Home shop insurance

[1018Machine]

A guy on another forum was asking about insurance for his home shop and it got me thinking, I wonder how many guys have a separate policy for their shop! Or, better yet how many people even know that if they ever had a problem (Fire, theft, so on...) and the insurance co found out they sold the odd job to the neighbor, or got paid for a little job from a buddy just how fast they would void you insurance.

I had to get a CGL separate from my home policy years ago for this reason as I could not find a single home insurer that would cover me as soon as I said I sold stuff I made in my home shop! I have to have two Million liability just incase some guy stubs his finger on a fishing reel I make!

 

[Perry]

I'm interested in where the line is drawn. What determines a hobby worker?

Does the shop location make a difference? Basement, garage, detached garage?

Size of equipment? I've been in a couple basement shops that had lathes bigger then I have seen at a few industrial manufacturing sites.

This is a great topic.

 

[skippyelwell]

Hadn't thought of that, insurance companies will use any excuse to void a payout.
Not to mention any "temporary electrical modifications" you may make to finish a project, if the payout after a fire was contingent on a electrical inspection I would never get any money.
There are way too many powered machines in my shop for the available power out put, but I'm the only one that works in my shop so it's perfectly safe as I can only use one machine at a time.

 

[Susquatch]

Can't add much to the discussion. As a farmer, my insurance covers me with 5M liability and 5M environmental. Many farmers have machine shops and my insurance knows I do too. Moreover, farming is a business that includes machine shop repair work.

I cannot say what would happen if a shop machine breakdown caused a fire or an injury. Insurance companies seem to depend on client oversights as an excuse to deny claims.

It's a very good topic to discuss.

 

[Dan Dubeau]

I had a convo a few years back about this with my Broker and he basically said "don't tell me I don't want to know" "just keep doing what you're doing, and unless you're doing something WAY outside the boundaries of acceptable and something bad happens then you'll be alright".

I specifically asked him about welding, and he said that unless I was running a commercial shop with a history of doing paid work for customers than I shouldn't worry about it. That's from the brokers mouth, but the higher ups writing the cheques might have a different answer. In short, I do not have any extra provisions or a specific rider to cover anything in my home shop. I take great care to do things safely and practice good housekeeping to mitigate any issues when welding, or other hot work. But I think my standard contents payout is $25k or something like that, which taking into account all my tools and toys wouldn't make a dent. I also think our total loss payout to rebuild is drastically under what it would cost in today's dollars to rebuild even the same small house that's here.

Denial of coverage for violations unless they are directly related to the cause of the issue really just don't happen, despite the warnings around the interwebs. Things like a mill being wired not 100% to code being found during an inspection cause by a candle, or kitchen fire are not going to cause the claim to be denied, there is legal precedent for that That's not to say it won't cause you issues. You might have to prove your case in court, but you are not likely to have your claim denied based on that. Unless the entire place was a janky house of cards with violations everywhere you look.......

One of these days I keep meaning to take a detailed pictorial inventory tied to a database for all the shop contents and valuables in the house in case of a break in, but can never find the time or motivation for it. I know I'm WAY under insured for contents. My Wife has specific insurance on her yarn and inventory for her business though. We talk about that scenario whenever we go on long roadtrips for shows, as it's really the only time she's rolling loaded and parking for extended periods of time. If her trailer were to get stolen while full it would be a record sales year.

 

[MashingMetal]

The problem with insurance is they write the rules to for everyone to fit in a nice little box. They should have policies like they have classic car insurance on shop equipment knowing you look after it but not use it commercially.

 

[Dan Dubeau]

That's the problem with blanket rules in general. Fine for 90% of the population that lead boring lives . For those that don't fit in the box we often run into situations that defy the rules and cause situations where lawyers get rich figuring it all out.

 

[Susquatch]

I think it's important to understand the money Trail.

In the home and property insurance policy world, Brokers make their money selling policies. Everything is ok to them.

Insurance companies make money denying claims. Nothing is ok to them.

Anyone who doesn't know this has never had a big claim.

I have had to go to court EVERYTIME I've ever had a big claim (4 times in my life). My broker was always MIA. To win in court (or to settle before court), you have to have clear unambiguous facts to prove that you are not at fault and that the insurance company is obliged to pay according to the fine print of their own policy.

It's really that simple.

