What You Need To Know about Insurance COIs

Jordan Buckner: [00:00:00] Welcome back to the StartUp to scale podcast, where I break down the real challenges of growing a CPG brand and provide you with the insights you need to successfully grow. I'm Jordan, and today we're diving into a critical topic that every founder really needs to understand, and that's insurance.

Retailers are raising the bar when it comes to liability insurance and the process of securing the right insurance and communicating that with retailers is really important. Pretty much most times you'll be asked for a certificate of insurance, which basically shows what insurance coverage you have as a company and making sure that matches what the retailer is expecting.

Sometimes though, there are some. Unnecessary kind of denials and delays in that process of what coverage is required, especially if you start working with larger retailers and want to make sure that you're prepared for what you're getting into. So, to help understand and make sense of this evolving landscape, I invited on Russ Taylor from Secure CPG, which is an insurance company.

Specializing in [00:01:00] coverage for CPG brands. And so we're going to kind of dive in and unpack what's happening behind the scenes and how you can ensure that you're compliant with retailer requirements and not delay getting on the shelf. So Russ, welcome to the show. 

Russ Taylor: Thanks so much for having me, Jordan.

Jordan Buckner: You are one of our frequent guests and for brands and listeners who have not dove into the topics on insurance. Definitely make sure that you look back at our previous interviews. But for today, I really want to get into. Certificate of insurance and how that relates to, and to CPG brands, especially as they start working with larger retailers, because there's some problems that you're seeing that are coming up before we get into the topic in detail, I would love for you to just give like one minute overview of what a certificate of insurance is also called a COI to kind of help lay the groundwork.

Russ Taylor: Sure. I think that's a great place to start. So certificate of insurance or COI You know, my biggest concern is that, you know, when brands are getting started, they, you know, they get into a retailer shelf and they hear, oh, hey, we need a certificate of insurance. And a lot of times companies reach out, they don't know what it is, it's their [00:02:00] first foray into getting insurance and being on a, you know, working with a retailer and they'll reach out to people like me or their local insurance agent and they'll say, hey, I need a COI.

A COI or certificate really is a snapshot or proof of purchase of insurance. It shows you what types of coverages you have bought and the limits that are associated with that line of coverage. The most common ones that you'll see on a certificate are general and product liability. And you'll have some inventory potentially put on their automobile liability, workers compensation and typically what a retailer or anyone asking you for a certificate is looking for is the auto, the workers comp, and in particular, the general liability and product liability.

Those are all coverages that are protecting against third party damages. So that's what, you know, the retail is looking for. Hey, if bodily injury or property damage occurs to a third party, we want to make sure the company has insurance for that. 

Jordan Buckner: It's kind of like your insurance card, almost like when , you have all those insurance, you don't give someone your whole policy, like this is the [00:03:00] insurance card and this kind of has the basic detail is almost like the insurance card for a business that says, Hey, here's a summary of the coverage that we have, it's a standard form.

Pretty much right. That like looks the same. You requested from your insurance agent. It's something that they just provide you. 

Russ Taylor: Yeah, absolutely. It's on what's called an accord form. It's very standardized. Once you know how to read it, it makes complete sense. But it'll list, you know, XYZ company has general liability in the amount of 1 million per occurrence.

Automobile liability for, you know, 1 million per accident so on and so forth. And then there's an additional section at the bottom for any notes. And what will happen is when you're getting into a local retailer, right? Let's say it's Russ's convenience store. I would say, Hey, Jordan, I need to get your certificate of insurance.

Please add Russ's convenience store incorporated to the bottom of the certificate. My address is 123 Main Street. In Baltimore, Maryland and add that to the bottom certificate and you'll send that to me. You'll ask your insurance agent. Hey, I need proof of [00:04:00] coverage. I need a certificate showing that I have liability insurance to give to Russell's convenience store.

And then I'll collect that and I just put it in my files. Hopefully nothing ever comes from it because everyone wants to be claim free, but. That's what it is. It's a checks and balances to make sure that you have insurance and that you know, if something bad happens because of one of your products, I Russ is convenient store can say, Hey, Jordan, look, unfortunately, something bad happened, but I know you have insurance because you gave me this certificate.

