General liability insurance

[nrpick44]

Not sure if this is normal but i had hell finding someone to give me a general liability policy. I called 2 different State Farm agents and they wouldn't even call me back. Finally called nationwide and they acted like it wasn't a big deal at all. Cost me 350 a yr though....

Who does everyone else use and do they base it off of how much your business brings in over a yr? Thx!

[Poplady1]

That price seems in line depending on your coverage type and your policy limits.  Was it a CSL policy or Aggregate?  Did it cover products liability?

You can also call NAMA direct and they will give you the current list of companies writing insurance for vending operators.

Blue Moose

[nrpick44]

It was "combined single limit of liability of 1mil per occurrence and 2mil aggregate for injury and or death and or property damage".

[Poplady1]

Does it cover product liability?  That might be important.

Blue Moose

[nrpick44]

yes up to 2mil

[Poplady1]

Depending on the type of vendor you are you may not need product liability which is expensive.  Product liablity is only needed if you open or alter the product before you resell it.  Bulk vendors do open the packages and then resell so product liability would be very important for them.

If you are just selling the product as received from Pepsi/Coke/7-Up and snacks in their packaging you are not altering the product.  You might want to discuss this with your insurance agent and be sure you aren't paying for coverage you won't need in your business.

Blue Moose

[nrpick44]

I never even thought about that. Im not into bulk, but since im just getting into the biz i may just keep it just in case i do have an account who wants candy machine.

Thanks for the info. It really helps a newbie like myself.

[mizugori]

I called a few places and none of them knew about it at first but they were all eager to find out for me in order to earn my business. The state farm guy called me back later the same day once he got info, and we worked out the details from there. He did need to have an estimated revenue for the underwriting, I based that off an estimated $30/month per machine. The lowest he could set the machine liability was $100 coverage in the event of mechanical breakdown or theft - he could not totally eliminate this coverage. My policy costs $327/year for $2,000,000 liability coverage (1M per incident 2M per year) which I felt like was reasonable.

Also, some people constantly post on here that if you don't have significant personal assets or if you have an llc and don't own many machines then you do not need insurance. I don't like that philosophy. Think about it, suppose you have an llc and you treat it as a proper business, and you own even just 10 basic bulk vending machines. Maybe northwestern super 60 candy machines on stands. If someone were to sue your business, and they won, they could take whatever assets you have in the llc bank account, and your ten machines (which using the example above would cost you about $1000 to replace, plus shipping, tax, products, etc....)

Isn't it worth ~$300 to protect even that small of an investment? Besides, if you formed an llc you most likely have more than 10 cheap machines... so a more likely scenario would involve your business losing a few grand or more.

just my $.02

[nrpick44]

i totally agree with you mizugori. I wouldn't have known anything about it if wasn't for my 1st location requiring me to carry it.

[NinnJinn]

I never really thought about it that way either.  I only have 1 machine that I paid $150 for.  But, for me to replace that same machine off of craigs list or ebay, I'm looking at 500 or more.  That doesn't include my 368 pieces of product etc.  Plus, I obviously plan on expanding.

Very good point!

[blu Vending]

Never crossed my mind. Very interesting and useful information.

[Bender]

See my post in topic "LLC info", with audio and transcript, where a certified financial planner advises that an LLC will not protect your personal assets in any way if you are performing your own labor on your vending machine route:

http://vendiscuss.com/forum/index.php?topic=5975.msg76842#msg76842

For small vendors, without significant assets, consider that you are "judgment proof".  It means that you are not going to get sued if you have no net worth, because lawyers don't take personal injury cases if there's no money to be had.  So if you've got a small vending route, and you don't own a house or other high-value assets, there's no lawyer in the world who's going to take a personal injury case against you, because you don't have anything to take.  The first thing a PI lawyer wants to know is how much money you have that they can take from you.

