My franchisee has an incident and doesn't have proper insurance. Now what?

Opening your own franchise comes with a lot of responsibility. With so many costs upfront, often times franchisors will take the cheaper route when it comes to their insurance needs because they don’t have the support or expertise to make educated decisions on their insurance needs . But, it’s important for franchisors to keep in mind that your main duty as a franchisor is to protect your assets before it’s too late.

However, if you weren’t as diligent during your initial insurance process, you may find yourself in a predicament where you’re not sure what to do . 1851 spoke with Doug Groves, principal of EZ CERT , and he shared the steps franchisors should take to find out the extent of the claim and better understand how it will impact your business.

Notify your insurance agent or attorney.

The first step is to make sure you inform all the appropriate parties and make them aware of the issue at hand. According to Groves, “There’s nothing more important than letting your insurance agent know something happened immediately. Be sure to tell your agent all of the facts, including if the franchisee is still in business.” Your agent and attorney will be able to identify if you have a policy in place that may satisfy the loss with a self-insured retention or help identify next steps.

Have the franchisee notify their attorney.

If your franchisee is in business or not, you should connect with them to be sure they have also contacted their attorney. If they are not covered, you should recommend they hire an attorney, especially if they are still in business. “If your franchisee is still in business, it’s important for them to also have coverage--even if they weren’t covered before. That way, they are protecting themselves for any future issues that may arise,” shared Groves.

Have an honest conversation with your franchisee. “It’s a delicate conversation if a claimant is involved,” Groves shared. “Talk with your franchisee to see if a few dollars will make the problem go away. A small fee can save a whole bunch of real dollars down the road.”

As hired parties began to review the claim, it’s the perfect time to look at your internal processes and see what went wrong. Groves recommends looking at the following:

• Review your current insurance coverage and double check you are thoroughly covered from all potential exposures.

• Determine if you have a system in place for renewing and reviewing insurance coverages.

• Review your tracking program and make sure you know what you are tracking and why.

To avoid these issues in the future, it’s beneficial to have a company like EZ CERT on your side. EZ CERT works with franchises to track and manage insurance certificates to ensure your franchisees are purchasing your FDD required insurance coverage.

Groves shared, “Franchisee insurance compliance is something that costs franchisors time and money. EZ CERT is here to partner with you to make sure you’re covered and you can focus on growing your business, not being bogged down in potential insurance nightmares.”