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InsuranceMan 2.0

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  1. Happy, happy Tuesday!!!!!!!!!!!! Ah ... I know that summer is never long enough, but fall has finally started to settle in on Sheridanopolis, and I could not be happier. It is my favorite time of year. Cooler temperatures (but not too cold), the smell of the air, the brisk mornings. What is not to love! I hope that wherever you are, you are making the best of this time of year. Today in the TMIT I want to address something that has needed addressing for a long time, the word "Premium". What does it mean? Well, it actually means a lot of different things. According to Merriam-Webster a "premium" is defined as, "A sum over and above a regular price paid chiefly as an inducement or incentive." It also means, "The consideration paid for a contract of insurance." Ha, there is how it relates to insurance. However, it is also defined as "A high value in EXCESS of that NORMALLY or USUALLY expected." OK!!!!!!!! Now we are at the root of what today's posting is about!!!!!!!! Clever, right?!?!?! Although many of us associate the term of "Premium" to mean the money we that we pay in exchange for an insurance policy the issue that I have been seeing across the board is that many of you are being gouged in the way of your premiums. I have had so many distillers getting in touch with me over the past month saying, "Hey, InsuranceMan 2.0!!!, would you be willing to take a look at my policy?!?!? I think I am paying way too much!" Yes, the OTHER definition of premium. I have discovered, through looking at about two or three dozen policies recently that the majority of you out there, those who do not have insurance through me, associate the word premium with the OTHER definition of a high value in excess of that normally or usually expected. AND YOU ARE RIGHT!!!!!!!!! Good night, Irene!!!!!! I have to tell you, I recently saw a policy come across my desk where an insured was paying nearly $50,000 for his insurance, I poo you not!!!!! 50-GRAND!!!!!!!!! That is an insane amount of money for distillery insurance. And it is not like it is GINORMOUS "Big-Boy" producer. Don't get me wrong, it is a nice operation, but no where near the 50K mark. Anyway, it turns out I was able to secure him BETTER coverage for less than half the money, and actually cover him for all of the exposures he had, not just the one that was listed on his excessively expensive policy. Do you know why? Do you know what the difference was?!?!!?!? It is the thing that I have seen dozens of times over in the last month and that thing is, the other insurance agent DIDN'T KNOW WHAT THE H311 THEY WERE DOING!!!!!! UGH! If I ever get my hands on some of the evildoers, I swear, it will look something like this ... Anyway, I am so enraged when I see the good people of ADI-Ville being taken advantage of by these dunderheaded-muddlenoggins! They simply do not belong in the insurance world, let alone writing polices for distilleries that they do not know anything about!!!!!!! Grrrrrrrrr!!!! What is happening people??!??! I know exactly what is happening. Many of you don't know where to turn for insurance so you reach out to someone you know, someone down the street, someone that you happened to see an ad for on a bus speeding by maybe, but you are playing Russian Roulette people. The client that I spoke about above before my amazing fight scene depicted above was paying twice as much as he should have been. And that was not just for one year, two years would be horrifying, but he was paying this for the last three years. Truly grotesque!!!!!!!!! Think about that for a minute. He was paying $25,000 a year TOO MUCH for three years. For those of you that are still reeling from the fight scene, let me assist you. That is $75,000 wasted over the course of three years. Imagine what this distiller could have done with an extra $75,000!!!!!!! You all know what he could have done with that. Increase his profits, keep out of debt, hire someone, marketing campaigns, new equipment, the list is endless. But no, he wasted it on an insurance evildoer who didn't know what they were doing and this good distillery citizen paid the price. Well, enough is enough people! Do not let these vile evil insurance people abscond with your hard earned money any longer. Call me, please, for the sake of all things holy! I am not saying you have to use me, but at least call me for a second opinion. Chances are you will end up working with me, but let me at least show you that things can be better and done correctly when it comes to you policy, and often for much less. Let me get you back to associating the word "Premium" with the best definition. The definition that I associate this word with, and that is "of exceptional quality." Until Next Time Dear Reader, Stay Vigilant, Aaron Linden InsuranceMan 2.0!!! 307-752-5961 aaron@roaringforkins.com or insuranceman2.0@yahoo.com
  2. Good Morning My Friends, In today's installment of the TMIT there is only one thing that I want to say. Let us never forget the real, everyday heroes that gave their lives on this day eighteen years ago, and those who have given their lives over the last almost two decades due to illnesses sustained from the terrorist attack on 9/11. Every day, first responders, fire fighters, police, military service people and others provide us with protection, put their lives on the line, and serve us so that we can live in freedom and know that we are safe. If you see someone in uniform today, please take a minute to thank them for what they do. It is often a thankless job, but we ALL depend on them, every hour of every day. Until Next Time .... Stay Vigilant, and NEVER FORGET, Aaron Linden a.k.a InsuranceMan 2.0!!! 307-752-5961 aaron@roaringforkins.com or insuranceman2.0@yahoo.com
  3. @Skaalvenn and @Airman700, thank you for the feed back. I am wanting to explore some various options for folks in the distilling industry. I have the ability to do "onesie-twosie" policies for individuals, but there is more purchasing power in numbers, that is why I would like to know if there are various state guilds, groups, etc., that distillers have formed, and what the interest of those groups would be. Generally speaking, an organization can not form solely for the reason of securing group health insurance, but many of the state guilds have been around for a while. Is anyone out there willing to do a polling of your guild/group and find out what kind of a participation rate we may be looking at?
  4. Tuesday is upon us once again, dearest ADI-ers, so here we go. In today's installment of the TMIT I am actually going to ask a short and sweet question and I am hoping for several responses from the forum goers. I am wondering to myself, "Self ...", I wonder ... "How many distillers out there would like to have a health insurance alternative?" So, what I am asking is the following, how many distilleries out there would be interested in some sort of health insurance plan? It could be an individual group type policy, but more what I am wondering is would there be interest in a larger group policy for distillers guilds, etc.? Let me know if this is something of interest to anyone out there and if so, where you are located and what your thoughts or questions are. I am doing some exploratory research on my end, but I want to know if anyone else out there has thought about this and I am wanting to get a feel for the potential need of such an offering. I look forward to hearing from you. Until next time my friends .... Stay Vigilant, Aaron Linden a.k.a. InsuranceMan 2.0!!! 307-752-5961 aaron@roaringforkins.com or insuranceman2.0@yahoo.com
  5. It’s Tuesday, It’s Tuesday, Woo, Woo!!!!!!!!!!!!!!!! Good morning my friends in ADI-land! Do you ever have those days where you wake up and do your superhero work out (usually consisting of the dog running me, not the other way around), your weight training routine, and then have some wonderfully flavorful French press coffee and a luxurious breakfast and you just feel like the word is your oyster?!???!?! Well, if you have had those mornings then you know how I am feeling. All is right in Insuranceopolis and I am just in a hap-hap-happy mood. I hope this post finds you feeling the same. In today’s installment of the TMIT I want to touch on a topic that we have never really spoke about here previously. This is something that may concern some of you, and for others it may not be a big deal at all, it just depends on your operation. Although insurance has a long history and is a concept almost as old as dirt, this coverage is one that actually did not even exist just a few decades ago. What am I talking about???? Any guesses???? CYBER LIABILITY!!!!!!!!! Yes, siree Bob. Cyber Liability actually came into existence well after the advent of computer technology, email, and quite honestly, a rather long time after the wide accessibility of the internet and shopping online. As we have discussed previously, insurance is antiquated in many senses and big ships turn slow. Although there was a need for this type of coverage prior to it being offered, this “late to the game” approach by the insurance industry is quite typical. Often times this approach is born out of bureaucracy and red-tape, but more-often-than-not it is simply due to the fact that no one really knows what the true exposures are or how to underwrite or provide coverage for such a new threat. We have been dealing with fires and lawsuits since the beginning of time so those are easily dealt with by insurance carriers. There are specialized underwriting matrix that exist regarding property loss and liability that are backed by over a hundred years’ worth of data. But cyber … well that is something that simply did not exist previous to 1988. Why 1988 you may ask? Well, according to NATO International, the first documented attack on the cyber infrastructure occurred in 1988 and was called the Morris Worm. This was a rather simplistic attack that took advantage of a weakness in the Unix system Noun 1 and slowed computes down, ultimately making them cease completely. Oh, how far and much more nefarious have attacks progressed from then to now!!!!!!!! Realistically, cyber liability coverage can trace it’s roots back to somewhere in the 1990’s, but back then, as is mostly