I'm not a lawyer, this is my own opinion, based on what I hear my local radio lawyer say all the time.  If you have a small vending route and little to no net worth, nobody's going to sue you for your $100,000 bulk vending route, I'd put money on that!  Why do I say that?  Because personal injury lawyers don't take small cases, it's not worth it for them.  They only take contingency cases if there is a chance of significant recovery.  His 30% would be $30,000 for your $100,000 route.  He doesn't want to liquidate a bunch of vending machines.  His costs would likely be more than $10,000, so it's not worth his time. Few plaintiffs are going to put up a $10,000 retainer to hire a PI lawyer who won't take it on contingency..  He doesn't want your vending machines!  And his client doesn't want your vending machines either.  Even if there were a significant injury, up to and including death, if you have little to no assets, any PI lawyer worth his salt is not going to take the case because there's no money to be had.

So whether or not you have an LLC, if you have no insurance and few assets, you're pretty much judgment proof.  If you own a house and a vending route, you're at risk because they could pierce your LLC and go for your real estate.  Now if you have a million dollar insurance policy, the lawyers will smell that money, and that's more likely to draw personal injury lawsuit.

If you have insurance and no LLC, your insurance company will use their lawyers to represent you in a personal injury lawsuit.  If you have an LLC and no insurance, you will have to pay out of pocket for your own attorneys.  If you have no LLC and no insurance, and no net worth, you're not going to get sued because it's not worth any lawyer's time and money, you have nothing they can get.

Out of all the options, however, it does seem that the general liability commercial insurance policy is the most prudent avenue to protect your business and personal assets from a lawsuit.

[Jax Snacks]

Here is another type of "protection" to chew on.  I was told that a retirement account (IRA, 401K, etc) can not be touched by a civil law suit.  I head that even OJ's retirement account is safe!  So maybe start dumping as much money into a retirement account as legally allowed to act as another shield from law suit leaches (and their lawyers).

FYI. My brother was scammed in a real estate deal years ago.  He went to court and won.  The scammers wages were even garnished.  However, he never recovered all the money.  The guy kept changing jobs and moving around and hiding his money in relatives accounts or even a shoe box.  Remember this is a civil suit and the government is not collecting (like the IRS would).  So the power of collecting the money is really diminished.  OJ has never paid a dime to any one other than his lawyers!

[mizugori]

I have to respectfully disagree.

Number 1, anyone can take you to small claims court themselves - it doesn't need to be a $50k case. And, there are plenty of small fry lawyers out there that will take just about any case.

Also, establishing an llc may or may not protect your personal assets if you were sued - but SOME kind of business structure, be it sole prop, llc, dba, etc, is needed if you are going to legally report your income and claim deductions for when you purchase machines, product, etc....

Also, everyone on here keeps suggesting that just because you don't own a house and 500 machines, you will not be sued. That is absurd. They can garnish your wages. So don't think that not holding any savings is going to protect you because it won't. Also, everyone owns SOMETHING. Do you own your car? Even if you finance it, you had to put some money down and you have most certainly built up equity in it... Do you own a big flat screen TV? How about a computer? Do you have any money in a checking or savings account, CD, money market, or stocks/mutual funds? Even your 'child's college fund' could be tapped in the event of a lawsuit.

Making the assumption that someone won't go through the time and effort to chase your assets just because it seems like a petty amount of money is a huge mistake. Pennies to one man are millions to another.

A friend of mine sued a woman because she damaged the house she was living in (she was a rentor) when the landlord sold the house to my friend and evicted this woman. My friend was awarded $4,000 by a court. Not a lot of money right? The woman outright REFUSED to pay. She did everything, from threatening him, having her boyfriend harass my friend, moving, changing jobs and working under the table/off the books to try to hide her income, EVERYTHING that she could possibly do to avoid paying him. But he was pissed, and the principle of it bothered him, so he continue to pursue the issue, and little by little, every dollar that passed through that woman's hands eventually found its way into my friend's hands. The court did most of the work, my friend didn't have to pay for lawyers or private investigators or anything - they were able to track her illegal / off the books income and they took it right out of her bank account and at one point they summoned her to court to pay more that they discovered she had earned, she did not show up so the police went to her house and gave her the option of being arrested or paying. She reluctantly paid. It took like 8 months but eventually my friend got the $4,000 and he didn't have to sweat much to get it.

So just keep in mind, if someone is willing to ask a judge to get them what they are entitled to, the court may very well do this to you. So after you've been forced to sell your machines and leftover product, and you still owe more, be prepared to fork over a percentage of your paycheck until you've paid in full. So... get insurance!!

