdown policy are not just those that occur after the accident, but also include the proactive features these type policies have to prevent the loss or accident in the first place. Most importantly are the risk control attributes that are included. When you take advantage of this type of policy you receive assistance in setting up inspection schedules and evaluations along with the identification of potential hazards and creating a preventive maintenance program. The insurance company representatives assist the policyholder with government compliance issues and the filing of required certificates. The insurer can also assist in the case of a loss with helping find replacement parts and other resources to help you get your business up and running in a timely manner. The business can be provided with valuable safety checklists such as a document defining the correct way to start up a boiler or how to qualify for “green” certification.

As with many other business decisions the more proactive you can be in preparing yourself with the correct coverage before the loss, the quicker reaction time you will have in recovering from the loss. Reviewing the need for this coverage with your agent will be time well-spent.

We would all like to think that we are a good judge of character and that the people we surround ourselves with share our same values; but unfortunately that is not always the case.

It is impossible by simply looking at someone or interacting with them during a one-hour interview to do a true assessment of their character. One must be prepared for the liability of employee dishonesty in the workplace, no matter how inconceivable we might think that possibility is. Employee dishonesty can affect your business in multiple ways and the business owner needs to be wary of it and prepared to handle the consequences. Check with you insurance agent to determine if purchasing employee theft insurance will be beneficial to you.

Employee dishonesty seems to be more prevalent in small businesses where employees get treated as if they were part of a family. We give our trusted employees more access to our business documents thus providing them more opportunity to abuse that privilege. As the economy continues to struggle the incidence of employee dishonesty is rising. Some employees feel that their loss of compensation or reduction in benefits entitle them to receive other means of compensation and they may resort to illegal activities that they would not have previously considered.

Where possible, shifting employee responsibilities among fellow employees can be an effective way of preventing employee theft and discovery of any theft activity currently occurring. Studies have found that unhappy and or bored employees are more likely to attempt some type of theft from their employer. Rotating responsibilities and encouraging new opportunities within your company will also keep your employees challenged and possibly eliminate boredom.

You should perform reviews to determine your employees’ attitudes and any lifestyle changes that may be beyond their financial means of income. Performing background checks on new employees and routine background checks on current employees can be an effective method of preventing and discovering employee theft activity.

As a business owner you need to be proactive in putting deterrents in place to protect yourself from this form of theft. One of the most-effective deterrents is to communicate your company’s policy and follow through when the policy is violated. Ensuring that all employees are notified in writing of what will not be tolerated and what actions you will take to discover and punish these dishonest activities goes a long way.

For instance, if your employees know that you will be auditing your own books monthly, that in itself would be a reason for them to reconsider taking any illegal actions. If you have a zero-tolerance policy with your employees, it is imperative you abide by that policy the first time there is a violation. It is also important that when these dishonest activities do occur that you communicate the infraction to the rest of your employees and let them know what action was taken. When the opportunity arises to assist in the parts, service, sales or accounting departments by filling in for a sick or vacationing employee, take it. You having a complete understanding of how your business operates will allow you to recognize any problems in your procedures, or with a specific employee, more quickly. Also, installing computer software that controls and monitors who is accessing company data will provide you with information to recognize any abnormalities.

Employee dishonesty can be as blatant as actually stealing money directly from your business or as subtle as giving friends and family large discounts on your products.

Recently, one woman working at an auto dealership was convicted of using $645,000 of company assets to pay her personal credit card bills for the last 10 years. The dealership was not able to recover all that money and it was a huge loss both financially and emotionally. Having an audit plan in place where more than one person is looking and reviewing your financial data can go a long way to protect yourself from these types of incidents. Also, have an independent auditing company perform an audit of your financial records and carry out a physical inventory annually. Company checks, requisition forms for supplies and equipment and all other activities requesting the use of company funds should require more than one signature for authorization.

