Are you playing Russian roulette with business insurance?

Originally published July 24, 2008 on my original blog, Sales Training 2.0.

This counts as one of the many blog topics that I previously would have scoffed at … until I had to get personally involved with insurance for three different training firms over the past few years.

In short, you probably have some basic insurance policies today just like any small business.You also have many customer contracts (I hope) … and in some of those contracts you have some clients that have requested you maintain certain insurance policies with specific limits.Unless, or even if, the same person deals with both issues in your firm, you probably have some insurance policies that are required by contract that you don’t have!

Some of you may even be playing Russian roulette by intentionally avoiding these policies because they are so expensive! Unfortunately I have seen an increased focus by Fortune 500 firms in the last few years when it comes to insurance, including more requirements for Certificates of Insurance to document vendor compliance.

Here are some of the policies and limits I have been seeing so you can see if any of your clients are asking for something extraordinary:

  • Commercial General Liability – $1 Million per occurrence and $2M aggregate
  • Automobile Liability – $1M (covering all motor vehicles owned, hired, rented or used by your firm related to the client project)
  • Workers’ Compensation and Employers Liability – Liability of $1M and waivers of the insurer’s right of subrogation against the client

Other policies or documents occasionally required:

  • Business interruption and recovery
  • Umbrella / Excess Liability Insurance – $1M
  • Errors & Omissions – E&O (or Professional Liability Insurance) – $1M
  • Fidelity Bond / Crime Insurance – $500K
  • Additional Insured – specifying that the policies name the client, its subsidiaries, officers, directors and employees as an additional insured
  • Certificate of Insurance – upon request (or sometimes required to be supplied up front)

Now remember, insurance requirements in a contract are just another set of terms to be negotiated. If you are a small firm you may be able to get 1 large client to essentially pay all your policy premiums if you keep a few extra hundred dollars per class in their prices when you negotiate.

When getting quotes for the expensive policies, like E&O, be sure to ask your agent for pricing options with variable deductibles (sometimes called ‘retention’ on E&O policies.

I would be interested in hearing when you have been able to negotiate some or all insurance requirements out of a customer contract – and if you have better luck with smaller or larger firms. (Remember, don’t name client names as that would probably violate your confidentiality provisions of those client contracts!)

PS If you use subcontractors to deliver your workshops/service you have additional worries. 1) Do your insurance policies cover subs or only employees, and 2) do your contracts with these subs require them to maintain any insurance? Without one or both, you probably can’t use subs without being in breach of your customer contracts!