Reader question:

What kind of coverage does a carpet cleaner need when an auto accident causes three months of lost business? In May 2015, this happened to me, and my unit caught fire. The Insurance company paid me for repairs to the unit, but it took three months to complete the repairs and return to full production.

 I have loss of business coverage, but according to the insurance company, that only applies when I have walk-in business, and since I go to customers’ homes, my insurance does not apply. If my warehouse was damaged, it would pay for the loss of business.

This does not make any sense to me. Why do I carry insurance?

I have had others ask me about this same thing in the past, and I hope my response is helpful.

Carpet cleaners and restoration contractors have very unique insurance needs. As the insurance industry works to create more universally targeted insurance policies, it is not uncommon for certain unique industries, such as carpet cleaners and restoration contractors, to not be taken into account. This can make it difficult for an insurance professional to find a solution for those types of risks.

Why you’re not covered

It is very reasonable to think business income insurance would pay out if your equipment were to suffer damage. However, business income coverage is a premises coverage line intended for businesses whose operations would be compromised if they suffered a loss at their owned or operated location. There would have to be physical damage to the premises, scheduled on your premises (property) policy, by a covered cause of loss in order for the coverage to respond.

For example, if a hardware store were to burn down, the proprietor would not be able to conduct business and would, therefore, suffer a loss of business as well as property damage to the hardware store. The way business income coverage reads is that the insured must suffer a loss at their owned or operated location impairing the insured to conduct business.

Since business income coverage is location-specific, a loss of income away from your owned or operated location would not apply as a claims trigger on the business income policy. Keep in mind the business income policy is still important to your business, if your warehouse/office (premises) were to burn down and you were not able to conduct your operations.

What you can do

Although there is no coverage offering in the insurance market specific to loss of business as a result of an auto or equipment loss, there are other insurance coverages that can help.  You may find rental reimbursement coverage or rental fees to be more relevant to your specific needs. In more detail, a truckmount can be scheduled on an auto liability policy or an inland marine policy (also called a contractors’ equipment policy).

An auto liability policy in general does not have the capability to include business income coverage due to an auto accident; however, it does have an extension that could be purchased called the “rental reimbursement coverage endorsement” or CA 99 23. This endorsement would pay the additional amount incurred for the cost associated with renting an auto in the event of covered damage to the covered auto on the auto policy.

This coverage begins to pay 24 hours after the auto was damaged and will pay out until the auto is repaired or replaced. Be careful when purchasing this coverage because it is limited to a number of days shown in the endorsement. In addition, there is a daily limit and maximum limit associated with the coverage which you and your insurance professional can determine.

If you schedule your truckmount on your inland marine policy, there is an option to purchase “rental fees” coverage. Insureds that generate income from the use of equipment off premises may consider the cost to add “rental fees” to their policy. This allows them to rent substitute equipment after they suffer a loss to their equipment.

I suggest determining the limit on the endorsement based on the estimated daily rental cost for the equipment multiplied by the number of days you would expect to need to rent equipment until your own equipment is repaired or replaced. Once you have determined a rental fee limit needed specifically for your business, make sure it is reflected on the endorsement purchased.

The use of rental reimbursement coverage on the auto liability policy or the rental fees coverage on the inland marine policy will help keep your business open and operating at almost full capacity while your truckmount or equipment is being repaired. Even though these coverages will not pay for lost business, they will help avoid potentially catastrophic lost income that could be detrimental to your business while your equipment is being repaired.

Industry-specific help

Finding insurance professionals — including your insurance agent and your wholesale insurance broker —  who specialize in insuring carpet cleaners, restoration contractors or trade contractors is very important to the longevity of your business. Those insurance professionals should help in designing the right coverages for your business. To help qualify these professionals, simply ask them how many carpet cleaners, restoration contractors or trade contractors they currently write. This will help gauge their experience placing insurance programs for contractors in your industry.

Keep in mind, insurance professionals knowledgeable of what you do for a living do not cost more than an insurance professional with minimal experience.

I hope this response was helpful to our reader who challenged us with the question and to all readers. I encourage all Cleanfax readers to email me their own insurance questions, and I will respond to as many as possible. I can always help point you in the right direction.

Kari Dybdahl, BA, has over nine years of experience in the environmental insurance industry assisting clients from carpet cleaners to municipalities. Dybdahl recently was named number three in Insurance Business America’s Top Insurance Producers list, along with being recognized with Elite Women in Business, Young Gun in Insurance and Hot 100 awards. Her true passion is assisting carpet cleaners and restoration contractors place comprehensive insurance to protect the longevity of their businesses for years to come. Dybdahl’s daily tasks include placing compliant insurance for Crawford Contractor Connection members, ICRA members, Alacrity members, various third-party network members, independent contractors and several more. She also designs member and franchise-specific insurance programs alongside Dave Dybdahl. Reach Dybdahl’s team at (608) 824-1192 or reach her directly at kari@armr.net.