the case through today, no one really understood the need for this coverage and very few purchased it. It was not until around the year 2000 that Lloyd’s of London launched the first Cyber Liability policy. Fast-forward to 2019 and you may think that the percentage of companies that purchase this coverage would be HUGE due to the increase of cyber attacks. Well dear reader, you would be very, very wrong. Less than one-third (1/3) of all US based companies carry any type of Cyber Liability coverage. SERIOUSLY!?!??!! Everyone gets attacked at some point, right?!?!?!?! Well … according to statista.com, not everyone is attacked. In 2018 the annual number of data breaches was upwards of about 1,300 in the U.S. Although that may not seem like as many as one would think, please keep in mind that the AVERAGE COST of a cyber breach at that time was $27,370,000! Yes, that is twenty-seven MILLION DOLLARS!!!!!!!!!!! Now, obviously we are talking about some big-time companies here, hospitals, credit card companies, etc. With that said though, smaller businesses get hit all the time and everything is relative, right??!?! If a big corporation has a cyber liability loss of $27,000,000 it still is going to hurt their bottom line at the end of the year, just like if your business has a loss of maybe $270,000 it is going to hurt your bottom line, maybe even to the point of putting you out of business where as the “Big Boys” can absorb such a loss a bit easier and continue to operate. Ok, enough of the history lesson, although it was needed in order to set the table so that we can discuss this topic further. So, what does Cyber Liability cover? Well, that depends on the type of business, the size, what kind of records you keep, and quite honestly it depends on the carrier that you purchase the coverage though as they are all different. In a nutshell, Cyber provides coverage for financial losses that result from data breaches or other cyber type attacks. As stated, different carriers offer different policies, but most do cover not only first-party (you and your business) coverage, but third-party coverage as well. That means that a cyber policy can provide insurance for losses that you sustain due to a cyber attack that ruin your personal data records as well as anyone that is damaged due to your data being breached. How about an example, eh? You sell your product to John Smithe (pronounced “smYthe” 😊 , either on site at your location or via an internet sale, if that is legal where you are located), and you retain Mr. Smithe’s information in your database. Maybe you have his name (duh!), address, phone number, etc. … but here is where it gets scary … maybe you have also retained his date of birth for legal verification reasons, as well as his credit card number and other vital purchasing information. If Mr. Smythe’s information is stolen due to a cyber-attack, UH-OH, you could be in serious trouble now. In fact, there are multiple sites out there on the world-wide-interweb-thingy that offer “Data Breach Cost Calculators”, and according to one that I like the best, if you have been breached and exposed only 10 clients personal payment information or their personally identifiable information, that loss could cost you upwards of $180,000!!!!!!!!!!! That is on 10 clients!!!!!!! The average cost per record can be nearly $20,000. That number should be an eye opener for sure! Now, just to be fair, that is a large amount of loss due to a data breach, don’t get me wrong but there may be a silver lining to all of this. Let’s say you had 10,000 clients that were breached, who had their information stolen, the claim may not be extrapolated by the same per client cost that was previously mentioned. Again, it depends on the type of loss and your coverage, but typically the majority of the expense comes in the way of incident investigation costs. Those costs typically are the most expensive as the “investigation is the investigation” regardless of the number of clients, but the per client cost goes down dramatically as that is spread across all 10,000 which could essentially drive the per client average down to around $40 per client. Hey, we are still talking about a loss of $380,000 though, and that is enough to put a sizeable dent in your profits and potentially put you out of business if you don’t carry this type of coverage. OK, now that I have your attention, I can hear you pondering the ultimate question that everyone inevitably will ask, “How much is this going to cost me?!?!?!?!” Honestly, it is not as daunting as one may think. The average cyber liability policy premium for a business ranges from about $1,000 annually up to $7,500. It just all really depends on the size of your business, the type of records retained, and a myriad of other factors. All-in-all it is not as much as one would think for such a viable and real threat in today’s world. I have heard many reasons from folks as to why they don’t want or need cyber liability. From, “Well, we only use ‘Square’ and don’t keep any records of a personal nature”, to “We don’t have any records that are worth anything.” I hear you and I understand, but … Although payment services like “Square” and others take care of most of the PCI data compliance for you, maybe that is not your biggest exposure. Do you keep records on employees, or maybe some “trade secret” data of your products, or your own payment and purchasing information? Do you have a website that generates sales for you? What if your website is hacked and you lose revenue? Could this be an issue? Yes, yes it could and yes you do have these exposures! We all do. Let’s face it, everything in our life is all ones and zeros stored on an electronic device somewhere. We don’t have piles of paper files clogging up valuable square-footage like in the olden days. Well, that data has intrinsic value my friends, and without it, or if it is corrupted or stolen and held hostage, what are you going to do? If you have a cyber liability policy in place the world becomes a lot less “gloom and doom” and more “sunshine and rainbows” knowing that you may not have to bear this burden alone since InsuranceMan 2.0!!! and the cyber liability insurance carrier will be there to save the day. Do you want to know more or find out if you really have a need? Then get in touch with me and I can assist you in the process, I am here to help. Until next time … Stay Vigilant, Aaron Linden a.k.a. InsuranceMan 2.0!!! 307-752-5961 insuranceman2.0@yahoo.com
  6. ***** UPDATE ***** For anyone that may not yet be aware, I can still be reached at 307-752-5961 or at insuranceman2.0@yahoo.com . I have separated from the "past agency" but have been up and running at my new agency for about a year now. Thank you to all for the referrals and nice words. I am here to assist you, so give me a call or shoot me an email! Until then ... Stay Vigilant, Aaron Linden a.k.a. InsuranceMan 2.0!!!
  7. Happy Tuesday To All, In today's installment of the "Tidbit" we are going to try something I gave a shot a while back but it was not as well received as I had hoped it would be, but first ... In the spirit of always growing my superpowers (and due somewhat to regulations and complilance), InsuranceMan 2.0!!! has been a bit preoccupied with CE. Ah yes, as any of you that came from or are still dwelling in the professional world (outside of distilling), there are requirements for Continuing Education (CE) in order to keep your licensure up to date and make all of the regulators happy, happy, happy. Well, 'tis the season, and I am neck deep in it, but that does not mean I am not here to serve and protect you! I should have it all wrapped up in the next day or so, but I have been a bit busy with it all. That then brings us to the meat of the TMIT for today. As stated, I tried to do a little Question and Answer (Q&A) post a while back and I have either done such an amazing job at educating all of you that no one has any insurance questions, or people just did not want to ask questions. I hope it was the former but methinkst thou ADI-ers mayst not want to appearest naive. Whatever the case, I would like to open up this post to questions. Any questions that you may have. There are no silly questions, people, so let's have at it. Do you have questions about your General Liability, perhaps your property coverage, maybe how your stock should be calculated?!?!?!?! Do you want to know how to make a killer Pad Thai or ask what I am doing this weekend? Nothing is off limits, so let's get this party started?!!??! Who will be first???? What will they ask?!?!?! So many questions ... but all from me so far. Now it is your turn. Be the first to post a question and let's have some fun with this. Until someone does ... Stay Vigilant!!!!! Best, Aaron Linden a.k.a InsuranceMan 2.0!!! 307-752-5961 insuranceman2.0@yahoo.com
