How Santa Claus could create the right insurance policy this holiday season

’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.

Smart Business spoke with Rowles about insuring a familiar company 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 (CGL) policy.

In order to defend against losses, Santa should review this with his agent to determine the appropriate limit specific to his risk management plan, while keeping in mind that exclusions can limit coverage. For example, a policy excludes coverage for ‘your work’ in a typical CGL form.

How does Santa properly insure the North Pole operations facility?

Similar to any large corporation, there are many complexities. 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 build out of the workshop.
  • Toys: Since Santa ships only by airfreight, 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 equipment his workers bring to the workshop. It’s important to review this because many policies limit the amount provided for theft under the 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.
  • The sleigh: This should be on an inland marine form. Like the forklifts that your company sends to multiple locations, Santa uses it all over the world.
  • Workshop interruption: Santa works year-round to get ready for Christmas. Losing one day could make a difference between Dec. 25 and Dec. 26. Business interruption insurance ensures Santa has adequate cash to meet his obligations, can continue to employ the elves and may set up a temporary facility at the South Pole.

Why does Santa need directors and officers insurance?

Santa determines who is ‘naughty’ and ‘nice,’ and business leaders make decisions every day that impact others, just like Santa. Directors and officers liability coverage pays for defense in a lawsuit. If purchased on a duty to defend basis, the insurance will supply expert counsel for a suit not resulting from bodily injury or property damage.

How is cyberspace impacting Santa?

It’s true kids can now email letters to Santa. Most insurance policies don’t cover blogs, emails or electronic messages. 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. 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.

Unfortunately, the ideal insurance policy isn’t wrapped and waiting under the tree. Business leaders need to invest time with an agent, in order 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.

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