Buying the right insurance for your business.
By Jennifer Strawn
You’ve worked hard to build your business from the ground up, but are you protected in case the unthinkable happens?
Many insurance companies offer commercial insurance packages geared toward small- to medium-sized businesses, but a standard commercial policy may leave you hanging when you need it most.
Plus, some insurance companies won’t even carry the types of policies you’ll need as a groundwater contracting company.
“Any kind of contractor is not eligible for a business owner policy,” says Tom Trainer, CIC, CLCS, managing associate agent at Smith & Leavitt Insurance Services in Columbus, Ohio. “We prefer to do it a la carte for contractors where we add all of those coverages—and whatever others they need—together for them.”
Not sure if you have the right insurance policies? Here’s a guide to what you may want to have if you manage a business in the groundwater industry.
Property and casualty
Any business should have both property and casualty insurance. A commercial property policy typically covers your property and certain types of machinery or equipment from fire, theft, vandalism, and other damage.
Casualty insurance, on the other hand, focuses on the liability side. It covers your company in case you damage someone else’s property or injure someone.
General liability policies fall under casualty insurance and can help cover medical expenses and attorney fees resulting from bodily injury or property damage for which your company may be legally responsible. It doesn’t cover employee injuries, auto accidents, punitive damages (in most states), workmanship, intentional acts, or professional mistakes.
The most common limit on general liability policies is $1 million, but lawsuits can easily exceed that. To make sure you’re adequately covered, you can purchase an umbrella policy that adds anywhere from $2 million to $20 million to your liability coverage.
Situations that can result in a lawsuit include someone at your company injuring someone, being at fault in a car accident that injures someone, or a non-employee getting injured on a work project—events that, unfortunately, can occur.
Because general liability doesn’t cover employee injuries or accidents, you also need workers’ compensation insurance. Depending on your state, you’ll want parts A and B.
Part A, which you can get from the state depending on where your business is located, covers employees’ medical bills, related expenses, and lost wages when an employee is injured on the job. Part B, also known as employer’s liability or stop gap, covers you when an employee is injured and sues you for negligence.
The right amount of coverage for your business depends on a lot of factors. Gregg Drilling & Testing Inc. in Signal Hill, California, carries a total of $10 million in liability coverage because some of the projects they work on now require at least that amount.
“It’s driven mostly by clients,” says Sonja De Keyser-Meurs, the controller for Gregg Drilling & Testing. “Some of the projects have become quite extensive. Most require at least $5 million, but we had quite a few requests to bring it up to $10 million. It became cheaper to carry the excess rather than having to request a separate individual policy per project.”
There’s not really a “recommended” amount.
“We tell them to look at the price,” Trainer says. “See how much it costs for $1 million; see how much it costs for 10 million. Then decide if it’s worth it.”
Like Gregg Drilling & Testing, projects will probably dictate how much you carry. If you need more for a specific project, there is always the option to purchase a project-specific umbrella policy.
Commercial auto insurance is another type of property and casualty insurance all businesses should have, especially if employees are driving company vehicles. Commercial auto insurance includes collision and comprehensive coverage, liability coverage for bodily injury, property damage, uninsured motorist and underinsured motorist coverage, and other coverage for medical payments, towing and labor, rental reimbursement, and auto loan or lease gap coverage.
Inland marine is yet another necessary policy because it covers your portable or mobile equipment. Unlike “marine insurance” covering property transported over water, inland marine covers products, materials, and equipment transported over land.
In short, it covers the construction equipment that leaves your shop on a regular basis.
“It’s a funny name,” Trainer says, “But you want to make sure your equipment is covered everywhere it goes.”
Some insurance carriers won’t cover your equipment when it’s underground. That’s why it’s important to purchase down-the-hole insurance. This provides coverage for when your equipment is damaged while it’s below the earth’s surface or if it gets stuck in the hole.
“‘It happens quite a bit, so that’s why it’s excluded from a lot of policies,” Trainer says. “Insurance carriers that know what they’re doing in the groundwater industry will make an exception to the exclusion.”
Loss of use coverage
Another important piece of coverage you might be missing is loss of use. It’s one many groundwater contractors overlook, but it’s not one you’ll want to be without if your rig is vandalized, stolen, or damaged.
Loss of use coverage pays for you to rent another rig or pays lost income due to being without a rig.
“You can get it for your vehicle, too, but a rig is really both,” Trainer says. “An auto policy may provide about $40 or $50 a day in rental coverage, but that’s not enough to rent a rig. That’s why loss of use for your rig is so important.”
The basic pollution policy will cover your company if you or one of your employees release chemicals into a water system or on someone’s property. It can also cover you if someone brings legal action against your company due to chemicals damaging plants or contaminating drinking water.
Employment practices liability
If your business sees turnover from time to time, you might want to consider employment practices liability insurance. It covers your company against claims by current or former workers who believe their legal rights as employees of the company have been violated.
- Wrongful termination
- Sexual harassment
- Failure to employ or promote
- Wrongful discipline
- Wrongful infliction of emotional distress
- Mismanagement of employee benefit plans.
“It’s a pretty popular coverage,” Trainer says. “A lot of employees who get terminated are bitter. They’re angry, so they’re going to try and sue.”
Other types of insurance
Gregg Drilling & Testing purchases other policies protecting them against other unexpected events—including crime insurance and a fiduciary liability policy.
The company offers a 401(k) plan, and once that plan reaches a certain threshold, they’re required to carry fiduciary liability insurance. This protects them in case the internal plan administrator mishandles funds for the plan.
Crime coverage is not something you may need if your business is small, but with more than 150 employees between Gregg Drilling & Testing and its other company—Pitcher Drilling Co. in Palo Alto, California—it’s nice to have.
If you’re running a larger operation with several employees handling money for the business, this insurance can protect you in the event an employee steals money.
At the end of the day, insurance is there to protect your livelihood from any number of risks you face during your day-to-day operations. How much insurance you carry and what policies depends on a number of factors—including how risk averse you are.
Trainer offers one golden rule of insurance: “Buy what helps you sleep at night.”
Jennifer Strawn was the associate editor of Water Well Journal from 2004 to 2007. She is currently in the internal communications department at Nationwide in Columbus, Ohio. She can be reached at email@example.com.