The recent floods will have resulted in retailers across the country frantically checking the finer details of their insurance policies.
It is when such disasters strike that we all realise how important it is to have the correct cover. Especially when it can make or break a business.
But with the sector going through so many changes in the past few years, it can be difficult to make sure all the important areas of your business have adequate protection.
Some parts of the country are only just starting to dry out after this summer’s freak weather. City analyst firm Fitch claims it could cost as much as £3bn to cover the total damage.
Hundreds of homes and businesses will still take many weeks or months to get back to normal. And for people living in some of the worst-affected areas, the threat of yet more rain this autumn must really be dampening their spirits.
The Association of British Insurers says there have been almost 60,000 claims resulting from the June and July floods. These can be divided into 45,000 domestic and 14,500 commercial claims. The association puts the average flood claim at between £20,000 and £30,000, with insurance companies warning the extra payouts could mean higher premiums in the future.
The flooding highlights the need for forecourt operators to make sure they have the insurance that best suits their needs - opting for the cheapest policy can sometimes simply end up being be a false economy.
Robert Reeve is technical manager at specialist company Davis Corporate Risks, which is the recommended broker of the Petrol Retailers’ Association (PRA).
His main tip for retailers is to make sure they have a solid recovery plan in the event of any disaster. He says: "Retailers need to think, ’What would I do if the worst happened? How would we keep trading?’
"One of the most important things is to keep back-ups of everything off site.These could be anything from stockists’ phone numbers to information on stock or deliveries.
"If you do need to make a claim, the onus will be on you to prove to the insurance company what you have lost.
"Keep a copy of your most recent purchases and the details of what you’d expect your takings to be at this time of year. Contingency planning is essential. You can do this yourself or, if you’re unsure of what to do or don’t have the time to organise it, it’s worth looking into getting a consultancy to do it for you."
According to Reeve, insurance policies do not cover maintenance costs or damage caused by lack of maintenance, so retailers cannot get such cover on underground fuel tanks.
The tanks are, however, covered for standard insurance perils such as fire and flood. So anyone affected by the recent flooding should have been okay.
PRA director Ray Holloway, has been helping a number of PRA members who were hit by the floods to varying degrees. And insurance has been one of the main concerns among traders.
"The first message we would send out to retailers concerns water getting into the fuel tanks," says Holloway.
"Obviously if there’s water underground, that’s one of the biggest issues for forecourt operators. So make sure you know what’s in your policy."
This is something retailer Guy Warner found out recently - and almost to his peril.
Last month we reported how his site in Tewkesbury, Gloucestershire, was wrecked by the disaster, with the forecourt and all but the tops of the petrol pumps submerged for days.
The forecourt shop was also flooded with 4ft of water. And by the time Guy, the managing director of Warners Retail, got back into the shop it needed to be totally refurbished and restocked.
But while the site needed new pumps, very little water got into the fuel tanks. This turned out to be very lucky for him because he had everything covered by his insurance - except the fuel tanks!
Guy put the slip-up down to an oversight and remains upbeat about the future, despite owning a forecourt in an area of the country which is prone to flooding.
With his site still out of action, Guy has two tips for those in the industry: "When it comes to making a claim, you are so relieved that you went for a robust policy rather than maybe the cheapest option," he says.
"We went with Norwich Union and the staff were fantastic. But the main thing I think we really benefited from was having a good insurance broker.
"We went through JL Fisher in Gloucester and the company was extremely pro-active and took a lot of the potential aggro and stress out of the situation for us.
"The staff argued our case with Norwich Union and got a loss adjuster out on the site on the Sunday after the floods started. I was impressed by how quickly they got things moving. After all, the water was still there, and rising!
"The adjuster gave us the green light very quickly so we were able to start planning the clean-up operation immediately. Our brokers have been fantastic. While lots of brokers just sell the insurance and then take a back seat, I think it’s really important to get one that will manage the insurance for you when you really need it.
"Without them, we could have been one of the unlucky ones, stuck in the awful situation of having to go through call centres and not knowing what would happen."
Guy, who hopes to re-open the site on September 13, isn’t too worried about his forecourt being out of action for so long because his business was also covered for loss of earnings.
He says it is definitely worth thinking about what would happen to your business if you were forced to shut up shop for any reason - albeit temporarily.
Not all insurance policies cover loss of income if a business is unable to trade. The policy holder usually needs to request it be added as an extra.
This issue has been highlighted by the floods but it is something many traders may overlook.
It is therefore vital to consider getting business interruption cover added to a general policy - the bills can add up quickly if you are forced to stop trading, even for just a matter of days.
Holloway adds that another extremely important area of insurance, which is a technicality but should not be overlooked, concerns product spillage. "Many traders affected by the floods would be covered for pollution," he says. "But they probably don’t realise that this only covers them for polluting the surrounding area or their neighbours’ properties - and not their own land. It only covers damage to property owned by a third party.
"If you have a spillage, there are all sorts of things to think about, such as replacing polluted soil. But these things probably aren’t covered in the policy. If you contaminate any soil with oil, the soil must be replaced. But this is of course very expensive.
"It counts as contamination if it’s on your own premises - so retailers need to get specialist environmental policy." Fortunately, the PRA members affected by the flooding were covered for both contamination and pollution due to the association’s own insurance recommendations.
