Spoilage insurance

If the power at your flower shop goes out or your restaurant’s refrigerator stops working, you could face significant financial losses. Spoilage insurance covers the cost of lost inventory, including flowers, pharmaceuticals, food, and other perishable items, due to unexpected issues such as:

• Power outages, impacting your refrigeration, cooling, and humidity systems
• Equipment failure, including if your freezer, refrigerator, or HVAC system breaks down
• Equipment contamination, such as if a refrigerant leak spoils your inventory

If spoiled inventory issues force you to temporarily halt operations, some policies include business interruption coverage. This coverage reimburses your lost revenue during a disruption and covers operating costs, such as wages and rent, to keep your business afloat until you can reopen.

Losing perishable stock due to a power outage, equipment breakdown, or other covered event can cost your business substantially. Spoilage insurance protects small businesses from these financial losses, helping to pay for lost inventory and related damages to help your business bounce back.

Spoilage coverage is critical for businesses that rely on climate-controlled storage for their perishable inventory, such as:

• Florists: If a walk-in cooler breaks down, loses power, or has a contaminant leak, spoilage insurance would pay to replace lost plants and flowers.
• Gardeners: Spoilage coverage handles financial losses over spoiled plants, crops, and other perishable goods that are spoiled due to a cooler malfunction or power outage.
• Pharmacies and medical offices: Spoilage insurance reimburses healthcare businesses for the loss of expensive, temperature-controlled medications, including vaccines, insulin, and biologics.

Yes, spoilage coverage typically covers the loss of spoiled meat, dairy, produce, and other perishable stock that a food service business depends on for income, provided that the outage is caused by a covered peril, such as a storm, lightning strike, or explosion.

These types of businesses include:

• Restaurants, including coffee shops, pizzerias, and other businesses that have a refrigerator or walk-in freezer.
• Mobile food businesses, such as food trucks, food vendors, and any other food providers that travel to their customers.
• Retail stores, which include bakeries, delis, grocery stores, and other places that sell perishable items.
• Manufacturers and distributors, such as businesses that process or distribute meat, frozen goods, beverages, produce, cheese, and other perishable items.

Before you submit a claim, you need to clarify whether your insurance will cover your specific incident. Review your food spoilage policy terms to determine whether it covers:

• The spoiled food items
• The cause of the spoilage

It’s crucial to call your insurance agent as soon as possible to report the incident. To speed up the process, be ready to provide:

• Your policy number
• Date and time of the spoilage
• Cause of the incident

To speed up the claim approval process, it’s important to send your insurance provider all of the proof and documentation around the incident’s cause and the cost of the damage. This includes:

• Pictures and videos of the spoiled inventory, where it was stored, equipment that malfunctioned, and any other damage incurred
• Create a detailed list of the spoiled inventory, including its quantity, cost, and the date it was purchased
• Gather receipts for all of the lost or damaged items
• Collect proof of the cause, such as written confirmation from the utility company if the spoilage was caused by a utility outage, or refrigeration unit maintenance reports if you had an equipment malfunction

Once you’ve gathered all of your documents, you need to send all information to your insurance company, including:

• The completed claim form from your insurance company
• Your documentation files

Make sure to keep copies of everything you’re providing to your insurer, in case of discrepancies.

Being cooperative during the claim evaluation period can help you get a response faster. This includes:

• Acting professionally and transparently if an adjuster comes to your business to inspect inventory, equipment, or other items from the incident
• Responding promptly to follow-up communications, providing any additional documentation requests, and following instructions

Once your insurance company gives its decision, it’s important to act accordingly. For example:

• If your claim is approved, you’ll be reimbursed for your lost items, allowing you to replace your inventory and resume operations
• If your claim is denied, you should speak to your provider about the details of their decision and to understand your policy terms more clearly

Food contamination isn’t covered by a spoilage insurance policy because it’s a different type of liability.

When food gets contaminated with harmful bacteria, chemicals, and foreign materials, customers can get hurt or sick. This is bodily injury, which is typically covered by a general liability policy.

Food contamination coverage protects your business from the significant damage a lawsuit can do to your finances, time, and reputation. This insurance covers costs related to:

• Removing and replacing contaminated ingredients
• Covering medical bills for customers who fell ill
• Cleaning and sanitizing equipment
• Paying attorney’s fees, judgments, and settlements
• Hiring a crisis management firm to help repair your brand’s reputation
• Supplementing business interruption costs while you recover

A commercial general liability policy also includes product liability insurance, which covers claims of illness or injury from food you manufacture, distribute, or sell. This type of protection also applies to cottage food businesses that sell homemade products under state cottage food laws.

If your general liability insurance doesn’t include food contamination coverage, you can add it to your policy as an endorsement.