  8. The very best of Tuesday mornings to you!!!!!!! Yes, Tuesday is upon us once again! I know we all look forward to what that means! It is time for today’s installment of the TMIT. Today I am going to shed some light on something that I have mentioned many times in the past but never really took the deep dive on. That “something” is co-insurance. Ah, co-insurance. This “something” is something that most insurance agents cannot even wrap their minds around. Don’t believe me, just ask them. I have actually had conversations with underwriters who have said that they really don’t quite understand it. Well, ok. I guess their job is underwriting and not claims adjusting, BUT STILL!!!!!!!!!! As you sit down with your insurance policy to give it a loving perusal (really, who does this?!?!?!!) you will inevitably come across your property section of the policy. In that section you will see the amounts of coverage you have in regard to your building (if you own it, or maybe your tenant improvements and betterments), your equipment (at least I hope you have coverage for that), your contents or business personal property (BPP), and maybe even your stock on hand (if your agent knows what they are doing that is) to name a few. If your policy is of a more standard ilk, you will see the description of what is being covered, the limit of value of that coverage, your deductible, and more likely than not, your co-insurance limit. OOooooooo …… Yep, there it is!!!!!! It is the insurance equivalent of spotting a unicorn in an open field. It is mythical, it is magical, and really, when you see it, you may rub your eyes and wonder silently, “What the heck am I looking at?!?!?!?!?!” Co-insurance comes in a myriad of different flavors depending on the carrier providing your coverage, but typically you will see an 80%, 90%, or in some cases 100%. I will say that one of the only times you see a 100% co-insurance clause should be if it is an “agreed value” or something of the like. Fear not dear reader, I will explain this so that you understand it, no matter what percentage you have listed. Then, armed with this all-knowing insurance geek knowledge, you can sit around your next dinner party or tasting and astound people with your incredibly in-depth repertoire of insurance knowledge, which to be honest, probably won’t get you anywhere. REGARDLESS, let’s get to it. For this example we will use your building value (fear not, if you do not own your building you can simply apply this to whatever aspect of property coverage you like, it all functions the same way). Let us hypothesis that you have your building listed with a nice round value of $1,000,000 (places pinky to corner of mouth with one eyebrow lifted)!!!!!!! Excellent. Maybe your agent went to the painstaking lengths to run a Marshall & Swift cost estimator or some equivalent based on contractor costs and types of materials used in your location to accurately decipher what your actual building costs would be if you needed to rebuild from the ground up. Wait, what?!?!?!! Who did what now?!?!?! Well, this is an interesting point of fact. Where did your insurance amount come from? Did you give it to the agent and they just said ok and used it? Is it what the property would sell for if you wanted to sell it???? Either way, dollars to donuts, it is wrong. First of all, your agent should always be providing you with a replacement cost estimation of what it would run if you had to rebuild the entire building, end of story. If they have not done that, run, screaming!!!! Not that you don’t know your building and what intrinsic value it may have to you, but in this case, the cost of construction is ever changing and the only accurate way to know what that cost would be is to do an “Insured To Value” (ITV) or “Total Insured Value” (TIV) cost estimation based on the most recent and up to date figures available in your area. As to “what would it sell for”, again, WRONG! The sale value takes into account things such as location, overall land and land size, etc. The sale price is not what it would take to rebuild the building. In fact, sometimes the sale price could be much more, and in some cases it could be much less that what the building alone would cost to replace. Interesting, isn’t it?!?!?!?!?! In fact, I am going to use a real-life example for you so you can see how dangerous this can be. I have a client in a middle of the country city, a city that was hit hard with having too much warehouse real estate and not enough buyers for the market. He was able to score an incredible deal on his building. He procured a 10,000 square foot warehouse for around $150,000!!!!!! That comes out to $15 a square foot (not including the land), which is UNHEARD OF! He calls me all excited and wants to get insurance coverage for his distillery in this location. I said great, and congratulations. He tells me that he wants to insure everything like it was before, but now he owns his own building (proud moment for him to be sure) so he wants to include that on the policy for $150,000. WHOA!!!!! Pump the breaks … What? He tells me of the amazing deal he got, and he only wants to insure the building for what he has into it. Can anyone say, “co-insurance clause”?!?!?!!? OK, here we go. A co-insurance clause is put into insurance policies (almost always reflected as a percentage) and used by insurance companies to ensure that policyholders insure their property (again, any kind of property) to an appropriate value. Why do they do this? Well, it is a way for the carriers to make sure that they are receiving a fair and accurate premium for their risk involved in insuring the property. Ah yes, it all boils down to money! A prime example is the one that I just gave (as by design). This insured wanted to insure his building for $150,000 when the true replacement cost of the building would be much higher. The premium to insure a $150,000 building may be around $1,125 (if it is a $0.75 rate) as opposed to a premium of nearly $7,500 in order to insure a $1,000,000 building value. Now you can see why the carrier is interested in making sure that things line up correctly. This is one of the reasons why they have the co-insurance clause. Co-insurance works like this: It is the amount of insurance you DID have at the time of the loss divided by the amount of insurance your SHOULD have had (and just where does that value come from you are wondering????? You guessed it, mainly from an ITV/TIV that the claims adjustor runs, usually from Marshall & Swift. Oh, all the pieces are fitting together like I had this planned out or something!!!! The voice of experience is loud and clear coming from me!). Take that percentage, multiply it by the loss amount, subtract your deductible and that is what you get reimbursed from the carrier. Lost yet? Most people are, even those who have been in insurance for years. It is easy to understand when we go back to our example. We will get there in a minute, I promise. If this insured’s building has a true replacement cost of $1,000,000 and he has an 80% co-insurance clause, this means that to be in compliance with this provision he MUST insure his building to at least $800,000 (0.80 x $1,000,000 = 800,000) If he insures his building to that amount, he can avoid any kind of co-insurance penalty and he would receive the full amount of insurance (minus the deductible) in the case of a loss. Keep in mind that he will only be able to recoup the amount of value shown on the policy coverage form ($800,000 in this case), which would leave him having to out-of-pocket $200,000 in order to build this same $1,000,000 building, but that is better than what happens if you do incur a co-insurance penalty. OK, now that you understand that aspect, I will illustrate what happens if you are out of compliance. In our example it would look like this: $150,000 (DID have) / $800,000 (SHOULD have had since the value is $1,000,000 @ 80% = $800,000) = 0.1875 or 18.75% Yep, if an insurance agent didn’t know any better (which I of course do!!!!!!!) this client would have only had his building insured to 18.75% of its actual replacement value. VERY BAD!!!!! Here is the equation: Amount of insurance the insured DID have (if they had not known better): $150,000 --------------------------------------------------------------------------------------------------------------------------------------- = 18.75% Amount of insurance the insured SHOULD have had: $800,000 Obviously the insured is WAY out of compliance here. What happens next may make you cringe or toss your cookies, so hold on tight or prepare to look away! You have been warned. If the building were partially damaged, let’s say to the tune of $50,000 here is how this would play out: $150,000 (DID) --------------------------- = 18.75% multiplied by the loss amount of $50,000 – Deductible $800,000 (SHOULD) So you would have a co-insurance equation that looks like this: 18.75% x $50,000 = $9,375 - $1,000 deductible = $8,375 insurance claim payment. GASP!!!! As you can see, due to the insured being out of compliance and the co-insurance penalty being implemented, this insured is only going to received $8,375 on a $50,000 claim. This leaves this poor bugger having to out-of-pocket $41,625 in order to repair the building to bring it back up to where it was prior to the loss. Horrifying, right?!?!?!?!?! I don’t want to leave you with that vision today though, so I am going to show you what happens if everything is a hunky-dory! Same situation, but we have the building insured at $800,000. $800,000 (DID) -------------------------- = 1 or 100% x $50,000 loss - $1,000 deductible = $49,000 $800,000 (SHOULD) AND THE CROWD GOES WILD!!!!!!!!!! Here is the real deal folks and what you really need to know about co-insurance. Just don’t even play the game. My advice is to never try to get into a situation where you are trying to hit right on the value you need to meet your co-insurance limit. The price of concrete fluctuates, drywall, plywood, etc. Even if you think you are right on the money, it could all be different tomorrow and it could cost you big time! Think of this, what is it going to cost you to insure your building to its full value instead of 80% of its value? Well, in the case I gave above, it may cost you $1,500 more a year to insure your building (maybe!!!!) at $1,000,000 as opposed to playing the co-insurance game of Roulette and having it at $800,000 only to find out that is not enough. Do not scrimp on your coverage here, please, I implore you. Unless you are a “let it all ride on red” kinda gambler, this is something you need to stay away from. There are ways to shave some of the costs off your building replacement cost, there are. I have tricks and tips as to how to get some of the value down, but I am not going to share that here. Too many non-superhero agents read my posts to try and garner some of my super insurance knowledge, but there are ways to reduce the overall ITV/TIV. If you are interested in that further or need a comprehensive review of all things insurance-y, get a hold of me, InsuranceMan 2.0!!! and I would be glad to lend you a helping superhero hand. Until next time dear reader … Stay Vigilant, Aaron Linden a.k.a. InsuranceMan 2.0!!! 307-752-5961 insruanceman2.0@yahoo.com