Jordan Buckner: And I think a key part of that, too, is usually those retailers will want to be listed as an additional insured on that kind of policy. Right? And then that's essentially making the note on, like, through your insurance agent and on that form. Right? 

Russ Taylor: Yeah, exactly. The retailers are basically saying, hey, if somebody gets sick or otherwise harmed from consuming.

Your product, you know, Jordan's granola bars. I don't want to have to pay for that, right? Like, I had nothing to do with the manufacturing or distribution of Jordan's granola bars. I'm just the convenience store that sells them. So I'm saying, hey, Jordan, I want to know that. [00:05:00] If somebody chips a tooth on an almond in your bar, that your insurance is going to pay for it because that, you know, that's not my fault.

Conversely, right, you should be asking, we've gone over this in our previous podcast, you should be asking Russ's convenience store for a certificate of insurance saying, hey, Jordan, right? Like, if somebody slips, trips or falls. In my store, while they're holding your granola bar in their hand, right? And they sued both of us, right?

My insurance should be responsible for that. You didn't spill the water on the floor in my convenience store. So again, it's a checks and balances. It's a 2 way street and accord forms are. Extremely standardized. Everyone once you once you've been handling insurance for a while, everyone knows what they are.

Your agent should be able to turn these around for you. And we have a 24 hour turnaround guarantee time that, hey, you send in a request at 8 a. m. on a Monday. You'll most likely have it that afternoon that they can be populated pretty easily 

Jordan Buckner: and quickly by your agent. So let's get into some of the fun stuff, because I think let's say our listeners, you have the basic insurance.

Usually that starts off with like a 1 million, 2 [00:06:00] million policy, but then as brands start to get into larger retailers, they have different requirements. And so how are you seeing brands kind of navigate that one, if they have less than the required coverage and then two on those forms, a lot of times they'll do things like have a general liability plus.

You know, umbrella policy, how does that kind of align and where are some of the difficulties you see in working with some of these larger retailers? 

Russ Taylor: Yeah, so this has been a shift more recently in the last four to five months. I'd say when we started secure CPG a little over two and a half years ago with the exception of, you know, large brands that were that had tons of volume and large national retailers.

Most companies were okay with that normal, that initial limit that you get when you get a general liability policy of 1, 000, 000 per occurrence, 2, 000, 000 in aggregate pause there real quick for anyone uninitiated with that 1, 000, 000 per occurrence means anyone claim you have up to 1, 000, 000, 2, 000, 000 in aggregate means you have 1, 2 million for the whole policy period at your disposal [00:07:00] for multiple claims.

But we saw a number of brands that were okay and getting into regional retailers with a million dollars per occurrence limit, 2 million in aggregate. And then even some regional trials with national retailers like Whole Foods or or MOMS. Or fresh market. So then we started seeing the large retailers, all really pretty much all of the large national retailers, Whole Foods, nationally, Walmart, Target.

All we're saying, hey, you need to have a 5, 000, 000 dollar limit of liability to be on our store shelves. And then it became a 5, 000, 000 per currents limit to be on our shelves. So it escalated rather quickly from. Hey, we, a million dollars per occurrence. So now you need a five million per occurrence.

And that can be an onerous and expensive policy to buy for an emerging brand. It's, it's a lot of insurance for a company, even like Hartford or travelers or Chubb. Say, Hey, we're going to write a 5 million check, and we're only going to charge you a few thousand dollars per year in premium. It's not a bet.

They like to [00:08:00] take which, you know, then increase the cost of insurance for brands to buy a 5 million limit. So that really has become more. More frequent that we're seeing that with brands that are getting into these retailers and even at a regional level are the retailers. A lot of times are requiring a much higher limit of liability than we saw 2 years ago.

Jordan Buckner: Yeah, I think that's really, you know, it takes a financial kind of hit their brands, but it's something that , they have to do. You've also mentioned, like, as brands then start to add that policy, they're running into some issues with the actual certificate submission process. Can you walk through that?

