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How Does Your Current Business Insurance Policy Respond To A Catastrophic Loss?

The recent terrible natural disasters witnessed, which have affected families and businesses alike, causing many to lose their homes and livelihoods, is a reminder that nothing should be taken for granted.

And while people who resided outside of those affected areas banded together to send what aid they could to those who suffered in various ways, one has to wonder, how prepared were they if a similar disaster occurred in their own neighborhood or town.

For business owners   whether a major corporation or mom-and-pop laundry   that concern should have prompted them to review the insurance coverages they presently carry. And although carrying some form of insurance for their business may be reassuring, when examining the damage caused by the recent natural disasters, I am sure some wonder if the limits of coverage presently carried are adequate to protect their interests.

Some may have found themselves wondering: “Is our insurance coverage adequate to respond to a catastrophic loss? How can I determine what the adequate limits to be carried are?” As well as, whether or not they have a disaster plan in place, with appropriate financial reserves set aside to assist in the recovery process of getting back in business.

The fact is that many respondents to the survey question that we asked, “Are you prepared for a catastrophic loss?” merely assumed that their safety net is their insurance policy, without actually reviewing that policy to determine if they have adequate and proper coverage.

One definition of adequate and proper insurance is having the comfort of knowing that, should a catastrophic loss occur, you will get back to your business within a reasonable amount of time, retain your present employees, as well as, the majority of your customers, repair or replace all of your damaged personal property, and have the majority of the cost covered by your insurance.

This would require settling your customers’ goods claims to your customers satisfaction, rebuilding the plant, collecting funds from your business-interruption insurance to cover your loss of profit and additional expenses required to keep your business operating, making specific arrangements to outsource processing, obtaining temporary facilities, and all of the other necessary functions required to assure a normal transition back to business.

With that said, how does a laundry go about obtaining the proper insurance so they can develop this comfortable feeling? Leaving any owned buildings aside for the moment, the first area of attention should be given to the limits of insurance carried that cover his or her personal property. Included in this coverage should be the replacement costs for all of your furniture, fixtures, machinery, supplies and improvements and betterments.

It does not require any special skills to recognize that if the cost to replace (purchase new) all of these items is approximately $300,000, you will not be able to replace them without substantial cost to you, if you presently carry a limit of only $200,000 for your personal property.

Therefore, to purchase the proper limits to be carried, the next question becomes, how do you determine what the replacement cost is for your furniture fixtures, machinery, supplies, improvements and betterments?

One method is to take an inventory of your personal property, assign a replacement cost to each item inventoried, and then total all items and increase this amount by between 3% - 5% each year to account for inflation, and hope you assigned the correct value to the items inventoried.

Or, you could select an insurance representative who specializes in and has an extended understanding of the laundry insurance industry, and who is very familiar with the replacement values of property contained in most retail laundry establishments.

Also, when making this selection, you should inquire if your insurance agent has ever been involved with his insurance company in settling a claim involving a laundry who sustained a catastrophic loss.

If the answer is no, then that insurance agent in for a learning experience, which could very well be at your expense. If the answer to the question is yes, then you should obtain the name of the laundry who sustained the total loss, so you can inquire as to how the loss was settled, and if they were satisfied with the results.

The next area of concern should be how to cover the property of others in your care, custody and control, your customers’ garments. The correct way to cover this property is under a Bailee policy.

However, it should be noted that Bailee insurance policies are not standard, and come in various forms and limits. To assure yourself that you carry the proper Bailee coverage, you should insist on nothing less than the following:

A. Unlimited Coverage. Because your customers’ goods inventory fluctuates by day and by season, to determine the fixed amount that would adequately cover the loss of the customers’ goods in your care, should a catastrophic loss occur, would fall under the category of guessing and would be virtually impossible to select. And, when you consider the adverse consequences when underinsured under Bailee coverage, any limit other than unlimited should not be an option

B. Broad form or All Risk. This should include damage in process and mysterious disappearance.

C. Box Storage. This should also be unlimited without conditions to value.
D. Coverage at Other Processors.
E. Coverage in Transit.

If the above coverages are included in your Bailee policy, and a proper conditional receipt is issued when the property is accepted by the laundry, there should be little or no problems in the event of a total or partial loss.

Additionally, the cost for building materials, contractors, etc… has substantially increased over the years. And when coupled with the additional increases in these costs that almost always occur in affected catastrophic zones, you need to be sure you are keeping pace with local building costs and how they apply to any buildings you may own and need to properly insure.

Needless to say, there are other coverages required to protect your business that may not come into play in the event of a catastrophic loss, but should be included in your insurance program anyway. These other types include: Real Property or Building, General Liability, Boiler and Machinery, Plate Glass, Holdup, Burglary of Money, EDP, as well as Flood Insurance and Pollution Liability in as much as these coverages are specifically excluded from all Business Owners Policies, etc.

Adam Weber is president of Irving Weber Associates (IWA), the leading program manager underwriting insurance policies to the Fabricare Industry since 1946. IWA has worked to develop, maintain and enhance the necessary tools needed to provide Fabricare Businesses such as Commerical Laundries, Drycleaners, Linen Supply  and Uniform Rental firms with comprehensive and distinct coverage, which in many instances can be accessed through your existing insurance representative, or through one of the IWA Fabricare Insurance Programs exclusive representative. IWA can be reached by calling (800)243-1811or via e-mail at This email address is being protected from spambots. You need JavaScript enabled to view it. .

Quick Rinse - News From Around The World

Advance Discount Registration Opens for IHMRS 2011

WHITE PLAINS, N.Y. — Advance registration is open for the 96th annual International Hotel, Motel + Restaurant Show® (IHMRS) being held November 12 – 15th at New York City’s Jacob K. Javits Convention Center. A discounted registration fee of $30 is available through October 7, 2011, with the rate increasing to $50 on October 8. The IHMRS present more than 700 hospitality industry suppliers and attract some 30,000 trade attendees The IHMRS website is located here.