Did you know that the need for spoilage coverage extends beyond food-based risks? If your business has any stock that would be destroyed or rendered unusable due to an extended loss of power, then you would be wise to consider coverage that protects this perishable stock.

Spoilage coverage is designed for any business that processes, stores, or sells perishable items that must be maintained under controlled conditions to avoid damage. This insurance applies to both properties owned by you and the property of others that is in your care, custody, or control (as long as the property is located at the insured’s premises).

There are two coverage options, both or either of which may be obtained:

  • breakdown of equipment and contamination; and
  • power outage.

The breakdown or contamination option covers spoilage caused by the breakdown of refrigeration, cooling, or humidity control equipment, as well as damage from refrigerant contamination. The power outage option covers interruption of power, whether the source of the outage is on or off the premises.

Property covered under this insurance is valued using the same valuation method that applies to personal property in a commercial property policy. However, insureds can opt for another method that uses the “selling price” of the product for valuation purposes. This option assigns value to the stock based on the amount for which the insured was selling the product, less any applicable discounts and usual expenses.

If a refrigeration maintenance agreement is in place, an insured can receive a rate credit on the breakdown/contamination coverage. However, the agreement must be maintained in full force throughout the policy term for the rate credit to apply.

Businesses that may have a spoilage exposure include:

  • Restaurants, bakeries, and ice cream operations
  • Fruit and vegetable retailers
  • Grocery stores, convenience stores, and butchers
  • Florists, nurseries, and greenhouses
  • Pharmaceutical operations
  • Cigar stores
  • Exotic fish stores
  • Candy stores
  • Blood banks
  • Laboratories
  • Cold storage warehouses

If your business is vulnerable to the risks covered by a spoilage policy, you need to protect it from the potentially devastating losses that can occur should such an event occur. To talk to a Setnor Byer Risk Management professional about spoilage coverage, or any particular risk that your business is vulnerable to, please contact our office, and a member of our team will be happy to assist you.

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