Russ Taylor: Yeah, , it's happened most frequently, again, in the last six months where we're now seeing these increased limits. That are being imposed upon brands as they're entering into these large retailers. And I'm not trying to sound like I'm picking on the retailers, right? I'm sure they just got this passed down by their attorneys and said, hey, this is what you guys should be requiring.

But what I am. Sort of picking on them about is they're outsourcing their certificate [00:09:00] collection to 3rd parties. In most of these cases, right? you're getting a portal to upload your certificate of insurance to and what we're seeing happened very frequently. Now is push back when we get a brand that's comes to us and they say, hey, I have a one, two policy I'm now getting into Walmart and they're telling me I need 5 million in limit.

We go great. Okay, not a problem. We go out and the normal process that you would go through is get what's called an umbrella policy, which is an additional layer of liability that gets added to your underlying policy. So you have a million dollars per occurrence, 2 million in aggregate. We go out and we get you a $4 million umbrella, which brings you to a $5 million per current $6 million in aggregate, right?

That $4 million limit just gets added on top of both of those limits. And when we then send the certificate of insurance in. It doesn't match exactly this sample certificate that this third party has been given. And when you look at an accord file for a certificate, you'll see, you know, the [00:10:00] general liability has a 1, 000, 000 per occurrence, 2, 000, 000 in aggregate listed, and your umbrella with your 4, 000, 000 is, you know, two or three lines below that.

And you just sit there and you add four plus one gets you to that 5, 000, 000 per occurrence. The sample that these third parties are given, Okay. Is usually just saying 5, 000, 000 in the general liability box. And they haven't really been given any instruction beyond that. There needs to be 5, 000, 000 in liability.

This oftentimes we have seen gets a the system kicks it back and says, Hey you need 5, 000, 000, which then the insured, you know, comes back to me or their agent, whomever they're working with. And they say, Hey, it's telling us we don't meet the requirements. And then we have to go back and say, No, no, you do.

It's 4 plus 1 equals 5. And we've seen this where the pendulum sort of swings back and forth, and I don't want to again, not trying to try to pick on these people there. They haven't really given any instruction by the retailer other than that. Hey, we need 5, 000, 000 in limited liability. I want anyone who's listening is to be aware of this and know, hey, you might need to call your [00:11:00] retail broker or whomever your contact is at these retailers and just say, hey, look, the 3rd party is.

Pushing back on this. We have the limits here. We can show you maybe the retailers need to provide multiple examples of how the limit could be met. I think there's just a lot of ways. This could be solved by a pretty simple conversation up front. But I've seen this happen four or five times now in the last few months on any brands out there.

I want you to try and be able to avoid the headache of, Hey, we have the right coverage. The portal saying it's not covered correctly with the retailer and the back and forth that ensues. So maybe you can get this one off before it becomes an issue and your email box gets flooded. 

Jordan Buckner: Yeah, I think that's the biggest thing, right?

It's like any delays just can push things back like weeks as people are waiting to get email responses. And so a lot of times that they send over that example COI of like what the coverage should be in each line. If yours does not match that, be preemptively have a conversation with them say, hey, we're submitting this [00:12:00] information.

This is our actual, our full coverage and that meets your minimums, but in these two ways so that you can kind of flag that in advance, see if they need to add in just like an approval or something earlier as you're submitting that so that you don't see like weeks of delays, just trying to get everything sorted.

Russ Taylor: Yeah, I think you're 100 percent correct, right? Because the certificate usually becomes a bottleneck in a time constraint issue more so than anything else, right? Getting the coverage takes a little while in some cases, but that's usually okay. Great. We have a deadline. We know about it. The certificate can become this sort of really weird bottleneck in that, Hey, I have the coverage.

It's there. Why is this taking longer than it should? And that's the super frustrating part because it should be the easiest portion of the actual insurance transaction. 

Jordan Buckner: Yeah, that makes sense. So I think the other part, Russ, that you and I had talked about is the fact that At some of these larger retailers, different categories of a store can have different risk profiles and therefore different [00:13:00] coverage requirements.

Can you talk about what some of those high coverage categories are so that founders can be aware? 

