By: Dan Galos, Sales Executive / Risk Advisory Solutions
Any start-up food or beverage company hopes to make it big one day and land a large deal with a national retailer. Who wouldn’t want to have their products lining shelves across the country and stacking warehouses waiting for virtual orders to whisk them the next day by eagerly awaiting customers? I’ve been fortunate enough to work with many clients who’ve contracted with Amazon, Wal-Mart, Chewy, Whole Foods, etc. I usually get a phone call from them that goes something like this:
“Dan, I got a contract with (BIG NAME RETAILER), but they’re asking for $5 million of Product Recall Coverage, $10 million of Umbrella Liability, $1 million of Cyber Liability, $1 million of Auto Liability, etc.”
The list goes on.
The big-box stores, online retailers, and large grocery chains have extensive contracts, often with very significant insurance requirements. Often, the requested limits are many times what a business has in place currently. The large retailers or wholesalers may also ask for additional policies that are not part of the insurance program of its vendors.
In conversations with clients, I’ve learned the first reaction upon seeing these limits is: “What is this going to cost me?” They think that because they are dealing with a huge company, they don’t want to upset a large contract or sale by pushing back. What I’ve found over time is that the contracts are many times “boilerplate” wording, meaning that they are sending the same contract to everyone whether you are selling $10,000 or $1,000,000 worth of products with them.
It stands to reason that the riskier the product and the more you sell to a retailer, the higher their exposure will be, and therefore the more coverage they should request of you. A start-up company shouldn’t be expected to carry the same limits of insurance as a well-established and highly profitable enterprise. So, what can you, as a start-up or small business, do to maintain compliance and not upset the apple cart?
Just ask.
Just ask your contact in charge of verifying insurance compliance if there are optional requirements based on your size and product. It’s surprisingly effective, and I’ve worked with clients that reduced $5 million recall limits down to $1 million with nothing more than an email request. You will want to partner with an insurance broker that has experience and expertise on all listed coverages, as well as the food and beverage industry as a whole, so they can advocate on your behalf when that need arrives.
Are they asking for Automobile Liability coverage at a $1,000,000 limit? Well, do you have or use vehicles in the course of your business at all? No? Then should you need to provide proof of coverage?
Are they asking for Workers’ Compensation? Do you have employees in your business, or are there any officers not excluding themselves? No? Why should you need to comply with that request?
Of course, certain items may be non-negotiable. It’s highly unlikely that a contract would be outright canceled simply for an honest inquiry. I’ve never heard a story where a business lost a contract because they pushed back. Need help starting that conversation? Please reach out so we can discuss how Horton may be of assistance to you.
