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Vintage threads from the first ten years

Business Insurance

4/15/2003 8:42 PM
Alexander	Business Insurance or more properly, good friggin' luck GETTING any ! If I didn't already have a business in the general industrial/metalworking sector I'd be up the proverbial creek. Any sane person wants to Incorporate to avoid personal lawsuits, and you know that eventually somebody is going to drop their amp in a bathtub and it's going to be YOUR FAULT , so to limit your personal exposure you want the 'shield' of a corporation. But guess what- NO insurance company HAS to write you a policy ! I expected at least some sort of astronomical quote given the possible multimillion-dollar exposure. My existing policy has a 1-million dollar umbrella so I was curious how much more another couple million would be; no dice, no new ventures considered. Period. I have to slowly add to my policy to get the real protection I want. Just so you guys have an idea of what to expect if you get anybody to even write you anything at all, my basic Corp. liability, Property & casualty & workers Comp policy costs me 5 grand a year. You plunk down 20-30 percent & pay the balance over the next 8 months. why 8 months ? Nobody knows, it just keeps your invoices high for a while then you skate the last couple months feeling artificially good about cash flow ! Think long & hard about getting into this ! Best thing to do is sit down with a trusted attorney and / or CPA and run out the numbers on how many amps/pedals per month do you really have to crank out at X profit margin and then think about it again ! The hobby suddenly looks very different as a business venture though the lure of doing something you love is strong... I'm sure Carl Z. has some choice commentary on these matters too ! FYI, Alexander Retrodyne Amplification http://www.retrodyne-amps.com

4/15/2003 8:42 PM

Alexander

Business Insurance

or more properly, good friggin' luck GETTING any !
If I didn't already have a business in the general industrial/metalworking sector I'd be up the proverbial creek. Any sane person wants to Incorporate to avoid personal lawsuits, and you know that eventually somebody is going to drop their amp in a bathtub and it's going to be YOUR FAULT , so to limit your personal exposure you want the 'shield' of a corporation. But guess what- NO insurance company HAS to write you a policy ! I expected at least some sort of astronomical quote given the possible multimillion-dollar exposure. My existing policy has a 1-million dollar umbrella so I was curious how much more another couple million would be; no dice, no new ventures considered. Period. I have to slowly add to my policy to get the real protection I want. Just so you guys have an idea of what to expect if you get anybody to even write you anything at all, my basic Corp. liability, Property & casualty & workers Comp policy costs me 5 grand a year. You plunk down 20-30 percent & pay the balance over the next 8 months. why 8 months ? Nobody knows, it just keeps your invoices high for a while then you skate the last couple months feeling artificially good about cash flow !

Think long & hard about getting into this !
Best thing to do is sit down with a trusted attorney and / or CPA and run out the numbers on how many amps/pedals per month do you really have to crank out at X profit margin and then think about it again ! The hobby suddenly looks very different as a business venture though the lure of doing something you love is strong...
I'm sure Carl Z. has some choice commentary on these matters too !

FYI,
Alexander
Retrodyne Amplification
http://www.retrodyne-amps.com

4/16/2003 12:41 AM
Joe Gagan	Hi A, If I understand you correctly, you are covering liabity for your amp company under your metal shop insurance policy? Are you sure that they would pay a claim or go to court for you on a claim against your amplifier division? I am wondering if they would try to weasel out of coverage saying it isn't the type of business they thought they were insuring. I liked your other points, a very well worth considering.

4/16/2003 12:41 AM

Joe Gagan

Hi A,
If I understand you correctly, you are covering liabity for your amp company under your metal shop insurance policy?
Are you sure that they would pay a claim or go to court for you on a claim against your amplifier division? I am wondering if they would try to weasel out of coverage saying it isn't the type of business they thought they were insuring.

I liked your other points, a very well worth considering.

4/16/2003 2:49 PM
alexander	Hey Joe- You really have to trust and work with your agent on these things; his angle is that since I don't primarily manufacture the core components i.e. trannys etc. that I'm really an assembly operation and that my built in safety margins, best commercial practice/parts etc. is where you build your defense. He has a strategy to steadily add to and expand the definitions of what we're doing so that if someday I'm actually putting out a statistically significant amount of product that we'd have enough years/experience under our belts to fight any claims. You really need to supply written instructions and safety-related paperwork with everything you service/sell and be able to prove same if you want to have any hope at all in defending yourself. Go copy the generic 'house grounding' sheet that comes with ALL consumer electronic products- then add all you dare about your tube products needing high voltage power sources and explain their attendant risks. Explain how you add fusing or whatever you do to enhance that safety yet some things are beyond your control like bar-owner's wiring expertise or the lack thereof !! Better still would be a repair-return logbook that your customer initials or signs that he's rec'd said safety warnings. I don't know that any of my customers would balk at that- if one would then I'd have to be prepared to say goodbye on philosophical grounds ! There's always risks in life- you just can't get around that. HTH, Alexander Still Not a Defendant

