Operating is risky business without insurance

By Wayne Jordan

In my July 26, 2012, Behind the Gavel column, I related a story about the Mountaintop Antique Mall in Hillsville, Virginia [http ://bit.ly/1N6U5SO]. This popular mall near Interstate Route 77 is one of my favorite places to visit when I go antiquing near Hillsville. Last month, intending to visit Mountaintop, I drove right past the mall entrance. Thinking that I hadn’t been paying attention, I circled back and was momentarily confused: the mall was gone. There was nothing there but the gravel parking lot and a few outbuildings.

I drove to a neighboring antique store, and there I got the story: In the winter of 2014 the roof had collapsed under two feet of snow in high winds. To quote the Galax Gazette [http ://bit.ly/1JSHJwO], the 12-foot-high ceiling “came crashing down on countless collectibles, furniture, glassware, art, pottery and showcases.” Though mall owner Charles Nelson had insurance, many dealers do not.
Unfortunately, there seems to be a general lack of concern about insurance among small antique dealers. Allison Steeves of insurance brokers Steeves, Smith and Associates in Monroe, Connecticut, is very blunt about this situation: “The problem is that antique dealers don’t look at themselves as business people,” she said. “Based on the contracts they sign for their booths, any exposure makes them liable” [http ://bit.ly/1IWrF82].

Angie Becker, president of both the Antiques and Collectibles Insurance Group and the Antiques and Collectibles National Association [http ://www.acna.us /], agrees. Antique dealers are often underinsured and at risk of serious loss. Lack of liability insurance is the most prevalent issue, says Becker.

Regardless of where a dealer does business – in a storefront, antique mall, flea market, fair, antique show, auction or estate sale – accidents involving their displays leave them liable for damages.
For example:

Such incidents certainly aren’t new, but legal remedies are being sought more often and damage awards are going up. In the July 2002 edition of Best’s Review, Lynna Goch’s nationwide survey of jury cases “found that plaintiffs won cases more frequently than the defense in 2000, and the median compensatory awards have risen steadily since 1994.” This study reported that the “median award rose 15 percent in 2000 to $114,862 from $100,000 in 1999. Between 1994 and 2000, the median award rose 88 percent. In other words, awards are going up at the same time antique dealers are overlooking or ignoring their insurance needs [http ://bit.ly/1hvGCIi].

Amanda Naprawa, writing for AllLaw.com [http ://bit.ly/1UALs56] tells shoppers that regarding a retailer’s liability: “If you slip, fall or are otherwise injured in a store, you may have a valid legal claim against that business.”

Here’s why: Businesses that welcome the public onto their premises have a legal duty to keep them “reasonably safe.” The practice of personal injury law can be highly lucrative for an attorney (and, to be fair, expensive and risky). Attorneys seek out such business, and their emotional appeals to juries may result in a six or seven-figure settlement, even from a small dealer.

According to Becker, if a customer trips in your booth and is injured, they can sue the booth owner, the mall operator and the building owner. Personal injury attorneys look for as many deep pockets as they can find. “Regardless of how much business a dealer does, they need liability insurance,” says Becker.

While some agents recommend a dealer’s liability coverage match the largest recent court award against an antique dealer, others recommend an amount based on a dealer’s assets. An amount based on a dealer’s assets makes sense to me because “corporate veils” are sometimes pierced by a dealer’s personal negligence. In such cases a dealer’s home and other assets can be subject to forfeiture. At a minimum, $1 million liability coverage is suggested.

Inventory, fixtures and equipment should certainly be insured, but such items have a fixed and easily ascertainable dollar value. Liability claims, however, are open-ended and can result in outrageous jury awards. Dealers who are under-insured risk losing not only their business, but their home and other assets as well (depending on how their business is legally organized).

Most insurance programs can be tailored to a dealer’s, promoters or mall operator’s needs, and premiums and deductibles set at appropriate levels. In addition to liability and inventory, the following coverages are typically available:

Ms. Becker suggests that when considering insurance needs, a dealer should begin by asking themselves how much of a loss they can sustain. Some level of self-insurance – likely in the form of deductibles – will keep insurance premiums down.

Of course, when considering how to insure inventory, it’s important for a dealer to consider the time and effort that was required to build the inventory in the first place. Unlike consumer goods retailers, antique dealers can’t just pick up the phone and order a dozen more antique whatchamacallits from a trusted supplier. It could take a dealer many months to rebuild a well-curated inventory. Insurance companies won’t pay for your inventory “rebuilding time,” though. Usually, only the actual cost of the inventory is covered (there are several formulas that insurers use to arrive at an appropriate figure). But if you know that it could take you six months to rebuild your business, you should factor six months’ worth of expenses into your financial plan.

I know that antique dealers hate to add to their expenses, and that a good insurance plan doesn’t “come cheap.” But as one who has personally suffered business property loss, I can vouch for the helpfulness of a well thought-out insurance plan.