  9. It is Tuesday here on the ADI forums, and we all know what that means … In today’s installment of the Tuesday Morning Insurance Tidbit we are going back to the basics. I have had many conversations with folks who were not entirely certain what the different coverages of an insurance policy are, how they are broken up, or really what they mean. So, in today’s installment of the TMIT we are going to dissect a basic insurance policy and provide a 30,000 foot perspective. First and foremost, again, this is a very rudimentary explanation of an insurance policy. Many of you will have needs far beyond this, but for several of you it may be your first time thinking about these issues. Wherever you fall on the spectrum, I hope this is helpful. Where shall we begin? Well, let us start with what is potentially the most important piece of information on the insurance policy, YOUR NAME! You would not believe how many times I see this messed up, and you really would not believe the impact this can have on your coverage. Your name is going to be your name, the name of the distillery, entity of the distillery, etc. Simple, right? Well, for some, not really. Let’s say “Joe Smith” owns “Main Street Distillery” to keep things simple. What should the NAMED INSURED section of the policy read then? Well, who are we protecting with the policy? Joe Smith owns the distillery and as the owner/partner/member/officer he is provided coverage by the policy if done under the entity name. That would then mean that we should use Main Street Distillery then, right? Well, maybe and maybe not. Is Joe Smith a sole proprietor? If so then we have to name Joe Smith as the named insured doing business as (DBA) Main Street Distillery. Confused yet? Right! It all depends on the structure of the individual or entity that owns the business. If Joe is a sole proprietor, then in order for Mr. Smith to be provided coverage he has to specifically be named on the policy as the named insured dba the business name. If Joe set things up as a C-Corp, S-Corp, LLC, etc., then he would be afforded protection automatically by the policy under the entity. So, if it is Main Street Distillery, LLC then Joe would be included for coverage under the operations of the business. It should be simple, but it can be confusing, and it can impact your coverage in a monumental way. Case in point, let us say that Joe is a sole proprietor who is doing business as Main Street Distillery but the policy only names Main Street Distillery. In this scenario there is a loss and not only is Main Street Distillery sued, but Joe is sued individually for his negligence. Well, if Joe is not name as an insured on the policy then “Joe ain’t got no ….” coverage!!!!!!! That’s right, the only thing contemplated for coverage is what appears on the policy declarations sheet. WATCH OUT FOLKS! If the scenario is changed and the entity is an LLC, let’s say, then if the entity is sued and Joe is named individually, he would be afforded coverage via the policy since he is the owner/managing member of the LLC. See how this can be confusing and have a huge impact on who is and who is not covered? OK, so what if Joe operates the distillery as Main Street Distillery, LLC but owns the building under “Old Joe S Enterprises”? Well, how is the ownership structured here? Is it a subsidiary of Main Street Distillery, LLC dba Old Joe S Enterprises? If so, then I would hedge on the safe side and list it as such, but many miss this factor. Is it a separate LLC? If it is Old Joe S Enterprises, LLC then it could either be listed as an “Additional Named Insured”, a straight up “Named Insured”, it could be included to have coverage on the overall policy, or it could have its own policy. Ah, down the rabbit hole we go, HOLD ON!!!!!! Long-story-short, if you have never had the discussion with your insurance agent about what the ownership looks like, what the name of all of the entities are, and how they should be covered or separated out you could be in big trouble. Or … you could work with someone who has a tight grasp on all of this. Someone like me, InsuranceMan 2.0!!!, and you would know where you stand on this subject. Next we have the actual coverage, the meat and potatoes side of the policy. What you are actually being covered for and what that is based on. Again, a rabbit hole of impressive proportions in its own right. Simply put there are a few key coverage factors you will need to know about. They are as follows: General Liability Liquor Liability Property Coverage Commercial Auto Umbrella (maybe, depends on how big you are, lease contracts, distribution contracts, etc.) (and potentially) Workers Compensation. I say “potentially” Workers Compensation due to the fact that many distilleries that are starting out may not have that need as they may not have pay rolled employees, or if they do they may not be subject to work comp. It depends where you are located. See my post about Workers Comp here: For the General Liability it is broken out into roughly 6 different sections. Those sections are “Each Occurrence Limit”, “Personal and Advertising Injury Limit”, “General Aggregate Limit (Other Than Products – Completed Operations), Products/Completed Operations Aggregate Limit”, “Rented to You Limit”, and “Medical Expenses Limit (Any One Person)”. HOLY INSURANCE OVERLOAD, InsuranceMan 2.0!!!, “What does that all mean?!?!?!?!?”, you may be screaming at your screen. Well, in brief, your Each Occurrence Limit is the amount of coverage you would have for any one liability loss. Your Personal and Advertising Injury Limit would be the amount of coverage you have for any injury (physical) to a person or persons where as the Advertising portion would be if you were sued over saying something in your advertisements about someone else’s product tasting like caca and yours being superior. Then the Aggregate limit is the total amount of coverage that you would be afforded in any one policy period. So, if your per occurrence limit is $1,000,000 and your aggregate is $2,000,000 that means that the insurance company would pay out up to $1,000,000 for any claim, but never more than $2,000,000 in any given policy period. Clear as mud? No? OK, think of it this way. You have one claim wherein someone is injured and that claim is $900,000. Ooooo ….. yikes, that was dang near that Million limit, but you are ok, it was under. 6 months later you sustain a liability claim of $500,000. Boy Howdy, it is not your year! Well, due to the fact that you already used $900,000 of the million limit you may be concerned that only $100,000 will be covered. Not so! Because of the aggregate limit, the full $500,000 is covered in this claim. However, you now have had two instances that add up to $1,400,000 so you really only have $600,000 more in liability coverage to get you to the end of the year, and the way you are going, that may not be enough. The Products and Completed Operations Aggregate Limit works much the same way but this coverage only contemplated your products. So if someone were to be injured by your product, that would fall under this portion of the policy coverage. Somewhat easier, and there is more to say, but I will leave it there for the time being. Keep in mind that your General Liability premium and Products premiums are all based rated on your sales. Again, a rabbit hole that we don’t have time to go down but this is a huge pet peeve of mine. A L L sales need to be broken out and classified correctly, enough said. This is something that I find to be incorrect on about 80% of the policies I see that are not mine. I can fix this for you to make sure things are accurate, just give me a call to discuss this in detail. That bring us to the Rented to You Limit. This is for properties that you rent. WATCH OUT HERE!!!!!!! Most policies will give you $100,000 on the surface, and many of you are in lease situation where the building value you are in far exceeds $100,000. Many of the policies that I provide include an endorsement (you’re welcome) that replaces this $100,000 limit with a $1,000,000 limit. Ah, that’s better. But watch out for this, if there is no increased limit on this line item you could be in trouble. You can buy this limit up, but it will cost you some additional $$$$$$$. Last in the Liability section is Medical Expenses Limit (Any One Person) of $5,000. “Does that mean if someone gets hurt at my place, I only have $5,000 to cover their injury?” Great question my astute reader, but the answer is no. Medical Expense is kind of a sub-limit of the overall General Liability. This is for “nuisance” claims. If someone comes to your facility and slips on some spilled water (hypothetical) and twists their ankle and has to have it looked at and wrapped at the hospital, and the expense is $2,500 then the carrier would pay them that amount in exchange for them waiving their rights to seek further damages. If though, that same person who happens to be a concert pianist, slipped and fell braking their hand and now is claiming that they are going to be out of work for months on end, then it becomes a General Liability claim and would fall under that $1,000,000 limit. Now we are on to the Liquor Liability coverage. I know, I know … I hear it all the time, “But I only serve four (4) quarter ounce tastes, there is no way I can be sued for over serving under my Liquor Liability!” Well, read this: As for the Property coverage, this is where you are going to cover your assets. Your equipment, your building (if you own it), your contents, stock on hand, and miscellaneous items such as computers/boxes/labels/bottles/caps/corks/closures/etc. You are going to want to make sure that this figure is accurate for a few reasons. One, if something were to happen you want to make sure that you are reimbursed the correct amount so that you can replace your “stuff” and keep going. Second is that if this figure is not accurate you could face a co-insurance issue. Third is that you need to make sure that your product is covered correctly and adequately, especially if you are aging anything. The is so much more to this aspect but this is only a quick look at the overall coverage. If you want to know more about limits, co-insurance, deductibles, various coverage forms and what types of losses are covered, get in touch with me. How about Commercial Auto? If you own a vehicle in the name of the business, then you are going to want to place a commercial auto policy on that vehicle or vehicles. One, it protects you for a higher limit than you can obtain on a personal policy; Two, most personal policies exclude business use; Three, it protects the entity from lawsuits. You may be thinking that commercial auto does not apply to you because you don’t own any vehicles in the name of the business. I get that, but do you ever drive a personal vehicle, or ask others to do so for work related needs? If so, you have a commercial auto need. It is called Hired and Non-Owned (HNOA) Auto coverage. If you want more details go here: This brings us to the Umbrella coverage. What is this? Well, it truly is like an umbrella because it provides an extra layer of protection above the rest of the policies. Usually the limit is $1,000,000 and that is on top of your General Liability, Liquor Liability, Products, Auto, etc. So that $1,000,000 limit that you had, with an umbrella, is now $2,000,000. WHAT!?!??!!? SWEET!!!!!!! Yes, sweet indeed! However, it is truly only $1,000,000 as most umbrellas only provide an aggregate limit of $1,000,000 meaning that the limit really is just $1,000,000. Some reasons that you may consider an umbrella policy is that they are cheap, and they afford you a lot more protection. Maybe your operation is such that you are seeing many people in your facility, you do a lot of events, or your distribution area is so large that if there were tainted product and you could not recall it quick enough there would be the potential for a lot of claims. Who knows, but we can discuss that further if need be. Another reason would be that it is a requirement. Maybe the landlord requires you to carry $2,000,000 for any one occurrence. If that is the case, really, one of the only ways to achieve that is via an umbrella. Sometimes “big box stores” or distributors will require this in order for you to sell your products through them. Whatever the case may be, it is something to think about and have knowledge of. Last but not least is Workers Compensation. If you didn’t click the link above that references this, scroll back up after reading this and click on it to get a feel for what we are talking about. In that article it discusses what Workers Compensation is, who needs it, and why. I don’t want to regurgitate all of that here, so, if you think you have a need for this coverage, do yourself a favor and give it a look. OK, dearest loyal reader, there you have it. A brief (-ish) synopsis of an overall insurance policy, what to look for, what you need at a basic level of understanding, and some interspersed humor (hopefully, so that it is not as painful or dry). With that, I will leave you until next time. If you have questions, would like to learn more, or just want someone to bounce things off of (I am a superhero after all so things just bounce right off of me), give me a call, shoot me an email, or flip on the InsuranceMan 2.0!!! beacon and I will swoop to your assistance. Until next time dear reader … Stay Vigilant, Aaron Linden a.k.a. InsuranceMan 2.0!!! 307-752-5961 insuranceman2.0@yahoo.com
  10. What a Glorious Tuesday Morning in ADI-ville!!!!!! A glorious day just in time to coincide with a glorious installment of the Tuesday Morning Insurance Tidbit. Yes, I know … YOU’RE WELCOME! As you see from the title, we will be delving into quite a few TLA's today. What is a "TLA" you may ask? Why, it is the Three Letter Acronym for a Three Letter Acronym (TLA)! In today’s installment of the TMIT we are going to be discussing something that is becoming more and more prevalent in today’s insurance marketplace. As you know from my posts like “The Times They Are a-Changin’” and “Standard vs. E&S”, there has been a tightening of underwriting guidelines as well as several carriers that simply are leaving the distillery insurance space which in turn is forcing several distillers to head into and Excess & Surplus (E&S) lines market. With that comes some positive aspects, but also a few negative, which brings us to today’s topic. When you deal with and E&S carrier a few things happen. First is you get a hold of an insurance agent (but not just any insurance Shmoe, no … do yourself a huge favor and get a hold of an expert, someone like, oh, I don’t know ….. Hummmmm ……… let’s see here now ….. ME!!!! Yes, InsuranceMan 2.0!!!). Second, that agent assists you in finding out what kind of carrier is going to be interested in insuring your distillery. Third, if it is either decided that you do not fit a standard carrier (maybe because the standard carriers have rejected to offer a proposal, or simply due to the insurance agent knowing that you will not fit due to location, exposures, etc.) the agent will employ an insurance broker to go out to the E&S markets in order to obtain a proposal for you. Fourth, the agent provides you with the proposals and you make a decision based on coverage and premium. Fifth, you sign all the paperwork and bind the coverage. Last … And this is where our topic for the day comes in, the last step is the insurance premium payment … Dun – Dun – DAAAAAHHHHHHHHH!!!!!!!!!!!!!!!! If you have been used to working with Standard carriers in the past, it is like running through a summery meadow full of flowers, fawns prancing about, the sound of a stream trickling in the distance. Standard carriers don’t want any money down or up front, they will send you a direct bill invoice, maybe in 30 to 45 days from the issuance of the policy, and then you have several weeks after that to make sure you get your first payment in, and then, just when you thought it couldn’t get any better, IT DOES!!!! They will break up the rest of the payments over the course of up to 9 installments and they may not even charge you a fee to do it!!!!!!!!!!!!! W H A T ?!??!?!?!! Is this insurance Heaven?!?!?!?! Who does this?!??!?!? Well, they do. However, as that one pretty smart dude stated a couple of years back in his Third Law of Motion, for ever action there is an equal and opposite reaction. I am pretty sure he was talking about insurance and this topic. E&S carriers are the complete opposite of Standard carriers. Not only do they want 100% of the money up front (a.k.a. Fully Earned Premium or FEP / all the premium / cash on the barrel head / the whole enchilada), they also will hit you with things like “broker fees”, “inspection fees”, and “taxes”. These items are also “fully earned”. Just when you though it couldn’t get any tougher, they also subject you to a 25% Minimum Earned Premium (or MEP). That means that even if you were to cancel the policy a few months in, they are going to retain 25% of the total amount of the premium plus all of the taxes and fees, no matter what! WOWZA! You ain’t in that Heavenly insurance field or in Kansas anymore, Dorothy! So, you have to come up with a huge wad of cash upon binding the policy and if you cancel you will lose 25% of the premium and all of the taxes and fees?!?!?!? Yup, sorry Charlie. The horror!!!!! So, what can be done?!???!?!?! Well, have no fear, InsuranceMan 2.0!!! is here!!!!! I always am keeping a vigilant and weathered eye out for your best interest, dear reader, and I have your back … and your solutions. There is a wonderful tool called a “Premium Finance Agreement” (PFA) and with that agreement it will allow you to make a down payment (although it still has to be the 25% of the premium plus all the taxes, fees, etc., ‘cause they are going to keep that no matter what) but then it allows you to break up the rest of the premium, potentially into 9 other installments. Well, THAT’S BETTER than having to pay it all in full. Although it is true that the premium finance companies are not just going to do this out of the goodness of their hearts, in fact, they are going to charge you an Annual Percentage Rate (APR) in order to provide you with this option. But again, I have your back. Because I work with so many distilleries and have such a good relationship with my premium finance company, I can often times get them to an APR of 7%-11% depending on the overall size of the account. Sometimes even less! Most agents and premium finance companies will hit you with a standard 12%-15% to start and I have even seen them as high as 24%. Heck, you may as well pay your insurance on a credit card at that point! A few other things to be wary of in your insurance dealings with E&S carriers would be the cancellation provisos. Some will offer a “Pro-Rata” cancellation term. This means that once your 25% (plus taxes and fees) money is used up, if you cancel (for example 9 months in), they will refund you any unused portion of your premium payment back in full. That is what you want! The one to watch out for is the “Short-Rate Cancellation”. In this method the carrier would retain a percentage of the unused premium that has been paid if you request a cancellation, and only refund a portion of your money back to you. No Bueno! As it is with most things, there are a lot of moving parts when it comes to your distillery insurance as a whole, but if you get into a situation where you are dealing with an E&S carrier, those moving parts increase exponentially. This is not something that you want the aforementioned Shmoe dealing with for you, is it?!?!??! NO! So get in contact with me, InsuranceMan 2.0!!! and let me put my expertise to work for you! Until next time, dear reader … Stay Vigilant, Aaron Linden a.k.a. InsuranceMan 2.0!!! 307-752-5961 insuranceman2.0@yahoo.com
