’Twas the night before Christmas and Santa was in doubt. He read his insurance policy and wondered what was left out? He sees his agent but once a year, and his policy and coverages are not so clear …
“We are all busy — sometimes too busy — especially around the holidays, and many business owners put off looking at their insurance,” says Andrew Rowles, vice president at SeibertKeck Insurance Agency. “It is far from the most important item in their mind.”
As the holidays approach, Smart Business spoke with Rowles about insuring one of the most familiar companies we all know — Santa Claus, CEO of the North Pole.
How does Santa know if he should purchase a liability insurance policy?
Santa is liable for the products he makes, along with potential property damage from coming down your chimney. To cover this exposure, Santa, just like every other company, should purchase a comprehensive general liability policy. Reviewing this with your agent to determine the appropriate limit specific to your risk management plan is key to defending against losses. Keep in mind, there are exclusions in a liability form that can limit coverage. For example, your policy excludes coverage for ‘your work’ in a typical CGL form.
How does Santa properly insure the North Pole operations facility?
Similar to many of today’s large corporations, there are many complexities to an insurance policy. Here is a quick overview of how Santa might cover his facilities.
- North Pole — Since no one owns the location, he must have a tenant betterments and improvements policy to cover the buildout of the workshop.
- Toys — Since Santa ships only by air freight, he should purchase business personal property off premise or, depending on the contract, an ocean cargo policy to cover the inventory when in transit.
- Elves’ tools — Santa should have employees’ tools coverage under the property form for the extra small equipment his workers bring to the workshop. One reason this is important to review is many policies limit the amount provided for theft under the property form unless a specific limit is provided.
- Reindeer insurance — These are expensive livestock that Santa should insure against mortality, loss of use and major medical. So don’t worry about that hole in your roof, if Rudolph breaks a leg; Santa has it covered.
- The sleigh — This should be on an inland marine form. Like forklifts that your company sends to multiple locations, Santa uses this valuable equipment all over the world.
- Workshop interruption — Santa works year-round to get ready for Christmas. Losing the workshop for just one day could make a difference between Dec. 25 and Dec. 26. Business interruption insurance would ensure that Santa has adequate cash on hand to make sure he meets his obligations, continues to employ the elves and could set up a temporary facility at the South Pole.
Why does Santa need directors and officers insurance?
We all know about how Santa determines who is ‘naughty’ and ‘nice.’ Business leaders make business decisions every day that could impact others, just like Santa does. Directors and officers liability coverage pays for defense in a lawsuit. If purchased on a duty to defend basis, the insurance company will supply expert counsel for a suit not resulting from bodily injury or property damage. Just wondering what list your insurance agent would be on?
Now that the world is in cyberspace, how does that impact Santa?
It’s true kids can now email their letters to Santa. Most insurance policies do not cover blogs, emails or electronic messages of any kind under liable and slander. Cyber liability coverage would protect Santa from any electronic communications by him, or his elves, that might be the subject of a suit, breach of security or business interruption.
What if the reindeer sued because of who Santa promoted to lead the sleigh?
Employment practices liability insurance (EPLI) is often a missed coverage in a risk management program. EPLI was developed to protect the employer from losses not covered by directors and officers or general liability. This form applies to discrimination, wrongful termination, failure to promote, sexual harassment, wage and hour, and whistle-blowers claims. This protects Santa and Mrs. Claus, as well as elves that supervise others working at the North Pole.
What if Santa uses the 401(k) contributions to upgrade the sleigh?
Under the Employee Retirement Income Security Act (ERISA), all 401(k) plans must be insured up to 10 percent of the plans’ assets for theft. So if Santa misappropriates funds, the elves’ retirement fund is OK. This is purchased under an ERISA bond or endorsing the crime policy.
How can Santa be ready for what the workshop is like after Christmas day?
All year, Santa’s helpers were busy working late hours. This can cause unwanted tension in the workplace and irritable elves could finally lash out. As an employer, you can purchase protection against the expenses that result from incidences of workplace violence. These can include the cost to hire independent security consultants, public relations experts, business interruption expenses and payment of death benefits.
Unfortunately, the ideal insurance policy is not gift wrapped and waiting for you under the tree. Business leaders need to invest their time meeting with an agent committed to helping you manage your risks to develop the right risk management plan and coverage to protect your company.
But I heard him exclaim, ere he drove out of sight, Happy Holidays to all, all my coverages are right …
Andrew Rowles is a vice president at SeibertKeck Insurance Agency. Reach him at (330) 865-6587 or firstname.lastname@example.org.
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