Bad things can happen when you least expect it. In the service world, it pays to hope for the best and prepare for the worst. This is especially true where a simple mistake can be costly, and where accidents can and unfortunately will happen.

That can be an employee getting injured on the job, a customer falling in the lobby, a major summer storm that floods the bays, or a utility pole that fell into the entryway in an ice storm. No one can plan for these events, and any could be enough to impact the bottom line.

This is why being properly insured is critical today.

Two Industries with a Common Bond

Auto service shares one unfortunate trait with the insurance world—a lack of trust. That’s a point noted by David Willett, chief officer and co-founder of Spark Underwriters. The company provides specialized business coverage designed specifically for the vehicle repair industry, operating as a registered series of Mission Underwriting Managers.

The company serves single-location and multi-location repair and service businesses, bundling critical coverage into tailored policies.

“We take this industry very seriously,” Willett told National Oil and Lube News. “We also know that the public believes there are bad actors in both spaces.”

Quick lube operators face several highly specific risks, notably holding valuable property, namely the customers’ cars, and utilizing expensive diagnostic tools.

“Property can be a huge consideration,” says Willett. “In some parts of the country that risk can be greater, such as on the East Coast, like Florida, where there are the seasonal risks.”

However, every business day there are risks due to mistakes being made.

“Faulty work can lead to situations that damage engines,” Willett warns. “Shops need to be prepared for those mistakes.

More Services, More Coverage

Quick lube shops have increasingly shifted toward expanding their services, which has proven to be a revenue stream. However, with these new services, shops need to ensure they’re also covered in case something doesn’t go as planned.

Servicing more complex components elevates the risk of damage claims, mechanical errors, and legal liabilities if a vehicle breaks down after leaving the shop.

 “We’re seeing a shift from quick lube to quick service beyond just ‘oil out’ service, but insurance is something that isn’t considered,” explains Willett. “As shops take on other repairs, there are new risks. These may seem minor in nature, but we’re seeing frequent claims because something wasn’t done right.”

Premises Liability

Premises liability insurance, which can typically be bundled within a commercial general liability policy, is meant to protect quick lube shops from financial ruin if a customer is injured or their property is damaged on-site. A combination of slick fluids and heavy equipment doesn’t mix, so it is essential coverage for any oil change business.

Yet, operators should ensure the insurance company knows how to handle and address some claims.

Willett notes that shops can be targets for would-be “professionals” who seek to gain from their misfortunes.

“If I were an operator, I’d want to know how the insurance provider handles those claims,” says Willett. “Do they have an expert, and they don’t have to hire resources if there is a lawsuit?”

Another consideration is how quickly an insurance provider pays out or denies claims.

“There is a tendency in insurance just to pay some claims when someone slips and falls,” warns Willett, as it is the shop operator who still faces a potentially large deductible along with higher premiums.

“It is important the insurer is actively involved in such cases,” Willett explains. “Will they just try to get out quickly, as that is still your loss run in the end?”

The insurer should understand the safeguards that are in place, such as requiring customers to stay in their vehicle or a waiting area.

By contrast, Willett also cautions of those insurance providers that automatically deny every claim.

“Are the claims denied because you didn’t have the coverage? You need to know in advance,” Willett continues. “Shop operators need to see such claims as a business expense rather than an insurance expense.”

Cyber Liability and Employment Practices Liability Insurance

Areas where shops may not consider insurance are cyber liability and employment practices liability. Cyber insurance covers the financial fallout from digital attacks, network failures, and data breaches. That can include data recovery, legal fees, regulatory fines, and even cyber extortion.

Employment practices liability insurance protects employers against claims made by current, former, and even prospective employees, including lawsuits alleging wrongful termination, sexual harassment, workplace discrimination, wage violations, and hostile work environments.

“Operators can be exposed to cyber and EPLI, so there should be some level of coverage to protect the interests,” says Willett.

Today, cyber threats are increasing, and Willett suggests that insurers should be ready to work with IT staff should there be a problem.

As a final consideration, finding an insurer has gotten harder because of a reliance on new technology, notably like artificial intelligence, which is being used by the insurance industry to streamline workflows.

“Insurers are looking at how to use AI to reduce claims,” says Willett. “That is resulting in less touch and feel in the industry. Operators are feeling less connected as it is a system-driven business. I don’t see that as a benefit.”