Race Shop Insurance

[patman]

Hi Guys,

This might be sort of a strange question for this forum, but it seems there might be a few people on here with relevant experience who could help out so I'll give it a go:

I recently quit my job and opened a sports/race car shop. I do various things including race car setup, fabrication, normal maintenance for race and road cars, mobile service (mostly for large collectors doing normal maintenance at their facility), track support, etc. I do a bit of engineering consulting too, but not much.

I also use my own track days, SCCA FC racing, and a Chumpcar team I am sponsoring as advertising.

To be honest, for a new startup I have been doing pretty well, I am in the first 6 months and have a few good customers, mostly paying the bills, customers are happy, etc.

Now here is the issue: I am having a hell of a time finding insurance that I can afford, or for that matter who will even cover me at all. I currently have a garagekeepers/general liability policy through a well-known company, but they forced me to split the racing operations into a separate company, and now I am having to fight to keep them from cancelling me. Plus this gives me no insurance at all for race car work. Even with all these issues this is costing me about $4k/yr, but it also makes it damn hard to use the racing for advertising if I'm not allowed to tell anyone about it...

I recently got a quote from another agent that would have covered everything except the actual on-track racing, but when they heard about mobile service and track support they upped the price to almost $14k a year, and 10k deductible at that.

I am a one-man shop until I grow some more, and I just can't afford to pay thousands of dollars a month for insurance. Even after all my startup losses get absorbed I doubt I will gross more than $100k at least for the next couple years, it doesn't make sense to me pay 15% of gross just for insurance. FWIW I have excellent credit, clear driving record, etc.

Is this really what those of you who do this kind of work are paying? Anybody got a good agent that understands this business well enough that they might be able to help me a little better?

TL;DR: I own a small shop and can't find affordable insurance. Anyone got any advice?

Thanks,
Pat

[Bob L.]

You might try some of the speciality car insurance outfits... they do offer "off track" insurance on race cars... however, may not offer liability/business insurance. Would think they've heard the question before, might have some advice.

I use Ford Heacock in Florida for my cars.

Haggarty, Grundy, ....... other's....?

Interesting issue....

Bob L.

[Jim Edmonds]

Great question:

1. Is there a liability lawyer in our group that would comment on whether incorporation would help in a case like this? I'm thinking the question is "how does one protect both personal and business assets?", both: if you have the business insurance and if business insurance is not available for a reasonable cost?

Not trying to hijack the thread but it feels related.

2. Does a personal umbrella help protect one's personal assets it the racing universe?

Thanks,

Jim

[Rick Kirchner]

Since you are in the east, I'd call a west coast small shop, like Bob Morris at Sabina (Vince Tjmelland), Roland Johnson, Jack Crone, or even Dave Freitas (who is on the larger end of that scale) since you really won't be their competition.

[steve zemke]

Call Greg Rice at Rice Race Prep or a local car repair shop.

[HayesCages]

We have insurance that covers the building and tools. The liability release we have customers sign mostly protects us from someone taking it all. If someone has enough money they can sue anyone.
That's also why we are an LLC.
One place we wanted to work with required a million dollar insurance policy in their name, just to make some minor fabrications. "Even our janitor has to have it", they told me.

[Bongo]

I'm no lawyer, so take this with a grain of salt, but I've gotten some advice in this regard from my accountant. To my understanding, having an LLC cover your business IS a type of insurance. Because it stops the liability at that corporate level.

So you might have an LLC that covers your garage and all your tools and shop, but your race prep and on-track services might be under a nested LLC. That way, if something goes wrong, there isn't much to seize from that operation. That LLC just goes bankrupt.

For example, I might have a company that does race prep, sells parts for cars, and owns the rights to some brand or trademark.

My top-level company would have it's own LLC, but then I'd also have another one for the race prep, a different one that sells parts and another that owns the intellectual property (trademarks & brands).

That way the value of the organization is compartmentalized and protected from anything that might go wrong in the other areas.

Only downside would be depending on where you live/work. Here in CA, it's $800/year for each LLC just to keep it active, plus whatever you have to pay an accountant to do the returns, which in some cases can be a couple thousand dollars.

Hope that helps!

[ChristopherBernard]

I've been told that even as an LLC, you could still be personally named in a lawsuit as having been the individual that made the decisions. Seems there is no escape from the litigating types.
I am primarily an architectural metals fabricator. Sole proprietor and also a one man show.
My total business insurances average about $15,000 per year depending on gross sales and the phase of the moon apparently. Don't even get me started on the rest of the expenses (like $16,000 per year for my shops property taxes).
You've got to run pretty hard an for long hours to pull ot all together.
Good luck.

Chris

[Pi_guy]

I went to rent a space all I needed was insurance. They said call my broker they are reasonable. So I figured I will not mention race cars or welding, I describe my business as light electronic manufacturing I produce wiring harnesses. Left out details, response was soldering is dangerous we will not insure that type of business. Tried a few other places most were we do not insure that type of business. The one quote I got was about 3x the 1200 rent.
So we seek other solutions.

[Dog Licked Racing]

Contact Larry O'Donohue at "LarryO-at-InThePitsMedia-dot-com" he sells STP and small race business insurance for a living. Tell him Frank from Dog Lick Racing told you to get in touch. He is located in Virginia.