  11. Happiest of Tuesday Mornings to You, My Dear ADI-ers!!!!!!!!! Well, today’s TMIT is going to be fairly short and to the point (fairly). I am not putting up this post to Insurance-shame anyone, I am just addressing a particular issue that has been somewhat prevalent as of late. Let’s start with a scenario, shall we? You make booze. No, you actually are handcrafting a unique and individual spirit unlike those produced by anyone else. You have taken painstaking amounts of time to hone your mash bill, tweak your recipes and keep insanely detailed notes as to the overall distillation process. You put your heart and soul into what you do to make it uniquely yours, different and better than anything else available. YOU ARE A TRUE CRAFTSMAN! So, what if someone comes in to your distillery, tours around, sits down for a tasting flight and winds up saying something to the effect, “Yeah, the Vodka is OK, but not as great as Ti-o‘s though! Your bourbon doesn’t taste anything like Pen----n or J- -k.” (Yes, I know that neither of those are bourbons, that is the point here folks!) Your eyes may widen, you jaw may hang agape, and you may gaze deeply into the persons soul and think, “What the … ?!?!???!” Same can be said about what I do. I too am a craftsman. I too have taken painstaking lengths to hone my skills, to tweak my insurance recipes and keep insanely detailed notes to the overall insurance process to provide something completely different and better than anything else available, to make something that is uniquely yours! Crafting an insurance policy that no one else has, that takes into account all of the details of your unique and individual operation. So, when I hear things like, “Well, insurance is insurance, I don’t really know that you can offer me anything better than what I have.” I tend to have the same look that you might. “What the … ?!!!?” Has your current agent discussed your stock values and provided you with a spreadsheet that will calculate the correct values of your products regardless of the stage of maturation that they are in? Has your current agent taken an active interest in how your equipment is being valued and where it should be placed to get you the best insurance premium for your buck? I would say that for the most part the answer would be no. How many distilleries does your current insurance agent work with? Have they worked with 400+ distilleries across all 50 states and done import/export ocean-marine cargo policies for products being shipped overseas? If the answer is no, I think you can tell where I am going with this. God forbid, but if you or a loved one were ill and needed specialized care I dare to imagine that you would not run down to the GP doctor in town and say, “Well, I need brain surgery so let’s get this skullcap off!” NO, OF COURSE NOT! I have said it before and I will continue to say, you would seek out the best doctor in the specialized field and you would have them treat you. If you did choose to utilize the GP to treat you, well … you will probably get the results that you could expect, not so good. Same thing applies here. If you want to utilize a general practitioner of insurance, someone who writes shoe stores, a contractor or two, and a lot of homes and autos, you are going to get the results that could be expected. They are not going to understand the valuation of maturation (they may not even know what “maturation” is), they are not going to understand the difference between your tasting room and a bar, they are not going to take the time to dissect your overall business operation and make certain that each and ever aspect of off-site tastings, special events, gift shop sales, wholesale and retail sales are accounted for and how that may impact your overall premium. You very well may end up with a policy that is cobbled together with a carrier that may not be a good fit or the best use of your money, and in the case of a claim, well, if it was not done correctly you may be in a world of hurt. I always say that even if you don’t have the right insurance, you may have insurance anyway because you may have to get into a long and miserable battle of having to put in a claim against the agents E&O policy. In the meantime, and over the years that could take to settle, you may not operational and all your efforts may have been for naught. Is that a risk you are willing to take with your business, your passion, your life? If the answer is no, then I suggest at least letting an expert take a look at your policy. Let an expert dissect the coverage and ask the deep questions to see if you really have the coverage that you need for what you are doing. Each distillery is as unique as fingerprints, no two are the same. There is no catchall policy for every distillery. If you are uncertain as to what you are covered for, if the coverage has never been explained to you, or if you just bought a policy ‘cause you needed to have it, then it is time to bring in an expert. Unless you are the “put it all on the line” gambling type, I highly recommend that you get a hold of someone who has taken the time to go grain to glass at several different distilleries. To find someone that has spent nearly 20 years in the insurance industry who specializes in distillery insurance for nearly a decade. Someone that has been endorsed as the recommended insurance agent by ADI! Here, I am going to make that search easy for you, it is me, InsuanceMan 2.0!!! Heck, even if you just have questions about your current policy situation, I am more than happy to take a look at it, offer my insight and expertise, and if you choose to stay where you are at, OK. Dollars to doughnuts though, we will end up working together and have a great relationship. You may have tried the rest, now work with the best (I know, that sounds cocky and I really don’t want it to come off that way, but I have spent a very long time working diligently to understand all aspects of what you are doing as well as deep-dive into the insurance industry as a whole, so it is not cocky, I just really am passionate about what I do because I LOVE IT!) OK, end of rant for today. Was it a rant?!?!? Maybe. Was it informative? I think so. Does it clearly spell out that what you do is unique and truly different from everyone else? Yes, just like what I do for my clients is unique and truly different, something you likely won’t find anywhere else. Here is the best piece of advice that I can offer anyone that is either just starting out, has been distilling for a few years, or is a massive scale international producer, call 307-752-5961 and have a conversation. A no-obligation conversation. I guarantee, you will not be sorry. Until next time my friends …. Stay Vigilant, Aaron Linden a.k.a. InsuranceMan 2.0!!! 307-752-5961 insuranceman2.0@yahoo.com
  12. Happy Tuesday Morning, ADI-Land!!!!!!!!!!!!!!! I know, I know, you are probably currently undergoing some-sort-of anxiety as well as other physical symptoms of withdrawal associated with not having you weekly dose of the Tuesday Morning Insurance Tidbit for the last couple of weeks. Well dear reader, sit back, take in a deep breath, sip your coffee or what-have-you, and relax. I am back and you can rest easy knowing that the TMIT is back in all of its outstanding glory for your reading pleasure ….. You’re Welcome!!!!!! Yes, it has been a few weeks since the last installment of the TMIT and for that I apologize. As it turns out, InsuranceMan 2.0!!! was otherwise occupied administering superhero justice in a different capacity. Suffice to say, although it was not insurance justice, it was justice nonetheless and it was doled out in healthy, hefty amounts to the evildoers. With that said, let us get on to todays “Tidbit”. As you all are aware (unless you have either been under a rock or doing an insane amount of runs and bottling to get ready for the 4th of July sales) there have been a lot of sizeable disasters in the distilling world as of late. As you know, the Barton bourbon warehouse #30 that initially collapsed back on June 22nd ruined nearly 18,000 barrels of Bourbon. Despite attempts to shore up the warehouse and save what bourbon was left, those attempts proved to be unsuccessful as the rest of the warehouse came tumbling down on the 4th of July destroying the remaining barrels. Ugh, the horror!!!! Then on July 2nd we had the Jim Beam fire in Woodford County, Kentucky that destroyed 45,000 barrels. Again, THE HORROR!!!!!!!!!! This is just insane, people! Now, to make matters worse, an alcohol plume 23 miles long has spread down the Kentucky River from the runoff killing innumerable amounts of fish. Although Beam Suntory has brought in a team of environmental cleanup contractors and consultants the damage is far reaching and unfortunately far from over. As if all of this was not enough, back on March 5th of this year Sazerac had a 120,000-gallon mash spill in which not only was there a massive cleanup involved, but people were also injured. To this I truly say, OH THE HORROR!!!!!!!! Loss of property, damaged stock, and massive cleanup efforts are one thing, but injury to human life is undoubtably something that gives us all pause and is certainly “worst case scenario”. Things can be replaced, people cannot. My heart goes out! So, why am I bringing you all this doom and gloom in todays “Tidbit” you may be wondering? “I’m just a micro-distillery and I don’t have anything close to 45,000 barrels or 120,000 gallons of mash! What does this have to do with me?!?!?!”, you may wonder. Well, honestly, it has everything to do with you and here is why. Yes, although it is true that many of these larger disasters took place at the “big boy” distilleries and many of those are either self-insured or coverage is placed with a large reinsurance company, it still has an impact on all of us. Although the losses in these aforementioned cases may not have a direct impact on many of the insurance carriers that I work with, the overarching scenarios certainly do. Underwriters are a fastidious bunch and they pay a lot of attention to the news, especially when it has to do with an industry that they are providing insurance coverage for. Although the claims of these horrible losses may never hit my carriers P&L sheets, that does not mean that they are not paying close attention to the types of losses, the severity of the losses, and the frequency at which they are occurring. That is an interesting point. “Frequency” and “Severity” are two terms that are often batted around in the insurance world. Some may argue that it is better to have one event of “severity” over the course of many years than it is to have less damage but more “frequency”. Why is that? Well, in the world of insurance, it is not “if” you will sustain a loss, but “when” according to many actuaries (and you know how I feel about them if you have read my other posts). Generally, actuaries will say that everyone will have a loss at some point in time. And if you have never had a loss, then you are due to have one sooner than later. I don’t like that saying, but it is somewhat true. “Severity” is sometimes better in that if you have one large loss over the course of a decade it could be said that everyone is due to have a loss and that may not be as impactful to your premium as having multiple smaller losses every year or so. The reasoning behind this is, that if you are having losses more often, than there is potentially something inherently wrong with your process, safety protocols, or overall operation. Underwriters and actuaries do not like “frequency” in the slightest. These types of losses often have a greater impact on your overall premiums and can even lead to loss of coverage completely. Circling back around, these news stories and losses have an impact on the industry as a