Remember the movie “How to Lose a Guy in 10 Days”? It starred Kate Hudson and Matthew McConaughey. The film’s premise is that failure to meet another person’s expectations results in the dissolution of the relationship. I repeatedly hear propane marketers voice concerns about being put out of business because of a claim. The concern is that the insurance company that pays the claim will cancel their insurance, and in trying to find a replacement policy they will be unable co pay the greatly increased cost. These concerns are partially correct, but there are other rhings that can put a marketer our of business besides a large claim. So here is my list of 10 things that put you out of business:
1. You have a natural disaster such as an earthquake, earth movement, or flood. In California, as well as other parts of the U.S., earthquakes are an everpresent danger. The fact that an earthquake can occur is not the question; it’s when and how large. Most marketers in earthquake-prone areas don’t buy earthquake or earth move• ment insu ranee. And the standard fire policy, even with enhancements, excludes coverage. The same is true with flood insurance. Flood is normally excluded under the standard fire policy, so marketers in a flood zone without insurance are risking their companies. Stan Rull of Rull Brothers Propane (Bunker Hill, Ill.) explained to me what it was like when the Illinois River breached its levee in 1993. They had seven to 10 days’ warning, which allowed them to either secure residential ranks or remove them. However, they had to empty the propane out of their 30,000- gal. bulk tank that was located near the river and fill it with potable water in order to keep it from floating away. This required many hours of hard work and considerable expense to preserve the company’s assets.
2. Many marketers are underinsured. Marketers, when shopping for insurance, may use prior years’ property insurance values that have not kept pace with inflation or utilize a price they paid for a building or bulk tank they bought years ago. Therefore, they don’t meet the coinsurance requirements shown on their policy and would not receive enough insurance proceeds to rebuild.
3. You’re an entrepreneur and live life your way. We love the entrepreneur, but being in the propane business does not mean you have to reinvent the wheel. You can save yourself and our company time, energy, and hard-earned cash by joining the various state propane gas associations and the National Propane Gas Association. You have the benefit of training, forms, and using standardized procedures that are accepted by the industry, as well as achieving representation for your company before national, state, and local legislators.
4. You do most of your business by a “good old boy” handshake and rely on verbal communication because you can trust the other party. Recently I came in contact with several propane marketers that set tanks without a written lease agreement. That spells disaster. A written tank lease agreement establishes ownership of the tank. The tank lease agreement should also require the homeowner’s insurance company to be responsible in the event the tank is lost or destroyed.
5. You buy propane without knowing when the ownership changes to your company. The ownership of propane normally changes at the flange. The common carrier that hauls for you never takes ownership of the propane, therefore your company owns it while it is being transported. The common carrier is required ro carry $5 million of insurance coverage, but a severe loss above that figure puts your company at risk because you own the propane.
6. You don’t carry enough liability insurance. A million dollars doesn’t go very far in today’s litigious society. Burn claims are settled for six to 15 times medical expenses. Death claims are at the mercy of an unfriendly jury. My rule of thumb is to carry at least enough umbrella insurance to cover the worth of your company.
7. You take the shortcuts and live close to the edge. Every once in a while I hear a marketer say, “I am going to gamble.” One thing that I tell marketers never to gamble is excluding themselves from workers’ compensation insurance if they are active in the business. The reason is simple: You are the one who is most likely to have an accident and the one who is most important to the business. Your injury or disability absent the proper insurance coverage could be catastrophic. Remember that workers’ compensation covers all medical bills, long-term disability and, in the event of death, burial expenses, and a lost-wage component for your spouse.
8. You can lose your business by not having or completing paperwork. The marketer that says he is doing GASChecks and fails to complete the form with signature(sl is risking his company when he files it away, forgets it, and there. is a loss.
9. You don’t buy cyber insurance. The insurance industry is well aware of the serious risk your company’s computer software is under because of sophisticated hackers. Cyber terrorism is a very real threat, and even the most payment card industry-compliant systems are being hacked. The hacker that gets into your system and takes all your customer information can sell it to a competitor, as well as damage your customers’ credit and your reputation. This can put you our of business.
10. You don’t buy employment-related practices liability. Employee/employer relationships have changed. All employees have perceived rights that can easily be trampled on by an unthinking employer or manager. No company should be without an employment practices liability insurance policy.
The goal for all marketers should be to go home at the end of the day with a clear conscience, knowing that you have done the best you can for the safety of your customers, your employees, and your family. Don’t forget to kiss your significant other and the kids and tell them that your love them. Isn’t that the way the movie ended?
Frank B. Thompson is a chartered property and casualty underwriter based in Phoenix. He is the owner of PT Risk Management, an independent insurance company specializing in writing propane and petroleum risk policies throughout the U.S.