[patman]

Thanks for the replies guys.

Just to clarify, both the main shop and the racing company are LLCs already. Per my attorney, this protects me personally (with some exceptions).

The problem is that I have sunk most of my life savings into this venture, so I can't afford to write off the shop if something happens.

In addition to that, my lease requires both general liability insurance and property insurance.

I will follow up on the recommendations here, and will let you guys know if/when I get this resolved.

Thanks,
Pat

[Brian C in Az]

As mentioned in a previous post, you need to have each and every customer sign a waiver.
If you touch anyone's car in your shop and they have an accident, without a liability waiver, you can/will be sued. Every waiver needs to include the words "racing is a dangerous sport.....participate at your own risk and liability....."
Did you know that helping someone load a car in their trailer makes you liable if the car falls off the trailer on the highway and someone gets hurt? You needs signs at your shop and you need signed waivers from every customer.

[dsmithwc04]

Just to echo some advice. An LLC does NOT necessarily prevent you from losing your personal assets in a lawsuit. Piercing a corporate veil is entirely possible so make sure your corporate documents are in order. I also recommend you carry insurance that may cover your legal fees in the event of a lawsuit. Paying legal fees to defend yourself can easily reach tens of thousands of dollars quickly and remember you don't get that money back even if you win.

Keep in mind that you can be named personally in a suit even if you are an agent/owner of your LLC under certain circumstances in some states. And if the person suing you lives out of state, now your open to the possibility of a Federal lawsuit with a hole different level of BS. I've personally witnessed a frivolous lawsuit tear apart an honest business because the individual had more money than god and the lawyer to prove it. $60k in legal fees before they ever even saw the court room.

Also, those liability release papers folks speak of probably aren't worth the paper they are written on. They are only ever worth the amount of money your willing to pay to defend them in court.

[HayesCages]

Also, those liability release papers folks speak of probably aren't worth the paper they are written on. They are only ever worth the amount of money your willing to pay to defend them in court.

Yes, this is true with ANY release you sign, even the ones provided by SCCA, the race tracks and other groups.

[EACIII]

Remember LLC stands for Limited Liability Corp, not Full Release from Liability Corp.

Ed

[dsmithwc04]

Anybody know what you call a bus full of lawyers at the bottom of the ocean?........

[R. Pare]

A good start?

[HayesCages]

"Professionally" written with the help of an ... attorney. Feel free to use if you like.
Pat already has a copy though ;-)

[patman]

Contact Larry O'Donohue at "LarryO-at-InThePitsMedia-dot-com" he sells STP and small race business insurance for a living. Tell him Frank from Dog Lick Racing told you to get in touch. He is located in Virginia.

Thanks for all the help guys!

I got a couple of great leads, but this ended up being the winning answer.

Larry was able to set me up with a policy that covers all my needs at a much cheaper rate than what I was getting from the other places I talked to. If anyone else needs insurance, I recommend you take Frank's advice and give him a call!

Now I can forget about insurance problems and go back to building and fixing race cars!

[patman]

Well, a year later and back at square one.

The company I was working with decided they didn't want any more racing exposure.

Anybody have any new ideas?

[HayesCages]

We contacted L. O'D. at some point last year and never got a call back.

[BorkRacing]

Here are some basic facts as my significant other underwrites liability for businesses doing over 1M in sales.
1. A waiver is useless, most states do not accept consent to negligence.
2. A lawsuit can be filed where the event happened, in the car owners state, in your home state if that is different from where the track was or in the state that the person working on the car lives. Basically where the laws are best suited to win the suit.
3. You can do no harm but be held in court to the point of exhausting your insurance and then it becomes your burden.
4. Family members can also sue, adding to the cost burden
5. It can go civil and LLC, C corp and insurance don't apply

There is really only one carrier who underwrites this stuff and it isn't cheap...K&K Insurance Group https://www.kandkinsurance.com/Motor...ace-Teams.aspx

[EACIII]

Welcome to running a small business. It is not cheap and all easy money. Next time you wonder why the plumber charged you so much for his 2 hour visit you now know why.

[BorkRacing]

Welcome to running a small business. It is not cheap and all easy money. Next time you wonder why the plumber charged you so much for his 2 hour visit you now know why.

Because he owns a race shop with high insurance premiums?

[EACIII]

Insurance premiums are high on all small businesses. That was my point. You can blame most of it on lawyers

[HayesCages]

And judges. Working the business out of his home with an annual payroll of $68k (me) and annual total revenue of $188k "BJ's plumbing" just got a quotation for general liability insurance for $440 per month from Hiscox. Why do plumbers charge so much again?

[SStadel]

That's actually a lot for just GL insurance. I have lots of small trade contractors insured for less than $1,000 per year for GL and IM. Now in Illinois, Workers Comp is another story. If that quote you gave includes Workers Comp, then its very reasonable insurance.

[HayesCages]

From them:
General Liability : $5,890.00 •Damage to someone else's property (including $100,000 per rented space)
•Injury to a third party, including related medical expenses
•Actions of your staff, including temporary employees
•Includes optional terrorism coverage

Limits/Deductibles selected: •$300,000 per occurrence / $300,000 aggregate
• No deductible for General Liability coverage


I was simply seeing what it would cost. I have no interest in anything like it.