Realities of Liability Insurance in the Fireworks Industry
Jun 20, 2019 16:41:00 GMT -5
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Post by bkushnier on Jun 20, 2019 16:41:00 GMT -5
Your first encounter with needing insurance in the fireworks business may be when you go to apply for a permit to sell fireworks or have a fireworks display. You need to provide a Certificate of Insurance to the AHJ/municipality showing anywhere from $2,000,000 to $10,000,000 of Commercial General Liability insurance. They will normally require you to add them as an "Additional Insured". This means that they are expecting your insurance to cover them in the event of a lawsuit as a result of your operations. For example, you get a permit to do a shoot on Canada Day. Someone in the crowd claims debris landed in their eye and they file a lawsuit. Their lawyer files a "Statement of Claim" through the courts which claims everyone is to blame, from you for firing the fireworks, to the distributor/manufacturer because they claim the product was defective, to the AHJ/municipality for giving a permit to someone that they should have known was unqualified and dangerous. They may even name the display supervisor personally. Assuming you provided that certificate of insurance showing the AHJ/municipality as an "Additional Insured" then they will be expecting your insurer to pick up the tab.
But do you need to buy insurance to get one of these certificates? What if your friend has a company and gets one for you? What if your supplier offers to provide you with a certificate along with the product they supply and adds you as an "Additional Insured"? Doesn't "Additional Insured" mean the same thing as "Insured" or "Named Insured"? What if they add me as an "Insured" or "Named Insured"? This certificate is standing between you and doing the work you want to do, so who cares how you get it? Besides, it's the suppliers product that is causing the problem, so shouldn't it be on them? Anyways, I have liability coverage on my homeowners insurance so do I even have to worry?
I'll go through each of these questions.
But do you need to buy insurance to get one of these certificates?
Yes, you need to buy insurance to get a certificate. They are provided by your broker or agent to evidence coverage you have purchased. They show the insurer it is placed with, type of coverage, limits, and a description of operations. They are given to "Certificate Holders" as evidence that you have insurance.
What if your friend has a company and gets one for you?
Your friend can't "give you" their insurance by handing you a certificate of insurance. A certificate of insurance is not "insurance", it is more like a photograph. A snapshot of coverage used to show someone that you have insurance. Read the fine print on them and you will see words like "THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING INSURER(S), AUTHORIZED REPRESENTATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER." The company or person noted as the "Insured" or "Named Insured" is the one that has coverage. Being a "Certificate Holder" does not mean you have coverage, it just means you are someone who has been provided proof of someone else's insurance.
What if your supplier offers to provide you with a certificate along with the product they supply and adds you as an "Additional Insured"?
If your supplier adds you as an "Additional Insured" and gives you the certificate that does not mean your display or your retail operation is entirely insured. You are responsible for your own actions. You may have to hire your own lawyer if their insurer refuses to cover you because the claim is unrelated to the operations of your supplier, and even if they do agree to defend you don't expect them to pay judgments against you that are a result of your negligence. If someone trips and falls in your sales trailer, that will be on you. If someone claims you sold fireworks to someone under age and they got hurt, that will be on you. If they claim you shot fireworks into the crowd (even though you could see the idiot shooting his own stuff during your display) that is on you. Whether the claims are real or not, you need a lawyer to draft up a statement of defense, which costs ~$1,500. If the claim goes further expect the cost to go over $5,000 real quick.
Doesn't "Additional Insured" mean the same thing as "Insured" or "Named Insured"?
An "Insured" or "Named Insured" is very different from "Additional Insured". When you are the "Insured" or "Named Insured" on a policy then you are covered for liability arising out of your operations per the policy wording. The "Named Insured" is the one listed on the policy who is responsible for paying the premium and any deductibles, and has the ability to give directions on changes to coverage like cancelling or increasing limits. A policy will have wording on who else is an "Insured" under the policy, which normally includes employees, volunteers, and the owners. An "Additional Insured" is a special status that is provided to a third party because they are at risk of getting dragged into a claim as a result of the "Named Insured" or "Insured" doing something. It is normally requested as part of a contract. For example when you want to rent a store front for selling fireworks over Halloween, the landlord wants to be added as an "Additional Insured" because if something goes wrong from your operation then they may get dragged into a claim. They are increasing their risk by renting to you, so they look to transfer that risk to your insurer.
If someone is able to show you evidence that you have been added as an "Insured" or a "Named Insured" to their policy then you should have coverage for your operations as disclosed to the insurer. Congratulations, you don't have to buy any more insurance! Be careful that this hasn't been offered only for a limited time. Liability insurance responds to an "occurrence of bodily injury or property damage" during the coverage period. If the coverage period is one week while you sell your product out of a trailer, but the bodily injury happens two months later then there is no coverage. You want to be covered annually and constantly or you will risk having an "occurrence" where someone gets hurt and you aren't insured. This also applies to buying "event-based" coverage. Ask the broker or agent selling it to you what happens if there is an accident after it expires because someone took some unexploded product they found on the ground and decided to do something stupid with it a week later, or shoots the roman candles they bought from you for Canada Day at Halloween instead and someone gets hurt. If they say you'll be fine, at least you can try to sue them when things go wrong.