[Hillbilly]

I think that the legal structure of an LLC protects you as long as you are operating the business as a business.  Unless a lawyer can prove that you are not (called piercing the corporate veil) I think you are safe.  It is when you start using company money for personal use and vice versa that these problems arise.  To be safe keep your business separate from your personal stuff. In any well ran company a lawyer would have a hard time doing that. Just my opinion.

[Jax Snacks]

Well I guess we can conclude that for the end result, "it all depends"!  Different people, judges, lawyers have different personalities, attitude, education, upbringings, etc.  So different results could be rendered for the same type of case.  And of course different states and cities have different laws as well.  And I still ask the question, why has OJ still not paid up??!!

[Bender]

Len Tillem, the KGOAM810 radio lawyer, http://www.kgoam810.com/sectional.asp?id=25969  is a sassy New Yorker and I was sort of replicating his attitude in the previous essay.  He often gets personal injury calls, and usually he tells the callers that because there was no permanent injury, and the because of the cost of hiring lawyers and expert medical witnesses, getting doctor's reports, court filings, discovery, collecting evidence, hiring expert testimony, and taking it to trial, experienced personal injury lawyers are not going to take the case.  I believe even a rookie lawyer knows the difference between a cash cow and a dud, and lawyers don't take dud cases.  Now, if he hears a caller who has real damages, then he will refer them to his colleague, a personal injury lawyer, who he says never takes a case unless there is a good chance of $100,000 or more in recovery.  I'm not saying it can't be done, what I'm saying is that lawyers don't mess around with small cases.  They will if you pay them, so pony up the $5,000 retainer and he'll start billing you $500 per hour to work on your case.  I guarantee you'll get a $20,000 lawyer bill before you get a $20,000 judgment.

Here's a Ken Spillem type vending scenario that I made up as an example, and the sort of answer Ken might respond with: my toddler son got a bruise when the double head gumball machine tipped over while I was buying a soda at the convenience store.  Here's what Ken might say:

KEN: What happened to your son?

BENDER: He was looking at the gumball machine and it tipped over and hit him on the chin as it fell.

KEN: Was it one of those big things you see at the KMart?

BENDER: No, it was a double gumball machine on a little pipe stand.

KEN: How's your son now?

BENDER: Well, we went to the hospital, there were no broken bones, just a big bruise on his cheek, a little scrape, but no blood and no scarring.

KEN: So, he was looking at it, and it suddenly fell over on top of him?

BENDER: Well, actually, it was a little taller than him, so he was grabbing onto the machine to see the candy, and he kind of pulled it down.

KEN: Who owns the machine?  The store owner?

BENDER: No, he said it belonged to a charity guy who comes once a month to change the machine and fill the gumballs.  I called the guy's number and he didn't call me back yet.

KEN:  I'm glad your son is okay, but the thing is, you don't have much of a case.  You have no damages, your son is okay.  Lawyers like to see things like broken bones, you know, permanent injuries, brain damage, that sort of thing.  And they want to sue somebody with deep pockets, the gumball guy's not a rich guy, does he have any property?

BENDER:  I don't know.

KEN: So, you don't know much about the gumball machine guy.  Well, my advice is let it go.  Your son wasn't seriously hurt, there's no permanent damage, and no lawyer is going to take this case.  You could go to small claims court, but any judgment you win would be recovered by your health insurance for the emergency room visit.  Also, you would have to prove negligence, and the gumball guy is going to say your kid was hanging on the machine!  Let it go, he's okay.

I made that story up, I didn't call and it didn't happen.  But that's sort of how the story would go if it did happen.  Now a more serious case might justify hiring a lawyer, with the same caveats:  medical examinations, expert medical testimony, court filings, investigations, etc.  That all adds up, lawyers bill for every minute of it, and a lawyer knows if it's going to be profitable for him from the start.  Lawyers don't take cases to make you feel better.  They take cases if they smell money, that is, if there's a profit in it for them.  So unless it's a doozie of a case, a lawyer's not going to take it.

I understand and believe your buddy's story.  That's a small claims case, anybody can, and I have, filed a small claim suit without a lawyer.  And people should do it when necessary, it's a shining example of justice for the people.  Winning a judgment in small claims, however, is one thing, collecting on the debt is another, and much harder to do.

