What Small Businesses Can Learn from ASOS Factory Fire

"Fashion website ASOS remains closed after warehouse is devastated in arson attack," read recent headlines in the Daily Mail and countless other news sources.

Reports stated that all ordering had been suspended after a suspected arson attack at the main warehouse that required more than 50 firefighters (and the evacuation of 500 workers) after the fire spread to four floors at the giant distributions center that holds 70% of the company's $270 million in inventory.

The online clothing retailer is now taking orders again, but says that about 20% of its stock was damaged in the attack. The fire and its aftermath also damaged the business's reputation and required a pause in the company's order taking and fulfillment, probable storage and relocation for its remaining stock, and property damage, among other costly impacts.

So what can small businesses learn from events like the arson attack on fashion giant ASOS?

The Asos fire raised fears that the company could be out of operation for a long time. Combined with the loss to property and stock that a company incurs when a disaster happens, a pause in business operations can be crippling to a company's revenue. Acts of Mother Nature, criminal mischief, or other accidents could find you and your business in a similar boat. Power failure from a storm, flooding, fire, hail, wind, vandalism, and equipment damage are just a few of the instances in which business interruption insurance could save your business from damaging losses.

Business interruption insurance can keep capital coming into your company in the event of such disruptions. It covers the loss of income that a business suffers after a disaster while its facility is either closed or being rebuilt. While property insurance covers only physical damage to the business, a business interruption policy covers the profits that would have been earned, allowing a business to remain in the same financial position it would have been in if no loss had occurred. It can help you with:

•    Profits – Replaces profits that would have been earned, and can keep your business 
    afloat if a loss forces you to close temporarily

•    Fixed Costs – Covers operating expenses and continuing expenses incurred by the
    property while a location is temporarily closed, rebuilt, or relocated (such as mortgage,
    advertising, taxes, and salaries)

•    Temporary Location - Some policies cover the extra expenses for temporary relocation
    and advertising fees 

•    Extra Expenses - Reimbursement for reasonable expenses (beyond the fixed costs) that
    allow a business to continue operation during property repair

Asos is now offering discounts of up to 50% as it resumes taking orders, after the blaze forced the closure of its website for two days. They launched a massive summer sale, in an attempt to woo back customers that were affected by the fire and play damage control on its reputation. That’s two full days of lost revenue, combined with reduced revenue from sale merchandise, in addition to the many other areas of business affected by the fire. To no fault of its own, Asos and other companies who incur similar, unavoidable catastrophe have to account for losses in sales and revenue above and beyond the assets lost in the fire - which can be even more damaging to a company's bottom line.

For a larger company like Asos, while the losses are higher than for smaller business, their ability to bounce back is also higher. They have more working capital, credit, and insurance coverage to work with. An unexpected loss to a poorly insured small business can be crippling. 

Asos gave a statement that it is fully insured for loss of stock and business interruption, which will mitigate the impact the fire has on its business and revenue.

Many business owners don’t have business interruption insurance, even though the protection it affords is extremely valuable in cases like these - where the losses are unexpected and huge.

Cost may be a factor in why business owners pass on this coverage, with policies ranging from $750 and up, depending on business size. However, businesses may want to reconsider interruption coverage, based on statistics showing the increasing number of natural disasters. The total has increased from 400 major incidents to more than 600 in a typical year, according to a recent survey from global insurer Allianz.

Some insurance policies that help companies affected by catastrophic losses, are: 

•    Business Interruption

•    General Liability

•    Property

•    Umbrella Insurance

If you’re curious whether your business insurance coverage adequately protects you, or need to add business income to your coverage, please contact John Jacquat at 303.834.1001, or request a free quote or existing policy review on our website.

Craft Brewer Insurance Essentials: Liability Coverage

Liability risks can be some of the most 

expensive claims for your brewery.

Last month, I used a metaphor to highlight the importance of brewery-specific insurance (vs. standard commercial insurance) to your business and bottom line.

• The “Domestics”: The 7 Essential Business Insurance Policies (that you should already have).
• The “Crafts”: Brewer insurance essentials that protect your brewery better than the standard commercial ("Domestic") policy.
• The 4 P’s: Four specific areas of your brewery that have unique coverage needs (“Craft”) that you most need to protect.

This month, I’ll go into detail on the first “P,” or essential area of “Craft” coverage: liability.

The two most essential ways to Protect your Passion, or at least the opportunity to pursue it (patriotic pun intended), are through brewer-specific General Liability and Liquor Liability coverage.

We protect our passion (our breweries) by protecting ourselves from Third-Party Lawsuits. General Liability and Liquor Liability are essential to your business and your bank account. If you’re up and running, you should already have these, but there are important distinctions between general and brewery-specific coverage that can make or break the future of your business in the event of an unexpected loss.

Have you ever had a patron get hurt at your brewery? Or received a demand letter from an attorney representing someone injured by one of your patrons after they left your brewery? Then you know all too well how crucial these policies really are. If you’ve been paying the premiums but haven’t yet had to cash in on them, know that they’re worth every penny. With millions of liability claims filed each year, these policies protect your business and assets from unexpected loss, which is especially important because liability risks can be some of the most expensive business claims. 

What Does It Protect? A general liability policy can protect you against costs that result from bodily injury (to patrons), property damage, medical expenses, legal costs, judgments, and personal injury claims such as libel and slander. If you rent or lease your space, commercial general liability (CGL insurance) may also provide coverage for damage to that workplace.

How Much Do You Need? The typical General Liability limit is $1,000,000 per occurrence and $2,000,000 aggregate for the year.

Tip: Umbrella policies can provide relatively inexpensive added protection, kicking in when you exhaust the limits of your business liability coverage.

Costs: Vary considerably depending on the specific risks of the brewery, but are traditionally based on annual sales volume.  As your brewery grows, it’s important to up your insurance coverage so that you have enough protection. Check in with your agent each time you consider expanding or changing your business.

What Does It Protect? This type of policy will protect the brewery from liability if someone files a claim regarding the sale of alcohol, such as someone being injured in a car accident after drinking at your tasting room. 

How Much Do You Need? A $1,000,000 limit is often recommended.  Even if an establishment is not found liable, the average cost to defend a claim is $150,000, and in Colorado the maximum limit for an award regarding the over-serving of a patron is $219,750. That’s just one claim! The nature of your business and its perceived risks will help determine your needs. Work with an agent who is experienced in craft brewery coverage when seeking business insurance quotes. You’ve put blood, sweat, and tears into building your company. You need coverage that works just as hard to protect it.

Costs: Policy costs vary widely based on your brewery’s size and location and, again, is based on annual sales volume.

Why Choose A Brewery-specific Policy? Whether you have a full service bar or offer beer tastings after tours, liquor liability is essential to cover damages to persons and property caused by patrons who claim to have been over-served at your establishment. The sale of growlers/bombers adds another brewer-specific exposure that should be addressed by your liquor liability policy. Some carriers don’t understand the craft brewing world and the environments they create. They run from businesses that they consider “bars,” because of the liability that they carry and this lack of a full understanding of the business. Be sure the carrier you are with is comfortable with everything that you are.

Finding Brewery-Specific Coverage: Confused about where to start? As an independent agent and brewpub owner, I specialize in customized insurance policies for breweries of all sizes. I can assess your liability risks and recommend the appropriate coverage, balancing both your risk management and cost saving strategies.

Contact me, John Jacquat, for a free policy assessment and make sure your brewery assets are properly insured. Or email me at john@purerisksolutions.com.