 

[slow-poke]

I echo what Susquatch stated, and keep in mind the following:

- When you decide to go to court, the insurance company will use every stall technique known to mankind.
- Expect crazy worded threatening documents to be served to you full of lies and utter BS.
- Realize that the documents served to you that you assume were also sent to the court were never sent to the court.
- Expect threatening letters from the lawyers stating you will need to pay the insurance companies legal fees because you are not cooperating.
- Expect a settlement conference that is a complete waste of time where they will make a ridiculous low offer that can't be spoken about during the actual court case because it could bias the judge
- Expect your first reasonable offer days before the actual court date and not before.
- Realize that there are examples of the Insurance company withdrawing their offer as soon as you dismiss the case (because they finally made you an offer) and now it's too late to start over.

I went through a 3 year ordeal and in the end they paid out 3x the pre court day offer + legal costs

This is how they treat their best clients, I have never made a claim on my home or business insurance 40+ years, and I have never had at fault car accident (just people running into the back of me)

YMMV

 

[MashingMetal]

@Susquatch
I know, 3 big Insurance companies have lawyers on retainer and staff for dedicated to reducing payouts.
Insurance companies should not be allowed to regulate themselves.
The sad part is often those that can afford to hold out settling and navigate the system which may include taking your insurance company to court, get rewarded.

 

[jorogi]

1996 our place burnt down, total loss. I didn't have a shop back then but I did have some nice tools and some one of books. Our regular home insurance policy covered tools and books to a cap of $200 for each category.

My insurance broker came to my office to "discuss next years premium". Good I thought, no accidents or claims, should be good. 27% increase fleet wide. Why ?
"You're closer to an accident or claim".
Really ?
"Well the insurer had a crappy year with their stock portfolio this year and they need to maintain their dividends. Doesn't matter why, they're just going up".

Guy buys a waterfront property down the road, beautiful spot tiny old cabin. Works in the oil fields and spends a couple of weeks per year here. The plan is to save, retire, knock the cabin down after building a new home nearer the water. Months short of retiring, whilst in camp, the insured cabin burns down. Insurance companies only response is we will replace the cabin.
It was going to be demolished and replaced this year.
"Well rebuild the cabin and then demolish and replace it. How do we know you didn't burn it down ?"

Didn't someone once say "follow the money " ?

There is a very enlightening interview on the subject with Warren Buffet, again "follow the money"

 

[wmetfab]

Great topic.
I need to get insurance for my hobby business. Anyone know a good carrier?
I rent back the building I used to own. I have some expensive inventory and a decently equipped shop.
I dont do a lot of welding any more, I might do 2-3 small repairs a year for others and a bit when i restore small machines. People still ask ask but I say no. I go to markets. A small handfull of vetted guests come to see my collections but Im not open to the retail public

 

[1018Machine]

- When you decide to go to court, the insurance company will use every stall technique known to mankind.
- Expect crazy worded threatening documents to be served to you full of lies and utter BS.
- Realize that the documents served to you that you assume were also sent to the court were never sent to the court.
- Expect threatening letters from the lawyers stating you will need to pay the insurance companies legal fees because you are not cooperating.
- Expect a settlement conference that is a complete waste of time where they will make a ridiculous low offer that can't be spoken about during the actual court case because it could bias the judge
- Expect your first reasonable offer days before the actual court date and not before.
- Realize that there are examples of the Insurance company withdrawing their offer as soon as you dismiss the case (because they finally made you an offer) and now it's too late to start over.

I went through a 3 year ordeal and in the end they paid out 3x the pre court day offer + legal costs

Good advice slow-poke!

 

[1018Machine]

Great topic.
I need to get insurance for my hobby business. Anyone know a good carrier?
I rent back the building I used to own. I have some expensive inventory and a decently equipped shop.
I dont do a lot of welding any more, I might do 2-3 small repairs a year for others and a bit when i restore small machines. People still ask ask but I say no. I go to markets. A small handfull of vetted guests come to see my collections but Im not open to the retail public

My policy (the best I could find) is from Intact!

 

[1018Machine]

I had a convo a few years back about this with my Broker and he basically said "don't tell me I don't want to know" "just keep doing what you're doing,

That "don't tell me what I don't want to know" ends with your broker! The underwriter on the other hand doesn't care about what you or he discussed, you will loose in the end!

One of these days I keep meaning to take a detailed pictorial inventory tied to a database for all the shop contents and valuables in the house in case of a break in,

I have an Excel spread sheet with all my shop purchases, itemizing where and when I bought them, how much they cost at the time and a space for "current" value which every so often I update.