However, I find it hard to believe that the police would be able to arrest a person for failure to pay a debt, unless a judge issued an arrest warrant for contempt of court.  What was the threatened arrest charge?  We don't have debtor's prison in America.  Police officers sometimes make such idle threats to motivate citizens to obey their orders, even if the threat is entirely untrue.

Actually, in sharing my opinion, in the previous essay and this one, I am not proposing claiming "judgment proof" as a method of doing business, or protecting yourself from liability.  Indeed, I agree with your philosophy and business practice, that liability insurance, and one thing not mentioned, reasonable care in the course of operating your business, are the prudent actions to protect yourself from liability.

[alyssamma]

mizugori and Hillbilly give good advice. And what Bender says is pretty much true too. The reality is that even though it sounds contradictory, what they say is all correct. Most PI lawyers will not sue, but small claims court and/or wage garnesments can be very effective. I once almost had to sue someone for $15K and found out how to do it myself without a lawyer - it is pretty straightforward.

Also, keep in mind, opinions - which is what everyone, including myself, are giving here - are like a**holes. Everybody has one.

Kevin

[Poplady1]

I think an important thing to remember is the coverages offered in your General Liability policy cover Bodily Injury and Property damages and NOT Personal Injury.  Also the most important part of the General Liability policy is the defense protection.  In our judical system now, everyone gets sued when there is a claim.  If a vending machine should shock someone at a pool because the wall plug was damaged, you will be named in that suit and you will need to have representation.  Your policy provides that coverage. If you don't have insurance you will need to be represented in court whether you have any money or not, you will be required to be at every hearing concerning that case or they will put out a bench warrant.

Personal Injury is another form of claim and insurance.  Most general liability policies do not cover personal injury unless you are in some form of advertising, entertainment or publishing field. If you feel you need Personal Injury coverage you can apply for it with a insurance company and the underwriter will determine if you qualify for the coverage.

Blue Moose

[Poplady1]

This story might alarm some of you...and it should.  People are being put in jail for unpaid debts..

This appeared in the Minneapolis St Paul Tribune:

It’s not a crime to owe money, and debtors’ prisons were abolished in the United States in the 19th century. But people are routinely being thrown in jail for failing to pay debts. In Minnesota, which has some of the most creditor-friendly laws in the country, the use of arrest warrants against debtors has jumped 60 percent over the past four years, with 845 cases in 2009, a Star Tribune analysis of state court data has found.

Not every warrant results in an arrest, but in Minnesota many debtors spend up to 48 hours in cells with criminals. Consumer attorneys say such arrests are increasing in many states, including Arkansas, Arizona and Washington, driven by a bad economy, high consumer debt and a growing industry that buys bad debts and employs every means available to collect.

Whether a debtor is locked up depends largely on where the person lives, because enforcement is inconsistent from state to state, and even county to county.

In Illinois and southwest Indiana, some judges jail debtors for missing court-ordered debt payments. In extreme cases, people stay in jail until they raise a minimum payment. In January, a judge sentenced a Kenney, Ill., man “to indefinite incarceration” until he came up with $300 toward a lumber yard debt.

“The law enforcement system has unwittingly become a tool of the debt collectors,” said Michael Kinkley, an attorney in Spokane, Wash., who has represented arrested debtors. “The debt collectors are abusing the system and intimidating people, and law enforcement is going along with it.”

How often are debtors arrested across the country? No one can say. No national statistics are kept, and the practice is largely unnoticed outside legal circles. “My suspicion is the debt collection industry does not want the world to know these arrests are happening, because the practice would be widely condemned,” said Robert Hobbs, deputy director of the National Consumer Law Center in Boston.

Debt collectors defend the practice, saying phone calls, letters and legal actions aren’t always enough to get people to pay…..

Taxpayers foot the bill for arresting and jailing debtors. In many cases, Minnesota judges set bail at the amount owed.

In Minnesota, judges have issued arrest warrants for people who owe as little as $85 — less than half the cost of housing an inmate overnight. Debtors targeted for arrest owed a median of $3,512 in 2009, up from $2,201 five years ago.

Those jailed for debts may be the least able to pay….