This certificate is standing between you and doing the work you want to do, so who cares how you get it?
You should probably care, because if you don't have insurance and something goes wrong you will have to find the money to pay for it yourself. The AHJ/municipality will care, especially if they don't receive coverage as an additional insured. For the person supplying the certificate if they have done it for a price this may be seen as an attempt to "sell insurance". You can't legally sell insurance which requires having a broker or agent's license, so those people should care that things are done right as well.
Besides, it's the suppliers product that is causing the problem, so shouldn't it be on them?
Yes the "product" is involved in the loss, but that doesn't mean the liability stays with the supplier/importer. For example imagine you are a roofer and you install shingles. You get a call from the homeowner complaining of water damage to their roof. If they were installed incorrectly then the liability will rest with you, the roofer, and you need to have insurance. Even if you installed them correctly, did you have an obligation to check them first for defects? Were they defective when you got them or did they get damaged while in your custody? If the shingles are found to be defective then the liability may rest primarily with the manufacturer/distributor, but you may find yourself still involved depending on the evidence and how reasonable it might be to expect you to catch the defect.
Anyways, I have liability coverage on my homeowners insurance so do I even have to worry?
Will your homeowner's insurance respond? Unlikely. This is a commercial operation, so check that policy carefully and you should expect to see that not only are you not covered there, but if you have any commercial operations at your home they may deny any coverage for a loss at your home like a fire. Commercial operations can include storage of product or equipment, or seeing clients at your home. A Commercial General Liability policy is what you need. It is meant to respond to claims of Bodily Injury and Property Damage made by third parties against your for your business operations.
Well you may not worry much about the above questions if you are an employee. You should, though, because if your employer isn't insured you can be personally named in a lawsuit and be at risk of having no coverage. I would suggest this is most important to you if you are a display supervisor, as your level of responsibility for the safety of others is very high.
Alternatively, maybe you are working as a "sub-contractor" so you don't have to deal with that pesky income tax or lose money to deductions. Easier for the people paying you, too, as they may not have to register you for worker's compensation in some provinces. Now you are completely on your own. Even if they have insurance it likely will not cover you, only them. A "sub-contractor" is a separate person or entity who is responsible for their own actions, and is not included as an "Insured" on the policy of the company or person that hired them.
I hope this has helped educate you at least a little bit on some of the realities of liability insurance. The reality is that insurance is primarily an expense, and there is no certainty you will ever need to make a claim against your insurance. If you are operating a business it is one more thing keeping you from turning a profit. It is a barrier to starting a company as insurers charge more when you don't have a track record of being claims free. As a result people try to find a way to avoid buying insurance. There are consequences to doing so. Talk to an experienced insurance broker or agent to get professional advice on coverage. Don't assume anything with insurance. As always doing things right costs more up front. Doing things wrong can cost you everything.
But do you need to buy insurance to get one of these certificates? What if your friend has a company and gets one for you? What if your supplier offers to provide you with a certificate along with the product they supply and adds you as an "Additional Insured"? Doesn't "Additional Insured" mean the same thing as "Insured" or "Named Insured"? What if they add me as an "Insured" or "Named Insured"? This certificate is standing between you and doing the work you want to do, so who cares how you get it? Besides, it's the suppliers product that is causing the problem, so shouldn't it be on them? Anyways, I have liability coverage on my homeowners insurance so do I even have to worry?
I'll go through each of these questions.
But do you need to buy insurance to get one of these certificates?
Yes, you need to buy insurance to get a certificate. They are provided by your broker or agent to evidence coverage you have purchased. They show the insurer it is placed with, type of coverage, limits, and a description of operations. They are given to "Certificate Holders" as evidence that you have insurance.
What if your friend has a company and gets one for you?
Your friend can't "give you" their insurance by handing you a certificate of insurance. A certificate of insurance is not "insurance", it is more like a photograph. A snapshot of coverage used to show someone that you have insurance. Read the fine print on them and you will see words like "THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING INSURER(S), AUTHORIZED REPRESENTATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER." The company or person noted as the "Insured" or "Named Insured" is the one that has coverage. Being a "Certificate Holder" does not mean you have coverage, it just means you are someone who has been provided proof of someone else's insurance.
What if your supplier offers to provide you with a certificate along with the product they supply and adds you as an "Additional Insured"?
If your supplier adds you as an "Additional Insured" and gives you the certificate that does not mean your display or your retail operation is entirely insured. You are responsible for your own actions. You may have to hire your own lawyer if their insurer refuses to cover you because the claim is unrelated to the operations of your supplier, and even if they do agree to defend you don't expect them to pay judgments against you that are a result of your negligence. If someone trips and falls in your sales trailer, that will be on you. If someone claims you sold fireworks to someone under age and they got hurt, that will be on you. If they claim you shot fireworks into the crowd (even though you could see the idiot shooting his own stuff during your display) that is on you. Whether the claims are real or not, you need a lawyer to draft up a statement of defense, which costs ~$1,500. If the claim goes further expect the cost to go over $5,000 real quick.