Of course, there are physical ways that you can minimize your losses also. Other deterrents to employee dishonesty include the use of security cameras, access limitations to your property and inventory, and even something as simple as asking your employees to park away from your building. These actions make it more difficult for an employee to execute any physical removal of property from your business. Although most businesses run their operations with computers, there still seems to be the occasional need for faxing information and documents that may contain financial information about your company or one of your customers. Make sure access and use of your fax machine is restricted and it is kept in a secure area away from general traffic areas used by your employees and customers.

Employee theft can be a big problem if preventative measures and controls, such as those mentioned above, are not established. Protecting your business, and its employees, by controlling employee thefts before they happen is important to the survival of your company.

Since car dealerships can have many drivers, some with undesirable driving records, your insurance company many be requiring that a “driver exclusion” endorsement be added to your policy or a “driver restriction” becomes part of your business practice.  Basically, a driver exclusion is an endorsement added to your insurance policy which is signed by you and the individual named on the exclusion acknowledging that your insurance will not apply under certain circumstances described in the endorsement.  It is important to note that the absence of coverage does not take away responsibility from you or the excluded driver if the excluded individual is involved in an accident.  These forms can vary greatly among insurance companies and each can have a different effect on your insurance policy and should be reviewed with your agent and your attorney.  Some states have determined that a driver exclusion endorsement continues to be effective into your renewal policy without executing a new endorsement.  Make sure that if an excluded employee’s driving record has improved that you review this with your agent any time during the policy period, and especially at time of policy renewal.

Because driver exclusions are effective in most states in changing your insurance coverage, they are added to your policy by special endorsement and become part of your insurance policy. Although the titling of these endorsements is very similar, the wording contained in the endorsement can vary greatly and have a carrying effect on your coverage.

Some endorsements show titles such as “Driver Excluded”, “Driver Exclusion” and “Named Driver Exclusion.” Titles such as these would make you think they all would change your coverage the same exclude coverage for a specific employee. For the endorsement to be effective in its intent, it will also include wording eliminating coverage for the dealership and all named insureds.  Let’s take a closer look at some of the endorsement wording to see how they may impact your business. Remember, each claim situation and your state laws and regulations many change our general explanations.

Understanding Driver Exclusion Endorsements

The following are excerpts from one driver exclusion endorsement.  “The person indicated below is excluded from coverage.. when driving any motor vehicle… and this exclusion applies to all insureds.”  This endorsement appears to remove coverage only when the person named in the endorsement is driving.  But it refers to any motor vehicle and does not address ownership of the vehicle.  This would lead you to believe that the exclusion applies to your dealership vehicles, customer vehicles, vehicles owned by the named person and any other vehicle they may be driving and potentially involves your business.

Another driver exclusion contains the following: “The person designated… is excluded from any coverage… when operating any motor vehicle… applicable to all insureds of this policy… whether or not the operation as with expressed or implied permission…” This is similar to the previous example, but not exact. In this endorsement, they use the term “operating” instead of “driving” and add a condition about permissive use. Is “driving” different than “operating?” If one of your mechanics named in a driver exclusion is showing a customer why they are having a certain complaint with their car by starting their car, opening a door, hood or deck lid, will this be considered “operating?” If any of your mechanic’s actions cause damage to the customer and your insurance company considers his actions as “operating,” then you will not have insurance coverage for that incident. This endorsement sample has added wording addressing permissive use clarifying that you giving an excluded driver permission to use a vehicle, or the excluded driver driving without your permission, will not void the endorsement.

A Different Approach – Beyond “Driving” and “Operating”

Alternatives to Driver Exclusions

Since a major part of your business involves the use and driving of automobiles, a driver exclusion naming any of your key employees can have a significant effect on your daily business activities and on your financial stability if an excluded driver is involved in a not covered claim.  What can you do to avoid having driver exclusions added to your policy??

Maintaining Optimal Coverage for Your Dealership -

Driver Exclusions can be Removed!