The laws allowing for the arrest of someone for an unpaid debt are not new.

What is new is the rise of well-funded, aggressive and centralized collection firms, in many cases run by attorneys, that buy up unpaid debt and use the courts to collect.

Three debt buyers — Unifund CCR Partners, Portfolio Recovery Associates Inc. and Debt Equities LLC — accounted for 15 percent of all debt-related arrest warrants issued in Minnesota since 2005, court data show. The debt buyers also file tens of thousands of other collection actions in the state, seeking court orders to make people pay.

The debts — often five or six years old — are purchased from companies like cellphone providers and credit card issuers, and cost a few cents on the dollar. Using automated dialing equipment and teams of lawyers, the debt-buyer firms try to collect the debt, plus interest and fees. A firm aims to collect at least twice what it paid for the debt to cover costs. Anything beyond that is profit….

Todd Lansky, chief operating officer at Resurgence Financial LLC, a Northbrook, Ill.-based debt buyer, said firms like his operate within the law, which says people who ignore court orders can be arrested for contempt…

Few debtors realize they can land in jail simply for ignoring debt-collection legal matters. Debtors also may not recognize the names of companies seeking to collect old debts. Some people are contacted by three or four firms as delinquent debts are bought and sold multiple times after the original creditor writes off the account….

A year ago, Legal Aid attorneys proposed a change in state law that would have required law enforcement officials to let debtors fill out financial disclosure forms when they are apprehended rather than book them into jail. No legislator introduced the measure…

One afternoon last spring, Deborah Poplawski, 38, of Minneapolis was digging in her purse for coins to feed a downtown parking meter when she saw the flashing lights of a Minneapolis police squad car behind her. Poplawski, a restaurant cook, assumed she had parked illegally. Instead, she was headed to jail over a $250 credit card debt.

Less than a month earlier, she learned by chance from an employment counselor that she had an outstanding warrant. Debt Equities, a Golden Valley debt buyer, had sued her, but she says nobody served her with court documents. Thanks to interest and fees, Poplawski was now on the hook for $1,138….

She spent nearly 25 hours at the Hennepin County jail….

The next day, Poplawski appeared before a Hennepin County district judge. He told her to fill out the form listing her assets and bank account, and released her. Several weeks later, Debt Equities used this information to seize funds from her bank account. The firm didn’t return repeated calls seeking a comment.

“We hear every day about how there’s no money for public services,” Poplawski said. “But it seems like the collectors have found a way to get the police to do their work.”

Yves here. The story has many examples of people who were jailed, and more detail on the debt collectors.

[NinnJinn]

and when the debt golphers take the money from the account, sometimes they don't tell you...  My wife has a Check Deception charge on her record its a low class misdemeanor, but still!  Instead of taking the $50/week from her account for 15 weeks, they researched and found she had over $1000 in her account, so they pulled a single payment of  $950out in full,  and she had a $549 check to best buy bounce, and her $525 rent check also bounced!  And they were both over $500 so she was immediately charged with Check Deception and now has a criminal record!

[Jax Snacks]

Just curious how these people find out how much money is in anyone's account??!!  That should be confidential!  I can see the IRS being able to access that, but not a private corporation.  That really sucks!

[mizugori]

like I've been saying... you lose a lot of rights when you owe someone money...

another friend of mine owes about 25k in credit card debt and after he repeatedly did not answer correspondence and a summons, they issued an order that basically states that anything in his bank accounts is now owned by the creditor. They only got like 30 dollars because, naturally if my friend had any money he would have been trying to pay the debt, but the point is, anything he deposits in a bank account now goes directly to the debt holder.

[NinnJinn]

Just curious how these people find out how much money is in anyone's account??!!  That should be confidential!   I can see the IRS being able to access that, but not a private corporation.  That really sucks!

The court ordered a garnishment and my wife (not at the time, this was before we got married) didn't want her employer to know about it so she got the court to agree to  withdraw it from her checking account since she had direct deposit.  then the debt company was able to get the judge to subpoena her current bank statement and thats when they went for the kill,  When this happened, we went to the bank and they showed her the papers they had received for a court order for a current bank statement on her account.

And then 30 some days later, she is before the same golpher judge getting sentenced for check deception.