 

[Dan Dubeau]

That "don't tell me what I don't want to know" ends with your broker! The underwriter on the other hand doesn't care about what you or he discussed, you will loose in the end!


I have an Excel spread sheet with all my shop purchases, itemizing where and when I bought them, how much they cost at the time and a space for "current" value which every so often I update.

I have no doubt you're correct about that chain of command. I've been around enough to know that the greasy "don't worry, I'll take care of you" handshake from the guy that takes your money, is different than the one when it comes time to dole it out.....I don't want to make sweeping generalizations about professions, but.....

I still do not believe that they have much of a case to not pay out on your claim of a kitchen fire if they discover you also do welding in the garage occasionally. Not saying they wont try, and lawyers wont get richer doing it though. But I have a hard time believing that in most cases a judgment would not eventually be in your favour if the root cause of the fire was verifiable and within the scope of the contract regardless of breachable activities or legal fine print. Most of that fine print stuff in contracts is not actually all that enforceable, but it is a good first defence and deterant. As with most things legal your success might depend on your level of representation. There is case law, and there are bad lawyers, and your defense is only as good as you can afford sometimes.

Annecdote story time (because I just thought about this), My Aunts Neice from the other side lost their house a few years back to a fire pretty close to here. I don't really know her, or all the details, But I know it was an oily rag that caught fire in the garage due to welding sparks, and the house was a total loss. No idea about the insurance side of things, but there is a brand new house (much bigger and nicer than the one it replaced) sitting on that lot today, and they still live there. They are not rich, just middle working class folks like me, so they're either in debt up to their eyeballs and mortgaged for life from having to foot the entire bill to rebuild, or insurance paid out on the claim, even though it was caused from a welding accident, and poor housekeeping. I kinda forgot about that, and I'm actually curious about more details now, and will press my Aunt next time I talk to her. I don't know them well enough to stop in when I drive by and say "hey, Remember me from when we were kids? we have the same Aunt, you mind telling me all the details about your house fire?" .

I've always loved a good spreadsheet, but part of me doesn't really want to see that =SUM #.....

 

[1018Machine]

I still do not believe that they have much of a case to not pay out on your claim of a kitchen fire if they discover you also do welding in the garage occasionally. Not saying they wont try, and lawyers wont get richer doing it though. But I have a hard time believing that in most cases a judgment would not eventually be in your favour if the root cause of the fire was verifiable and within the scope of the contract regardless of breachable activities or legal fine print.

Logically I'd have to agree, and hopefully it would turn out that way if something did happen. Lots of people have items in their garage that could start a fire regardless if they made/sold something. It's likely as you say, insurance companies will put false clauses in knowing full will it's contestable but hoping it scares you enough to comply.

 

[Mcgyver]

There is another bit of misery they serve up - the inspector. Any of the stuff we have is considered a "dangerous" hobby and god help you if you get caught with welding equipment.

They hate risk, and for some reason I can't fathom, there is a lack of insurance available (demand higher than supply) so the pass on anything they perceive as risky. Can't fathom as in just raise the price if that's the case.

I had insurance cancelled once because of an inspector which really leaves you in a bind - they others magically all know about it and shun you because you were cancelled. Idiot inspector (who for example faulted me for hav a couple of power bars for low power draw computer peripherals, like he got is education for '60's commercials telling you not to plug in every appliance to one thin gauge extension cord or jam a coil in the fuse box) goes against you and the weenies get nervous

Really pisses me off - I mean promoting technical interest and hobbies at home fuels entrepreneurs and invention as well as future engineers and tradespeople all of which we need. But this is institutionalized, systemic behaviour slapping people down if you're not a brain dead sort on the couch watching TV.

 

[Susquatch]

Really pisses me off

Saved me a good rant. Thank you!

 

[mbond]

I think it is important to remember what people really want insurance for. The main purpose of buying insurance is to cover most of the cost of something that you can't afford to pay all at once. And that means, that any serious claim is going to be for an amount of money that is worth fighting for. And that automatically means delays, lawyers, threats etc. And no one other than you paid advocate (lawyer) is ever going to just 'do the right thing'

So that being said, unless you are operating a 'substantial' business (which has its own legal definition) or your tools are not 'common' (substantially similar to tools have been certified by UL / CSA etc. and are available from 3rd party manufacturers), the insurer eventually will have to pay. But that's commonly a multi-year process

Enbridge gas burned down my brother's house and 3 others on the street by making a mistake with a gas main on the street. No question of fault and it still took 3 years to settle the case