whole since they demonstrate that there is a potential for losses within the distillery business. Fire is of course one of the utmost concerns that carriers have when insuring alcohol. Alcohol is flammable and fire can spread quickly. In the case of the Jim Beam fire, they are hypothesizing that the initial fire was started by a lightning strike. Obviously, if lightning were the cause than this was not an operational or safety issue on the part of Beam Suntory, but it still resulted in an incredible loss. A loss that now is not just a loss of product, building, and value but now it is also an environmental loss, or a loss due to “pollution”. The point to all of this being that no matter your size of operation, things can and do happen. Things that more often than not are out of your control. Tanks leak, structures give way, fires break out, and people can be injured. If it can happen on a large scale at facilities who have been honing their skills for hundreds of years than it can certainly happen (albeit on a smaller scale) at any size operation no matter the precautions taken. Afterall, that is why they are called “accidents” and not “on-purpose-es”. Take for instance the matter of the Jim Beam fire. According to sources, the building was equipped with a fully functioning sprinkler system, yet the results were a complete loss. (ASIDE HERE … I have made this argument time and time again to underwriters, fire marshals, etc., that sprinkler systems do not stop these types of fires, if anything they only possibly mitigate the damage slightly, but I digress!) Could they have had lightning rods in place? Maybe. Would they have helped? Possibly. At the end of the day though, although this loss may have been due to an “act of God” (again, I don’t like that term. I would like to think that God, no matter your manner of religion, would never destroy so much delicious alcohol) and not due to their policies or procedures. A true “accident”. Accidents though are what drive insurance premiums and cause underwriters and companies to tighten up their already stringent underwriting guidelines. That is the impact on all of us. That is the issue at hand. This is why these losses are devastating not only to those who have sustained these atrocities, but to all of us in the industry as a whole. As I have written about previously (see: ), carriers have been undergoing an underwriting guideline tightening over the last 6 months or so and these stories certainly are not helpful. So, take heed and be warned, the difficult underwriting requirements that we have all been facing could potentially become more challenging in the months to come. So far, we have not seen an increased impact from these issues, but they are relatively new on the scene, but be prepared in the months to come. In the meantime, if you are struggling with your insurance coverage, need coverage to get up and going, or want to have a more in depth conversation about pollution coverage as it relates to the alcohol industry (especially if you are close to a natural body of water or waterway), just call on me, InsuranceMan 2.0!!! and I will zing to your rescue. Until next time dear reader …. Stay Vigilant!!!!!!! Aaron Linden a.k.a. InsuranceMan 2.0!!! 307-752-5961 insuranceman2.0@yahoo.com
  13. ***** UPDATE ALL ***** Please find all of my new posts under InsuranceMan 2.0 here on the forums. I may have moved to a new agency, but I am still here to assist you with all of your insurance needs. Call me at 307-752-5961 or shoot me an email at aaron@roaringforkins.com . THANK YOU !
  14. Good Tuesday Morning fellow ADI-ers, In today’s installment of the “Tidbit”, I am going to address a topic that I have been running into more and more lately and it is of utmost concern. Specifically the issue of "Policy Identity Confusion". I kid you not, out of the last dozen or so policies that I have looked at from other agents, (and keep in mind, they are not insurance superheroes like me, InsuranceMan 2.0!!!, they are just plain-old insurance drones) I have seen this issue no less than 5 times! 5 TIMES, PEOPLE!!!!! That is almost half!!!!!! Goodnight, that is A TON, and it is scary!!!!! It sends shivers down my super-spine to know that this is happening. What am I talking about? Non-other than the scary and fearsome “Material Change of Risk” clause contained within the deep dark recesses of your insurance policies. Oh, this area of the policy is in the darkest, spookiest, musty smelling, nastiest, dankest, most cobweb-riddled area that only the most stoic of insurance superheroes dare tread!!!!!! Alas, I, InsuranceMan 2.0!!! not only will tread into this fray, but I will shine my bright beacon of insurance knowledge on it for you in order to make it wither and wilt in front of your very eyes so that you do not fall victim to it!!!! So, what exactly is this, what is a “Material Change of Risk”? A material change of risk, by most policy standards is defined as ”An act or omission by the insured or his representative (that means “your agent”) that constitutes material misrepresentation or nondisclosure of a material fact in obtaining the policy, continuing the policy, or presenting a claim under the policy; Increased hazard or material change in the risk assumed that could not have been reasonably contemplated by the parties at the time of assumption of the risk; Substantial breach of contractual duties, conditions, or warranties that materially affects the insurability of the risk; A fraudulent act against the company by the insured or his representative that materially affects the insurability of the risk”. OK, so now we know what the definition of this is, but what affect can it have on a policy? Who cares?!?! Well, you may care greatly if you fall prey to this proviso. If it is deemed that there is or has been a “Material Change of Risk” to your policy, the carrier could do any number of things. They could choose to increase your premiums pro-rata for the duration of the rest of the policy term (by a lot, in some cases); They could decline the payment of a claim due to this increased or prohibited change; Or they could outright cancel your coverage with the proper (albeit, short) notification. “Why are we even discussing this?!?!?! I would never intentionally do something like this!!” I know you wouldn’t, dear reader, I know you wouldn’t. Likely as well, your agent would not knowingly pull the wool over anyone’s eyes either, but sometimes these things can happen unknowingly, and sometimes, unfortunately, with knowledge. But, back to the original issue at hand, as well as those highlighted in RED above. What I have seen recently are distillery policies that have been placed with insurance carriers that improperly classify the type of business within the General Liability Class-code Section of the policy (this would be a “condition” that could “materially affect the insurability of the risk”). This is the section of the policy that shows what classifications of business you are covered for, how much premium is to be charged based on your sales figures, and the overall “meat” of your policy and coverage determinations. Ah, now this is all starting to come together, right!?!?!? I have seen many recent DISTILLERY POLICIES that have been classified under one of the following class codes: 51350 Beer, Ale or Malt Liquor Mfg. – In Bottles 51351 Beer, Ale or Malt Liquor Mfg. – In Cans 51352 Beer, Ale or Malt Liquor Mfg. – Not Bottled or Canned Yes, it is so much clearer now and you are tracking where this is all going, aren’t you? If you are a “DISTILLERY” but you are classified as a “BREWERY”, and that is what is shown in your General Liability hazard class schedule, and this is the determination of the premium you are paying for, do you think that could potentially result in a “Material Change of Risk”? OF COURSE IT CAN!!!!! As we all know, in simplistic terms, beer could be used to dowse a fire if need be. What happens though if that same fire comes in contact with Vodka for instance? Yuppers, big ol’ fire and things that go boom. As well, breweries typically are not prone to the ill effects of fire, whereas distilleries have a much higher risk and concern of fire. I dare say that if you have been erroneously classified as a brewery and suffer a loss as a distillery, that very well could constitute a “Material Change of Risk” and the carrier may deny the claim on the basis of this provision, leaving you in quite the lurch. Many times, this classification identity issue is not done intentionally, rather it is simply due to the fact that the agent handling the policy may not be familiar with working with distillery clients. They very well may figure, “Booze is booze, what’s the difference?” Maybe they really have no clue that there even is a difference and they really think they have classed this correctly. Either way, the policy is written for what it is written for, and there is no, “Hey, if this was a mistake, don’t worry about it” clause! The policy is the policy and the coverage is the coverage. I will say, I have also seen the seedy underbelly of the insurance beast as well, where an agent knowingly improperly classified an account to either beat the prior premium, or to make it fit a carriers underwriting guidelines in order to “make a sale”. FOR SHAME!!!!! Tsk on those evil-doers!!!!!! Regardless of how or why it was done, at the end of the day it is you and your business that could suffer the wrath of this policy condition and we don’t want that! Keep in mind that there are many insurance providers in the country that will write coverage for breweries all the live long day. Those same carriers that love breweries however have no tolerance to knowingly write coverage for a distillery. So, if you were placed with a carrier such as this, and you were improperly classified, chances are that they could cite this “Material Change of Risk” provision that is placed in the policy for just this type of circumstance. That could mean that you have to pay through the nose once it is figured out, or you could be cancelled or denied coverage. All rather bad situations! How are you classified? What classifications are on your policy? Do you know? Have you looked? What would happen in the case of a claim? As I always say, the worst time to find out what you are and are not covered for is after a loss has already occurred. You need to know, NOW! You need to be confident that the insurance company will be there for you should you ever need them. If you don’t know, if you are not certain, maybe it is time to call in an expert. Perhaps someone that knows these policies and carriers inside and out. Someone who has “Insurancevision X-Ray Powers”, that can see deep into the inner workings of your policy’s soul. Someone like … InsuranceMan 2.0!!! Until Next Time My Friends … Stay Vigilant! Aaron Linden a.k.a. InsuranceMan 2.0!!! (307) 752-5961 insuranceman2.0@yahoo.com
