Ask these questions to pick the best insurance coverage

Businesses, like people, purchase insurance with the hope that they’ll never need it. You pick a carrier expecting that if disaster strikes, they’ll have your back. One night in 2012, this situation ceased to be hypothetical for SummerWinds Nursery’s garden centers. Frank Benzing, SummerWinds’ president and CEO, got the call that his San Jose store had burned down. Benzing booked the earliest flight he could from the company’s Boise, Idaho, headquarters. Representatives from Hortica®, a brand of the Sentry Insurance Group and SummerWinds’ carrier, arrived that day, too.

“They were really sensitive and comprehensive to our situation in San Jose,” Benzing says. “It was not their first rodeo for a calamity in a garden center. This is what they specialize in.”

After walking through the wreckage with Benzing, Hortica quickly determined exactly what amount of coverage was available for that store, and made sure the safety issues were handled in an appropriate way. Fertilizers and chemicals burned along with the facility, so cleanup efforts were delayed until that was resolved.

“We excel at getting people back to business quickly,” says John Hodapp, senior vice president of agency operations with Hortica. “We excel at mitigating loss [and] preventing further damage to crops and greenhouses, whereas other carriers that don’t have that unique expertise don’t know what to do. While they’re muddling through things, it’s getting worse. We excel at getting there quickly, preventing further damage to their crops or structures and getting them back in business. That’s what makes us unique.”

The fire validated a few specific types of coverage that were particularly useful in a disaster. Make sure you have enough property and liability coverage for your operation, but don’t neglect business loss. If your business is shut down for a year, that coverage can protect the lost revenue. That was a crucial part of SummerWinds’ insurance plan, Benzing says, because after the fire, the San Jose store was shut down for months while the company developed and implemented a rebuilding plan.

Smarts and service

SummerWinds’ human resources and benefits manager, Liz Grissom, handles most of the retailers’ insurance needs. She says industry knowledge is paramount in selecting a carrier.

“We aren’t the average retailer. In our industry, because we are seasonal, it’s important that the carrier understand the effects of fluctuations in inventory and the number of associates we have on staff,” Grissom says.

Reputation is another major factor when picking a carrier. When shopping around, Grissom wants to know what people are saying — especially potential customers like her.

“We want to know what their customer service is like, what their claims process is like,” she says. “What’s the reputation? Do other people in the industry have anything good to say about them, or are they just epically awful to deal with. None of us has time to deal with bad customer service.”

Hodapp suggests asking about the carrier’s experience insuring similar businesses in your segment. For instance, a nursery grower should ask about the carrier’s experience insuring other nurseries. Finally, do they support your industry by funding education and training?

“Our goal is to be the horticulture industry’s insurance carrier, but also to support the industry because we realize if that industry isn’t doing well, we don’t do well,” Hodapp says.

Be sure to look into a prospective carrier’s financial records, too. The key metric to check is the “A.M. Best” rating. An A or A+ rating is critical, says Richard Muñoz, operations manager for McLellan Botanicals/Taisuco America Corporation, a California grower that specializes in orchids. As your insurance company has to understand reality in the nursery business, you also have to understand reality in the insurance business.

“It’s like working in a glass greenhouse,” Muñoz says. “The insurer has to be able to look in and you have to be able to look out and see them. This gives both of you the right perspective on what the relationship really is.”

When selecting a carrier, Muñoz prizes the four “T’s”: time, transparency and trust to build teamwork. If an agent comes prepared, that’s a good first step. If you receive a thorough walkthrough, that’s another positive step. If they rush through your appointment eager to get to their next potential client, then you should move to the next potential carrier. If they take the time to go over their plans in detail and answer your questions, then you begin to build the necessary trust.

“It’s a team in every aspect,” Muñoz says. “You both win if no losses or lawsuits occur. So both of you are in it together for the right reasons.”

Appropriate plans

Understanding what your coverage actually covers (in writing) in the event of a loss or lawsuit is crucial. Words in a contract have specific meaning and that meaning must be understood.

“Either you are an insurance expert or you have knowledgeable people with the insurance company you chose who you can trust to help you understand the scope of the insurance you are purchasing,” Muñoz says. “Using other insurance sources is good, but everyone has a different opinion [about] how to spin it. Your business team has to be prepared to decide.”

When selecting a plan, Grissom prizes the cost/benefit ratio. SummerWinds is not a grower, but does use several greenhouses for storage. She often asks, “Is it worth it to cover those structures?” The answer often depends on which market SummerWinds is in. The company operates retail facilities in Arizona, California and Missouri, and risk management strategies differ for each.

You may want to ask if specialized services like loss control are available, and you should definitely ask about the availability of coverage for your business’ specific exposures — like power failures or equipment breakdowns.

“Do you want an agent you have to teach about your business or do you want an agent that understands your exposure?” Hodapp says. “This is all we do, so we know far more than the typical generalist agent on how to ensure nurseries, garden centers and greenhouses.”

Muñoz says that a good carrier will take the time to understand your comfort zone. Your carrier can help you decide how much coverage is prudent, but you have to decide what will allow you to sleep at night.

Muñoz also cautions that businesses have to be very clear on what the “exclusions” are in their policy.

Also, make sure you understand the cancelation or non-renewal policy — in both directions. Muñoz says this is as important as the policy itself. Ask the agent what triggers cancelation or non-renewal, to eliminate unpleasant surprises later.

There are also several important questions to ask regarding lawsuits. Ask how defense costs will be handled in the event of a lawsuit. It is also important to know if in a lawsuit, you have any say in the decision whether to settle or defend.

“People tell me they hate insurance companies,” Muñoz says. “I love our agent. I get more information from our insurance agent than anyone else. They have more of a vested interest in our business than almost anyone else.”

—Matt McClellan

For more, summerwindsnursery.com; taisucoamerica.com; hortica.com