If you've been paying attention to the real estate scene in Denver, you know that demand for industrial space is as robust as demand for housing.
Online retailers occupy a lot of that space. New and expanding manufacturers also are helping create demand for industrial space.
While Colorado's manufacturing sector is relatively small, the renaissance in the sector seen across the country is (happily) happening here, too.
That got us thinking -- and worrying, as we're prone to doing -- about whether some of these new manufacturing operations are adequately insured. Startups, especially those that have yet to build much revenue, often go with as little coverage as possible until their business begins to grow.
That approach, unfortunately, leaves them as vulnerable to failure as stamping out faulty widgets would. With that in mind, here are three insurance policies beyond the basic property and casualty coverage that we'd recommend every manufacturer carry.
Business Interruption Insurance
Whether you're operating a craft brewery or an aerospace plant, globalization means transactions that cross state lines and national borders on an everyday basis.
As we become more interconnected, we also are increasingly interdependent. So hurricanes that strike thousands of miles away can feel as close to home as a tornado that tears through an industrial zone east of downtown Denver.
When disaster strikes at home, there's Business Interruption coverage, a line which protects us from losses that occur on our premises and disrupt our ability to conduct business. Manufacturers (and other companies) also are increasingly turning to what's known as Contingent Business Interruption (CBI) coverage, which helps them stay on their feet when disaster befalls a vendor or even a key customer.
CBI and Contingent Extra Expense coverage reimburse companies for lost profits and the expenses that result from that interruption of business at that vendor or client's premises, not their own. CBI especially makes sense for your business depending on how you answer a few key questions.
How much of your company's operations rely on another entity? How easily could you find a new vendor if yours is forced to close in the wake of some disaster or if their equipment suffers massive failure? How quickly could you get back to normal if you lost a key source of raw material?
If you're a manufacturer, these aren't simply smart business questions. Rather, depending on the response, they can be clear-cut existential threats.
Product Recall Insurance
A product recall can hit any company, even those with the best manufacturing and operational controls. The risks posed to manufacturers by their own defective products is, in fact, one of the greatest perils they face.
Recall insurance, among other things, can cover the costs of continuing manufacturing elsewhere. For example, if a listeria outbreak forces a food company to close a plant and cease production, these policies can cover the cost of using an alternative plant or competitor to produce the goods. It also can cover the cost of crisis management consultants who will help you protect your brand.
Employment Practices Liability Insurance (EPLI)
In the simplest terms, EPLI covers businesses against claims by workers who believe their legal rights have been violated. Some insurers provide this coverage as an endorsement, or add-on, to their Business Owners Policy, or BOP. EPLI also is offered as a standalone option.
Either way, no business today can afford to be without EPLI, not when the average settlement in sexual harassment cases is in the five-figure range. These policies also cover judgments and settlements in cases involving:
An EPLI policy also will cover the costs of defending a lawsuit, and the right EPLI policy will cover legal costs whether your company wins or loses in court.