  15. Good Tuesday Morning, Fellow ADI-ites, Ah … it seems as though Spring has finally Sprung here in Sheridanopolis, and fingers crossed, there will be no more of that flaky white stuff falling from the sky for many months to come!!! It is just a glorious time of year and the sunny skies are quite welcomed after such a long, cold winter. I hope that wherever you are, you are experiencing wonderful weather, and that you get a chance to get out and enjoy it. In today's installment of the “Tidbit”, I want to address a question that I have received quite a lot lately. The question of, “When is late too late?” What I mean by that is actually multifaceted, due to the fact that I have been asked the following questions: “When is it too late to obtain insurance?”; “When is it too late to get out of the insurance I already have?”; “When is it too late to make changes to my policy? Let me take these one-by-one in the order that they are presented. When is it too late to obtain insurance? The answer is “Never”. It is never too late to obtain insurance. Heck, I have even worked with folks that have been in operation for years that have never had insurance. Then, due to distribution requirements, or a change in business, etc., they need to obtain coverage. Truly, it is never too late to cover your ass ---- ets! I will say this, if you have been operational for a several years, a year, or even a few months, and you have not had prior coverage, it can complicate things a bit. Underwriters often times will ask, “Where has their coverage been prior to us?” When I tell them that there has not been coverage they often ask why. Then, through explanation usually we can get over that hurdle but there are a few things that need to happen in order to do so. Some carriers may want a “No Known Loss Letter” (or NKLL in cool insurance-ese language), or, some may choose to not offer coverage due to the fact that someone has been in operation without coverage and will ask that we come back to them after having a year of coverage under our belts. This can be an issue since it may throw that person into an E&S market for a year (or two), where they are going to end up paying a higher rate in order to prove coverage to a standard carrier later. If you have questions as to the difference between an “Admitted” or standard carrier and a “Non-Admitted” or E&S carrier, check out this posting that I put up a while back that explains it in all of its glory: Back to the question though, it is never too late to obtain coverage. Whether we have to go E&S, or if we can get it through a standard market, technically, you always need insurance coverage, really from day 1! Think about it. You have assets to protect, you have several potential liability issues that can arise, products liability issues, and you certainly have a liquor liability aspect that needs to be contemplated. Yes, I know folks that have run for 7 years without coverage and they have been just fine. It can happen. I also know some folks who have been up and running for a few months and have sustained a loss. In one case it was a pretty sizable loss to their equipment. It was the kind of loss that would have wiped them out had it not been for the insurance coverage that they had in place. Some may say that it is too late in the case of not having coverage and then sustaining a loss. I can understand that thought process, that it is too late if you have a loss and no coverage to pay for it. I personally would argue though, that it actually may be an opportune time to procure coverage so that you can make sure if a similar situation arises, you will be covered. Silver lining and all! That brings us to the next question, “When is it too late to get out of the insurance I already have?” Great question, dear reader! The short answer again is “Never”. It is never to late to get out of a policy that is either incorrect, does not provide adequate or accurate coverage, or one that is costing WAY too much premium. However …… it all depends on if it is a “standard” or “non-standard” policy. UGH! Here we go again with all this nonsense. Here is the quick “skinny” as to the difference and why it matters. Standard carriers will allow you to cancel a policy at any point and refund you any unused portion of your premium. What this means is that if you paid the policy in full but decide to cancel your policy 5 months into the coverage period, they will refund you the 7 months of unused premium that you paid in. Cool, right?!??! That is nice of them. E&S carriers operate a bit differently though. Most, if not all E&S carriers, have some built in costs and clauses that ensure they retain some of your premium for their efforts of writing your coverage. E&S carriers have things such as “Minimum Earned Premiums”, or MEP’s (again, cool Insurance-ese language for you to impress your friends with! Yet another reason to ready these riveting articles provided by InsuranceMan 2.0!!!) MEP’s state that you owe 25% of the total premium to the carrier regardless of when you cancel your policy. How about an example? OK! Let’s say that you purchase a policy from someone that does not really understand distillery insurance (this happens ALL THE TIME!). You get the policy and as you look through it you find that there are several things missing, or you have been classified incorrectly. In a rage, you slam the policy dramatically to the table, grab your phone, and feverishly dial up InsuranceMan2.0!!! to get my expert take on your policy. Through conversation we find that this policy that you have paid a ton of money for is not worth the paper it is written on. FRUSTRATING!!!!!! To further add to your ire, we discover that you have a 25% MEP which means that the carrier is going to keep 25% of the total premium of the overall policy even if you cancel. UGH! To further cause your blood to boil, we also discover that you have been charged taxes and fees (very common for E&S carriers) that also are non-refundable! Grab the antacid!!!!! So, what does this mean? It means that if your policy was $12,000 a year (ease of math sake, again. I just don’t like math all that much), the carrier is going to keep $3,000 of your premium dollars even if you cancel in the first few days, or months. As well, any taxes and fees (this amount could be $1,000 when totaled) are not refundable since they are due at inception of the policy. The long-and-short of this means that you are obligated to pay about $4,000 in premium no matter what. If you break that down into “months”, this basically means that you are obligated to stay with this carrier for about 3 1/3 months. Does this mean it is too late to get out of the policy you don’t want that does not provide the correct coverage? Not necessarily. I have worked with clients where we have been able to provide the correct coverage for them, all while saving them enough money to make it a wash, or close enough to it for the first year, that it was advantageous for them to make a switch early on. As well, as the coverage period continues, the amount of premium you might negate dwindles. Thereby, if we wait a month or so to get the policy rewritten, the blow becomes lessened due to the fact that you would have owed that premium anyway. Depending on your unique situation, it may be advantageous to make a change earlier than later. Or, you may have to wait until all of those initial premium dollars are used up, with the taxes and fees, and then make your move. It is still never too late to get a jump on it though, so we are poised to make the switch when it becomes financially advantageous to do so. Last but certainly not at all least is, “When is it too late to make to make changes to my policy?” Three guesses as to what the answer is! You really don’t have to be “Jeopardy James” to get this one correct! Come on, what is your answer?!?!?!?!? “What is, ‘NEVER’?” “Ding, Ding, Ding!!!! Right again!!!! Tell ‘em what they’ve won!!!!!!!!!!!!” “You have won an exclusive trip to ‘Insuranceopolis’ where you get to meet InsuranceMan2.0!!! and get a fully comprehensive analysis of your insurance needs!!!!!!!!!! This incredible prize package is worth … well, it is priceless actually!!!!!!” Truly, it is never too late to make any changes that you deem fit to make to your policy. Insurance policies are dynamic, living documents, really. You can add coverage or remove coverage for your policy at any given time. Your needs change throughout the course of a policy period, and you should be able to make adjustments at any time that you like. If you add coverage to your policy however, it may result in additional premium that you will owe (sometimes in full, sometimes over the course of the rest of the policy payments for the year.). If you take coverage away or reduce it, it will result in a premium refund that will either be paid out to you in full (if you paid in full or are close to the end of your policy period), or be applied to any future premium that is due. In closing, it is never too late to get insurance, it is never too late to get out of your insurance if it does not fit you correctly, and it is never too late to make changes that you need to your insurance. As well, plot twist, it is never too early to start working on your insurance needs either. Whether you are coming up on a policy renewal, just getting ready to start a distillery, move into a facility, or are ready to drop your first ounce of distillate, you need insurance. The sooner you start thinking about it, the better. Life is easier when you can check insurance off your list, and I, InsuranceMan 2.0!!! am just the person to get it done! Until Next Time My Friends, Stay Vigilant, Aaron Linden a.k.a. InsuranceMan 2.0!!! 307-752-5961 insuranceman2.0@yahoo.com
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