Another general insurance issue is long-term wet-stock leakage.
Retailers are usually not insured for continuous leakage, even though the average petrol retailer could be losing as much as £15,000 per site each year.
Added to this, serious leakage could result in huge clean-up costs, the threat of being taken to court and the possibility of a fine. But this area does require protection in the form of a specialist Environmental Impairment Liability policy.
Linda Cash, operations manager at wet-stock monitoring company Edensure, says: "Insurance cover usually only provides protection for what we call catastrophic incidents - like if the bottom of the tank falls off and when there is a sudden, large fuel leak.
"But the insurance often doesn’t cover continuous leakage, or failure to perform proper wet-stock analysis."
The legal limit for permitted leakage is nine litres per day. Edensure’s ES3 system identifies any leakage long before it exceeds nine litres per day. The company has Personal Indemnity cover of £500,000 and is so confident in the accuracy of the system that it offers this cover to retailers against any incident they do not identify.
Cash adds: "It’s real-time analysis and it is essential to have reputable methods of monitoring for the Personal Indemnity cover to actually be worth anything.
"This is why we insist upon interfacing with adequate site equipment which is capable of providing real-time data. As a result, none of our clients have had a leak which we have not identified."
On a different note, buildings insurance is also vital and retailers must keep their policy up to speed as their business develops.
Holloway says many retailers will have improved their premises in the past few years - but perhaps not kept their premium payment up to date.
It is essential this is kept in line with the business or any payout could fall short of what it would cost to rebuild the property.
Retailers also need to cover other services like car washes in their policies. Holloway warns: "Car washes display disclaimer notices warning that the forecourt operator is not responsible for any negligence on the customers’ part. It’s amazing what sort of accidental damage motorists can cause to their own vehicles - such as going through the car wash with the boot open. But while the sign may state that the operator will take no responsibility for accidental damage, the customer can still try to make a claim against the company. So it’s vital any insurance policy also covers this."
Other risks that are peculiar to forecourts include damage to canopies - usually due to bigger vehicles like lorries driving into them. This is classed as impact damage and would be covered on a general policy.
However, petrol pumps are not usually covered by insurance if they break down.
Retailers are also liable for the health and safety of staff and customers. This would usually be covered by a standard policy but it is vital to always check the small print on any insurance document to see how much protection you have.
Experts agree that this summer’s horrendous floods should act as a wake-up call for us all, whether it concerns our homes or businesses.
And while it does not necessarily mean that the price of everyone’s premiums will go up - despite threats from some insurance companies - savvy forecourt operators need to be on the ball and shop around to protect themselves.
"Most of the time people don’t even know what is in their insurance policies," says Ray. "The documents come through the post and they just get tucked away in a drawer until they need renewing a year later.
"But it is so important to read the contents of the policy to avoid getting caught out. The recent weather conditions should make people sit up and start thinking about what they are and are not covered for. If nothing else, the flooding has probably had a very positive effect on this."
Finally, Holloway suggests retailers look at some of the specialist insurers for the forecourt industry. "Do your homework," he says. "You might be surprised by some of the good deals that are out there."
l For further information contact the Association of British Insurers 0207 6003333; Petrol Retailers’ Association (PRA) [http://www.rmif.co.uk] 0207 307 3593; Davis Corporate Risks Ltd 01638 608060; Edensure 0845 0946390
=== cover: What to look for ===
? Is there Business Interruption Insurance included in the policy? This could cover anything from employees’ wages, loss of income from sales, or mortgage/rental payments if your business is unable to trade. If it is not included, think about how long you would realistically be able to survive if the business had to close temporarily.
? Look carefully at the excess you would have to pay on any claim. Is it worth paying a higher premium in the long term to bring this down to a minimum?
? When insuring for stock replacement, make sure your policy keeps pace with the business’ rising stock value.
? Check the details for wet-stock leakage and fuel spillage. These are only covered if the incident is ’sudden and unforeseen’ and there is no cover for own-site clear up. A specialist Environmental Impairment Liability policy would be required.
? Is your buildings insurance adequate? Building sums insured should be reviewed regularly, but it is the cost of rebuilding the property that is insured and NOT the market value of the property. If you are unsure, contact a building surveyor who will be able to give you a valuation for insurance purposes as well as a market valuation.
? Car wash - are you covered if someone sues for accidental damage to their vehicle or their possessions in the vehicle? This is relevant to Public & Employer’s Liability cover.
? Make sure your policy has adequate cover for the health and safety of staff and customers, again covered by Public & Employers’ Liability cover.
? Check the small print regarding the theft of stock.
? Finally, bear in mind that the main insurance covers are for property, business interruption and employer’s & public liability. There are numerous other specialist policies that might be suitable - but it depends on if this is relevant to each individual business.
=== Making a claim ===
? Contact your insurance company as quickly as possible and make yourself a priority to them. The sooner you get a loss adjuster on site, the sooner you’ll have piece of mind and know what you can claim for.
? If you have a broker, get in contact with him/her instead. Provide as much detail as you can and ask them to chase the insurance company on your behalf.
? Make sure your financial records are up to date and are ready to show to your insurance company. When working out what you’re entitled to, the insurer will want to know your estimated stock levels and trading figures for the time of year.
? Complete and return all paperwork immediately in order to prevent any delays to payouts.