Common Insurance Terms

Description of operations: Liquor retailers sell many types of bottled and packaged liquors and alcohol, including wines and beer, for off-site consumption. Kegs of beer may be available. Sources can be domestic or imported.

Operations must be licensed for the items sold. Sales may be limited to liquor and alcohol only, or the store may also sell soft drinks, nonalcoholic mixers, snacks, or gift items. Some items may be offered refrigerated for the convenience of customers.

Property exposures are primarily from electrical wiring, equipment and refrigeration units which can tax the electrical system. The wiring must be adequate and up to code. All equipment should be well maintained and in good condition. A fire can cause a total loss because alcoholic beverages are highly flammable and susceptible to damage from heat and smoke. Even a small fire can cause all stock to be condemned due to contamination from smoke and firefighting materials.

Theft is a major exposure. Appropriate security measures should be in place, such as keeping more expensive items behind the counter and inaccessible to customers and having security mirrors prominently displayed throughout the store. Premises alarms should report to a central station or police department after hours.

Equipment breakdown exposures are significant because of the refrigeration equipment.

Crime exposures from employee dishonesty and theft of money and securities are high. The inventory is attractive to employees as they can steal it and resell it for personal profit. Employee dishonesty is controlled through background screening of employees, inventory monitoring, control of the cash register, disciplined controls and division of duties. If there is a 24-hour exposure or even late night/early morning hours, liquor stores can be a target for holdup because of the significant cash on hand. To prevent theft of money and securities, money should be regularly stripped from the cash drawers and moved to a safe away from the front of the store. Irregular drops during the evenings are helpful in preventing a large buildup of cash. Closing time is the most vulnerable time so security procedures should be in place to prevent hold ups.

Inland marine exposures can include accounts receivables from customers and valuable papers and records for suppliers. Computers may be used for purchases and to track inventory. Backup copies of all records, including computer records, should be made and stored off premises.

Premises liability exposure comes from slips and falls due to public access to the premises. Floor covering must be in good condition, with no frayed or worn spots on carpet and no cracks or holes in flooring. Steps and uneven floor surfaces should be prominently marked. During inclement weather, snow, mud, and water will continually be tracked into the facility because of the high traffic exposure. Housekeeping should be excellent and spills must be cleaned up promptly. Sufficient exits must exist and be well marked, with backup lighting systems in case of power failure. Parking lots and sidewalks need to be in good repair, with snow and ice removed, and generally level and free of exposure to slip and falls. Security of visitors in parking areas is rapidly becoming the responsibility of the owner or operator of the premises. Outdoor security and lighting must be consistent with the area.

Products liability exposure for liquor retailers is normally low as long as a reputable manufacturer makes all of the liquor that is sold.

Liquor liability exposures are mainly from selling liquor to underage individuals and those already intoxicated. Failure to comply with state and federal regulations can result in the loss of a liquor permit which will close the business. Carding must be carried out in order to control the situation, and consumption of alcoholic beverages on premises should be prohibited. Employees must be trained to recognize signs of intoxication.

Automobile exposure may be limited to hired or nonownership liability exposures from employees using their vehicles to run errands. If delivery services are provided, MVRs and driving records should be obtained for any employee delivering products to customers. Vehicles should be properly maintained and records retained.

Workers compensation exposures come from lifting that can cause back injury, hernias, sprains, or strains. Floors may become slick, resulting in slips and falls. Employees should be provided with safety equipment, trained on proper handling techniques, and have conveying devices available to assist with heavy lifting. The employees in many retail establishments tend to be minimum wage and turnover may be high. Well-trained employees with an incentive to do their best and who have clear direction will have the fewest injuries. Company incentives to encourage long-term employment are positive signs of management control. Injury or death during holdup is a major cause of loss. Employees should be trained to respond in a prescribed manner. Workers must also be able to deal with unruly customers, including those who speak a different language, who are refused the purchase they desire.

Refrigerant leaks can be a potential cause of injury. The injury potential is determined by the type of refrigerant used and the reason for the leak.

Minimum recommended coverage

Business Personal Property, Spoilage, Business Income and Extra Expense, Equipment Breakdown, Employee Dishonesty, Money and Securities, Accounts Receivable, Computers, Valuable Papers and Records, General Liability, Employee Benefits, Liquor Liability, Umbrella, Hired and Nonownership Auto, Workers Compensation

Other coverages to consider

Building, Leasehold Interest, Real Property Legal Liability, Computer Fraud, Forgery, Cyberliability, Employment-related Practices, Business Auto Liability and Physical Damage, Stop Gap Liability

Reprinted with permission from the Rough Note’s Company copyrighted content.