Doesn't "Additional Insured" mean the same thing as "Insured" or "Named Insured"?
An "Insured" or "Named Insured" is very different from "Additional Insured". When you are the "Insured" or "Named Insured" on a policy then you are covered for liability arising out of your operations per the policy wording. The "Named Insured" is the one listed on the policy who is responsible for paying the premium and any deductibles, and has the ability to give directions on changes to coverage like cancelling or increasing limits. A policy will have wording on who else is an "Insured" under the policy, which normally includes employees, volunteers, and the owners. An "Additional Insured" is a special status that is provided to a third party because they are at risk of getting dragged into a claim as a result of the "Named Insured" or "Insured" doing something. It is normally requested as part of a contract. For example when you want to rent a store front for selling fireworks over Halloween, the landlord wants to be added as an "Additional Insured" because if something goes wrong from your operation then they may get dragged into a claim. They are increasing their risk by renting to you, so they look to transfer that risk to your insurer.
If someone is able to show you evidence that you have been added as an "Insured" or a "Named Insured" to their policy then you should have coverage for your operations as disclosed to the insurer. Congratulations, you don't have to buy any more insurance! Be careful that this hasn't been offered only for a limited time. Liability insurance responds to an "occurrence of bodily injury or property damage" during the coverage period. If the coverage period is one week while you sell your product out of a trailer, but the bodily injury happens two months later then there is no coverage. You want to be covered annually and constantly or you will risk having an "occurrence" where someone gets hurt and you aren't insured. This also applies to buying "event-based" coverage. Ask the broker or agent selling it to you what happens if there is an accident after it expires because someone took some unexploded product they found on the ground and decided to do something stupid with it a week later, or shoots the roman candles they bought from you for Canada Day at Halloween instead and someone gets hurt. If they say you'll be fine, at least you can try to sue them when things go wrong.
This certificate is standing between you and doing the work you want to do, so who cares how you get it?
You should probably care, because if you don't have insurance and something goes wrong you will have to find the money to pay for it yourself. The AHJ/municipality will care, especially if they don't receive coverage as an additional insured. For the person supplying the certificate if they have done it for a price this may be seen as an attempt to "sell insurance". You can't legally sell insurance which requires having a broker or agent's license, so those people should care that things are done right as well.
Besides, it's the suppliers product that is causing the problem, so shouldn't it be on them?
Yes the "product" is involved in the loss, but that doesn't mean the liability stays with the supplier/importer. For example imagine you are a roofer and you install shingles. You get a call from the homeowner complaining of water damage to their roof. If they were installed incorrectly then the liability will rest with you, the roofer, and you need to have insurance. Even if you installed them correctly, did you have an obligation to check them first for defects? Were they defective when you got them or did they get damaged while in your custody? If the shingles are found to be defective then the liability may rest primarily with the manufacturer/distributor, but you may find yourself still involved depending on the evidence and how reasonable it might be to expect you to catch the defect.
Anyways, I have liability coverage on my homeowners insurance so do I even have to worry?
Will your homeowner's insurance respond? Unlikely. This is a commercial operation, so check that policy carefully and you should expect to see that not only are you not covered there, but if you have any commercial operations at your home they may deny any coverage for a loss at your home like a fire. Commercial operations can include storage of product or equipment, or seeing clients at your home. A Commercial General Liability policy is what you need. It is meant to respond to claims of Bodily Injury and Property Damage made by third parties against your for your business operations.
Well you may not worry much about the above questions if you are an employee. You should, though, because if your employer isn't insured you can be personally named in a lawsuit and be at risk of having no coverage. I would suggest this is most important to you if you are a display supervisor, as your level of responsibility for the safety of others is very high.
Alternatively, maybe you are working as a "sub-contractor" so you don't have to deal with that pesky income tax or lose money to deductions. Easier for the people paying you, too, as they may not have to register you for worker's compensation in some provinces. Now you are completely on your own. Even if they have insurance it likely will not cover you, only them. A "sub-contractor" is a separate person or entity who is responsible for their own actions, and is not included as an "Insured" on the policy of the company or person that hired them.
I hope this has helped educate you at least a little bit on some of the realities of liability insurance. The reality is that insurance is primarily an expense, and there is no certainty you will ever need to make a claim against your insurance. If you are operating a business it is one more thing keeping you from turning a profit. It is a barrier to starting a company as insurers charge more when you don't have a track record of being claims free. As a result people try to find a way to avoid buying insurance. There are consequences to doing so. Talk to an experienced insurance broker or agent to get professional advice on coverage. Don't assume anything with insurance. As always doing things right costs more up front. Doing things wrong can cost you everything.
