Processing Insurance FAQ

• At the minimum, processing businesses need general liability insurance.
• If they have employees they will need workers compensation in most states.
• If they have vehicles registered to the business, or use vehicles for the business purposes, they will also need commercial auto.
• There are also other specialty coverages and endorsements that might be needed based on their operations.

Package policies are the most practical and convenient way for the insured to bundle several coverages together to receive a pricing break. Bundling all coverages provides a cost savings to the company and an incentive to the insured to place a number of coverages with the same company. None of the classifications in this category are eligible for a businessowners policy.

Types Of Processing Package Policies:

• Commercial Package Policy (CPP)

The equipment used in processing operations is specialized and may be difficult to replace. Business income losses may last longer than expected if a damaged piece of equipment cannot be replaced easily or quickly.

An output policy form should be considered because it is designed to cover the changing nature of the property as it goes through the processing operation. Personal property of others is also an important exposure that must be recognized and covered in the appropriate manner.

Improvements and betterments coverage should be used when the processor is a tenant because the machinery and equipment could be covered using a building rate rather than the business personal property rate.

Types Of Property Coverages:

• Building
• Business Personal Property
• Personal Property of Others
• Improvements and Betterments

A risk and exposures analysis is important to determine the appropriate inland marine coverage form(s) to use. Patterns and dies coverage may be important for a processing risk.

Transportation of raw materials as well as finished processed goods should also be considered. Because most processors are bailees, protection of the customer's goods is important.

Types Of Inland Marine Coverages:

• Accounts Receivable Coverage
• Bailee Customers Coverage
• Difference in Conditions (DIC) Coverage
• Electronic Data Processing Equipment Coverage
• Patterns and Dies Coverage
• Processing Risk Coverage
• Transportation Coverage
• Valuable Papers and Records Coverage

Some types of raw material inventory used in processing operations are not easily marked and therefore are harder to track, which makes them particularly susceptible to employee theft. Other crime coverages should be considered, depending on the nature of the operations and the manner in which they are conducted.

Other coverages that may be needed are determined by money-handling arrangements, the nature and extent of computer transactions and functions, and whether or not the business is considered a target. Fraudulent impersonation coverage could be very helpful to certain service operations because it covers loss through trickery.

Types Of Crime Coverages:

• Computer and Funds Transfer Fraud Coverage
• Employee Theft Coverage
• Forgery or Alteration Coverage
• Inside The Premises-Theft of Money and Securities Coverage
• Inside The Premises-Robbery or Safe Burglary of Other Property Coverage
• Money Orders and Counterfeit Money Coverage
• Outside The Premises Coverage

Bonds may be required in order for a processor to begin operations or remain in operation. In some cases, performance bonds may be required if the processor supplies services or products to a governmental entity.

Types Of Surety Coverages:

• Contract-Performance of Service or Supply Bonds
• Fiduciary Bonds
• License and Permit Bonds
• Miscellaneous Surety Bonds

Premises and operations liability exposures could be substantial if explosion or equipment overheating is possible. Products liability can also present concerns, depending on the nature of the operations performed.

Railroad protective liability coverage may be necessary if an operating rail spur or sidetrack is on the insured's property.

Types Of Liability Coverages:

• Commercial General Liability (CGL) Coverage
• Claims-Made to Occurrence Coverage
• Employee Benefits Liability Coverage
• Employment-Related Practices Coverage
• Product Recall or Product Withdrawal Expense Coverage
• Product Contamination Insurance
• Railroad Protective Liability Coverage

The auto exposure depends on the nature of the operations and the manner in which the processed goods are delivered to the customer. If the insured uses common or contract carriers to transport finished goods, the exposure could be as little as a salespersons' fleet and hired and non-owned autos.

Types Of Business Auto Coverages:

• Auto Medical Payments
• Business Auto Coverage
• Collision Coverage
• Comprehensive Coverage
• Hired & Non-owned Auto Coverage (HNOA)
• Uninsured/Underinsured Motorists Coverage

Processing exposes workers to the potential of significant injury. The chemicals used in some of the processes are toxic. Coverage for on-the-job injuries sustained by their employees through either a workers compensation policy or an approved self-insurance program is mandatory in almost every state.

Types Of Workers Comp Coverages:

• Excess Workers Compensation Self-Insurance Bonds
• Stop-Gap or Employers Liability Coverage
• Workers Compensation and Employers Liability Coverage

If the potential for injury or damage to others by the processed product is significant, or if an explosion or other catastrophic event at the processing plant is possible, high limits of coverage are important. The extra limits can be provided by either an umbrella or an excess policy.

Types Of Excess Liability Coverages:

• Excess Liability Coverage
• Retroactive Excess Liability Coverage
• Umbrella Coverage

Some processors have significant environmental and international loss exposures. These exposures are not covered in the standard forms but can be addressed by one or more of the coverages shown below:

Types Of Specialty Coverages:

• American Expatriate Coverage
• Business Legal Expense Coverage
• Commercial Credit Coverage
• Cyber Liability Coverage
• Data Security Breach Coverage
• Directors and Officers Liability Coverage
• Environmental Impairment Liability Coverage
• Export Credit Insurance Coverage
• Fiduciary Liability (Pension, Welfare and Employee Benefit Funds) Coverage
• Identity Theft Insurance Coverage
• International Insurance Coverage
• Risk Retention Group Liability Coverage
• Solar Energy System Coverage
• Tax Liability Coverage
• Tender Offer Defense Expenses Coverage
• Underground Storage Tank (UST) Liability Coverage
• Unmanned Aerial Vehicles (UAV) (Drones)