4/16/2003 2:49 PM

alexander

Hey Joe-
You really have to trust and work with your agent on these things; his angle is that since I don't primarily manufacture the core components i.e. trannys etc. that I'm really an assembly operation and that my built in safety margins, best commercial practice/parts etc. is where you build your defense. He has a strategy to steadily add to and expand the definitions of what we're doing so that if someday I'm actually putting out a statistically significant amount of product that we'd have enough years/experience under our belts to fight any claims.
You really need to supply written instructions and safety-related paperwork with everything you service/sell and be able to prove same if you want to have any hope at all in defending yourself. Go copy the generic 'house grounding' sheet that comes with ALL consumer electronic products- then add all you dare about your tube products needing high voltage power sources and explain their attendant risks. Explain how you add fusing or whatever you do to enhance that safety yet some things are beyond your control like bar-owner's wiring expertise or the lack thereof !! Better still would be a repair-return logbook that your customer initials or signs that he's rec'd said safety warnings. I don't know that any of my customers would balk at that- if one would then I'd have to be prepared to say goodbye on philosophical grounds ! There's always risks in life- you just can't get around that.

HTH,
Alexander
Still Not a Defendant

4/18/2003 6:45 PM

Doug H

quote:
"You really need to supply written instructions and safety-related paperwork with everything you service/sell and be able to prove same if you want to have any hope at all in defending yourself. Go copy the generic 'house grounding' sheet that comes with ALL consumer electronic products- then add all you dare about your tube products needing high voltage power sources and explain their attendant risks."

When I read this it made me realize something:

Think about the last time you bought a tool or an appliance. It could be a weedeater, lawnmower, drill, or even something as benign as an electric can opener. Now remember the owner's manual? How many pages in the front of the book were dedicated to nothing but safety instructions? A lot of these manuals anymore have more pages dedicated to safety instructions than anything else. And this is really stupid and obvious stuff too (Do not operate in a bathtub full of water, Do not touch spark plug while engine is running, Do not run mower over live electrical line, etc...).

You have to page through reams of this type of data to even get to the operating instructions. On top of that it is usually duplicated in about 10 languages. If it hasn't happened yet, someone will eventually get sued because the plaintiff claims they couldn't operate it correctly because they couldn't *find* the operating instructions. ;-)

The point is, there is some *major* CYA going on here, and these guys can still get sued. A major corp can afford to calculate risk and have enough capital on hand (or insurance) to deal with it based on the probability of an incident occurring.

I hope I'm not spreading fear & paranoia. It's just something to consider...

Doug

4/18/2003 10:15 PM
LFOscalator	Yeah, written instructions and written safety precautions seem to be needed for CYA. In fact I'd put the safety precautions on page one, with the common verbage instructing users to read the safety precautions before proceeding with anything else. Also, kind of explains why most manufacturers use the "No serviceable user parts inside" disclaimer, even when simple parts such as tubes are easily serviceable by people with even modest reasoning abilities. Then again ... LFO

4/18/2003 10:15 PM

LFOscalator

Yeah, written instructions and written safety precautions seem to be needed for CYA. In fact I'd put the safety precautions on page one, with the common verbage instructing users to read the safety precautions before proceeding with anything else.

Also, kind of explains why most manufacturers use the "No serviceable user parts inside" disclaimer, even when simple parts such as tubes are easily serviceable by people with even modest reasoning abilities. Then again ...

LFO

4/16/2003 5:12 AM
jaysg	I was asked to make some bass pre-amps by the proprietor of a very nice internet oriented exotic bass store. I'd built something a bit uncreative by Ampage standards, but he loved it. After looking into it and talking to friends, I decided to not do it based on the liability issue. It must be different if the things you make, don't take AC? Maybe another day I will set up a corporation and get the insurance, but it seems a large hurdle for something I'd prefer to stay a cottage industry.

4/16/2003 5:12 AM

jaysg

I was asked to make some bass pre-amps by the proprietor of a very nice internet oriented exotic bass store. I'd built something a bit uncreative by Ampage standards, but he loved it. After looking into it and talking to friends, I decided to not do it based on the liability issue. It must be different if the things you make, don't take AC? Maybe another day I will set up a corporation and get the insurance, but it seems a large hurdle for something I'd prefer to stay a cottage industry.

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