Business such as dry cleaners, alterations or shoe repair constantly have customers dropping off and picking up their clothing or shoes. Laundromats are no exception as some are offering wash & fold services.

With the majority of the inventory as possessions of clients, what would happen if there were to be a fire? How are you to compensate customers for the loss or damage of their entrusted items in such accidents?

Bailee coverage is crucial for businesses that hold customers’ property  while repairing or servicing. If a customer’s property is lost or damaged, the insurance company investigates the case. If you are found liable, the bailee coverage provides financial compensation to your client. Some business owners may already have  Bailee coverage.  However, it is more important to check if a sufficient amount of coverage is in place.

To determine the appropriate insurance coverage amount, check your inventory on the busiest day of the week or month. Then, calculate a monthly average. By multiplying the average monthly inventory by 1.25, the Safety Factor adds about 25%. This will help you find out how much inventory you keep and determine the appropriate amount of “Bailee Coverage”. This coverage may not seem so important in your day-to-day business operations. However, it will be helpful in cases when there’s a great damage to the customer’s property due to fire or theft,

For example, there was an incident where a dry cleaner was vandalized and robbed. After the basketball world championship’s final game, what started as an excited crowd became a group of mobs. They broke into a dry cleaner and ran away with all the clothes. Luckily, the owner of the dry cleaner was able to continue the business without much difficulty. He had prepared for the possibility of such an accident and had sufficient amount of bailee coverage. If he had not shown any active interest in determining if he had the sufficient amount of coverage for such  accidents, he would have had to reimburse the remaining lost items out of pocket after using up all his coverage limit minus the deductible of $1000.

Below are additional tips to be better prepared.

  1. Ask your insurance carrier or your agent on the coverages you have and the limit amount.
  2. In case of an accident, accurately assess the customer’s lost item.
  3. Estimate the value of the lost item based on both the price and the year of purchase.
  4. Check if your insurance provides coverage for risks such as riot, fire, or theft.
  5. When it’s time to renew your insurance, double-check if you need to update your insurance coverage limit or add additional items.

Above all, your priority should be to know what your insurance covers and the limit amount before an accident occurs.