Russ Taylor: Absolutely. This is one that I think comes as a shock to the brand owners more so than anyone else. And it's I understand why it happens on the retailer side. So, you might be again, Jordan, your granola bars in at Target and Walmart, and you're doing great.

And you say, hey, look, I'm going to launch a supplement of some sort that goes along with this. The supplement categories at particularly Walmart, and I believe Target. Carry a different insurance requirement than the rest of the food and beverage categories at those retailers. So normal limit of liability might be 5 million in the store, but in the supplement section, right?

I've seen as high as 20 million be required for brands to carry. So as you're launching new products. You might be, you might cross all your T's and dot all your I's, and you might just not be [00:14:00] aware that, hey, launching into a new category in a retailer is going to require a change to your insurance program.

I don't want this to scare anyone out of some big, grandiose idea they have, but again know the hurdles are in front of you and know that you're going to have to jump over them makes it a lot easier to execute. So we saw this happen a few times where brands got completely blindsided after they launched and then.

All of a sudden somebody came in a retailer came back and said, Hey, look, we said you have 5 million. You actually need 10 million or 15 million in liability to sell in the supplement section. 

Jordan Buckner: Yeah, that's really expensive. And I think people hear supplements and it's not necessarily just, you know, like, vitamin pills, because there's a lot of this is as more brands are moving towards kind of this food is medicine idea, right?

It might be a hydration mix powder or you know, food is kind of vitamins that you might want to be sold in the supplement category to be next to other items. I'm kind of curious. Have you seen types of [00:15:00] products that have kind of come across your view that people should be aware of might fall under this category of supplement?

Russ Taylor: Yeah, that's a really good question, and I think it depends on the retailer in particular, but I agree with you that the hydration powders and packets and tablets along with anything that might come in a pill or supplement form or something that has a nutraceutical properties, potentially, and that could be as benign as ashwagandha.

Right? And so I think checking with, Your contacts at the retailers before you buy into insurance policies is important to know the other category that and this may or may not come as a surprise people, but anything involving infants and toddlers is realistically going to have an increased liability requirement that comes along with it.

And, you know. Living close to a Walmart myself and Wegmans you kind of see that the little island of different products and you say, oh, if I venture over there, right, I'm probably going to [00:16:00] need to to carry an increased limit of liability. But I think Jordan, what we. Do a great job or what you do a great job in particular is like, this is not the, and I'll be all this is the roadmap, right?

Try, try and avoid the speed bumps as best you can. You're still going to have to go over them. But if you're ready for him, it doesn't jar your teeth. 

Jordan Buckner: Exactly. Yep. You can be prepared budget for the know that's going to affect because I think even what happens most time, right? Like, let's say you have 2 products and 1 of them's the supplement, you might have to get insurance coverage for your whole company. It's not like just for that product line, right? 

Russ Taylor: Yeah, that it gets tricky. You can get creative with some of the excess liability, but it's still gonna cost you something, right? . Nothing is given to you for free.

Unfortunately you can get really complicated insurance things. Some of our larger clients have very complex excess liability towers for specialty retailers that they're in, but for the most part, right? If, you know, if you're selling a line of products that's comprising a decent chunk of your revenue, [00:17:00] right your whole revenue is going to be counted into that into that excess liability calculation.

Jordan Buckner: Potentially, that makes sense. I know, you know, insurance can seem kind of just like a standard driving for a lot of people, but I think it has a lot of really important. Impacts on your business that most people erroneously, like don't think about until it becomes a problem. And I think, you know, what we want to do in these episodes is really bring some of these things to your attention so that you can preact, proactively think about them and take care of them before they become an issue.

Russ, thanks so much for being on today. And as always sharing some of the behind the scenes and insights around insurance for CPG brands. 

Russ Taylor: Absolutely. Thanks so much again for having me, Jordan. 

Jordan Buckner: If anyone listening is looking to get insurance for the first time or change insurance providers to someone who understands the CPG industry, I'm going to put Russ's info in the show notes as well.

Reach out for an introduction and see how he and secure CPG can help with your insurance needs for your brands.