Insurance: The Perils of a Failure to Communicate

If you buy or sell equipment, facility locations or companies, your agent had better know about it before it happens, not after.
By Nicole Croteau

In today’s economic environment, companies are facing bigger, more serious problems than they have in many years. Most people approach such problems by gathering as much information as possible and using that information to make the best decisions they can. Information is power, and the ability to gather and disseminate information appropriately can make or break any organization.

Unfortunately, we often don’t realize that we’re neglecting to share what could be important information with people who need to know it. And yes—no surprise here—this applies to insurance coverage as well. For facility owners and managers to make sound business decisions, they must candidly share information about major business developments with their agent or broker, and hear from that person about the implications of those developments for their insurance needs and insurance coverage.

A Cautionary Tale
So what’s a major business development? If you buy or sell equipment, facility locations or companies, to give you a few examples, your agent had better know about it before it happens, not after. Too many times, the insurance agent is the last to know about such things. This is not a good position to be in. By making such changes, you are changing your “exposure,” as we say in the insurance industry. This could leave you without coverage—or with limited coverage—and you would not even know it until there was a claim.

Chalk it up to a variation on Murphy’s Law: If something goes wrong at a facility, inevitably that incident will strike the one area in which you’re vulnerable. I know of one yard, for instance, that had many pieces of equipment on its property schedule. When a fire destroyed one large piece of equipment, the company discovered that one piece was not on the schedule. Uh-oh, as my 2-year-old daughter likes to say. The company is going to be out more than $150,000 to replace that machine.

How did that one piece of equipment go uncovered? Several things might have gone wrong. Perhaps the owner bought the equipment and never told the insurance agent to add it to the schedule. Or the owner told the insurance agent before the equipment was delivered, but the agent neglected to have it endorsed onto the property policy. Or it was a misunderstanding: The owner thought he had enough equipment coverage, or he didn’t think it was necessary to amend the policy to get that piece covered.

Reduce Your Risk
This is only one example of what can happen when there are gaps in communication between a company and its insurance provider. And though $150,000 is a serious expense, the risk can be even greater in some circumstances. I’ve seen companies buy new businesses or new property and never share that information with their insurance agent. This can be extremely dangerous in terms of exposure and cash flow.

Significant changes in a recycling operation allow insurance companies to reconsider the company as a risk. That could mean a non-renewal of all coverage or an exclusion of certain aspects of the business. You don’t want to find that out after the fact—that kind of information should be part of your decision-making process before the deal is done.

If and when you consider new operations or changes in your existing operations, always make your insurance agent aware of your plans. Your agent or broker should be a trusted business adviser. I always like to say, have me on speed dial, right next to your attorney or tax accountant.

If you’re not comfortable sharing such information with your agent or broker, that’s a red flag. Your relationship with your agent should be founded on mutual trust and integrity. If that’s not the case, it’s time for you to find a new one. If you do have a great relationship with your agent, be sure to communicate regularly. Don’t let the above claim scenario happen to you.

Nicole Croteau is vice president and program manager of the RecycleGuard insurance program, Willis of New Hampshire (Portsmouth, N.H.). She can be reached at 603-334-3084; This e-mail address is being protected from spambots. You need JavaScript enabled to view it . Willis RecycleGuard has prepared this article for informational purposes only. It is not intended to provide legal advice. Readers should not rely on this document or act upon any of the information it contains without first consulting competent legal counsel.

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