SCOTTSDALE, Ariz. -- As a convenience-store operator, you’re well aware of your multiple contractual obligations. These obligations tend to cause a lot of headaches and uncertainty and span from agreements you have with your suppliers, lenders, leaseholders and so on. In turn, you may place contractual responsibilities on your vendors, dealers, service contractors, etc.
When it comes to your contractual liabilities, there are a lot of I’s to dot and a lot of T’s to cross. To safeguard your investment, it’s critical to understand the various insurance provisions and requirements addressed in each contract you’re involved with.
All contracts are loaded with words, words and more words … and by the end, your eyes may be saying, “Give me a break!” But a thorough review is necessary, and there are two important factors to consider when doing so:
- Is my business accepting any unnecessary liability by signing the document?
- Does my current insurance policy language provide the required coverage and limits dictated by the contract?
Staying on top of all of these contractual relationships is challenging and poses an administrative nightmare. Most retailers are good with their main contracts. However, many struggle with maintaining annual updates on companies that serve their business. This can lead to situations in which a vendor may have insufficient insurance coverage—or no insurance at all. In those cases, you could be brought in to pay for your vendor’s accident.
So what should you do? Start off with devising a contract-management policy. This practice needs to be “owned” by someone within your company who is responsible for maintaining standards. The process should include a protocol for each contract to be evaluated by your insurance consultant.
Then you would confirm the proper coverage and limits are in place to satisfy the language within the contract.
Finally, you should maintain an annual system to confirm that all of your relationships are vetted for proper coverage. Don’t let contractual liabilities go unchecked—it could sink your business.
Eric Bolduc is vice president of property and casualty for Holmes Muphy, West Des Moines, Iowa. Contact him at ebolduc@holmesmurphy.com.
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