Why Your Twin Cities Coffee Shop Needs More Than a BOP

A business owner's policy (BOP) is the usual starting point for a coffee shop. It's a good base, but coffee shops have risks a standard BOP doesn't fully cover: expensive equipment, perishable stock, card payments and a busy staff. The same applies to cafes, bakeries and bagel shops.

This guide covers what a BOP does, the gaps to check, and the Minnesota rules that apply.

What a BOP covers

A BOP combines a few coverages in one policy:

• General liability for customer injuries and damage you cause to others, such as a slip on a wet floor.

• Property for your equipment, furniture, inventory and improvements, and the building if you own it, against covered causes like fire, theft and vandalism.

• Business income for lost income and extra expenses if a covered loss forces you to close for a while.

For the difference between a BOP and buying general liability alone, see our post on BOP vs. general liability.

Gaps to check

1. Equipment breakdown

Standard property coverage pays when equipment is damaged by an outside cause like fire. It usually doesn't pay when the equipment fails on its own, such as an espresso machine boiler, a control board or a cooler compressor. Equipment breakdown coverage, often added to a BOP, covers that kind of mechanical or electrical failure.

2. Spoilage

If the power goes out or a cooler fails, milk, cream and baked goods can be lost. Spoilage may be limited or excluded on a standard BOP, especially when the outage starts away from your building. Ask whether your policy includes spoilage coverage and what limit applies.

3. Business income limits

Check how much business income coverage you have and how long it lasts. A shutdown for a fire, water damage or waiting on equipment parts can last longer than owners expect. Your agent can help you estimate a limit based on your actual revenue and costs.

4. Cyber and card data

Your general liability doesn't cover a data breach. If card data is stolen from your point-of-sale system, costs can include customer notification, investigation and claims. Cyber liability coverage, as an add-on or a separate policy, is built for this. Using a payment provider that follows card security standards helps, but it doesn't remove your risk.

5. Crime and employee theft

A BOP usually has only a small amount of coverage for stolen cash and little or none for employee theft. A crime add-on or policy can cover cash theft, employee dishonesty and some types of fraud.

6. Employee driving

If employees use their own cars for bank runs or supply pickups, your business can be liable for an accident. Hired and non-owned auto coverage protects your business in that situation. See our post on hired and non-owned auto.

Minnesota rules to know

• Workers' compensation: Minnesota requires employers to carry workers' compensation insurance or be approved to self-insure (Minnesota Statutes § 176.181), and part-time employees count. The state can order a penalty of up to $1,000 per employee for each week an employer goes without it.

• Liquor liability: if you serve beer or wine, Minnesota requires retail liquor licensees to carry liquor liability coverage (Minnesota Statutes § 340A.409). Small on-sale wine and 3.2 percent malt liquor licensees with under $25,000 in sales the year before can be exempt by affidavit. Your city may require more. Liquor liability isn't part of a standard BOP.

Shopping for a BOP: what to ask

• Does it include equipment breakdown, and what's covered?

• Is spoilage included, including power outages that start off-site? What's the limit?

• What's the business income limit, and how many months does it last?

• How much coverage is there for cash and employee theft?

• Is hired and non-owned auto included, and at what limit?

• Do I need separate cyber, workers' comp or liquor liability policies?

FAQ

My BOP covers equipment. Why would I need equipment breakdown coverage?

Standard property coverage pays for outside causes like fire or theft. Equipment breakdown covers mechanical or electrical failure inside the equipment, like an espresso machine boiler or cooler compressor failing.

Do I need workers' comp for part-time employees in Minnesota?

Yes. Minnesota requires employers to carry workers' compensation (Minnesota Statutes § 176.181), and part-time employees count.

Do I need liquor liability if I serve beer or wine?

Usually yes. Minnesota requires retail liquor licensees to carry it (§ 340A.409), with an exemption for small wine and 3.2 percent malt liquor sellers under $25,000 in prior-year sales. It isn't part of a standard BOP.

Does a BOP cover a customer burned by hot coffee?

A customer injury claim like this usually falls under the general liability part of a BOP, up to your limits.

Does a BOP work for a bakery or bagel shop too?

Yes. Bakeries, cafes and bagel shops have the same main gaps to check: equipment breakdown, spoilage, business income limits and cyber.

Want your coffee shop's coverage checked? Call City Insurance and Financial Services at (763) 582-1888 or contact us. Related: commercial insurance.

City Insurance and Financial Services, Minnetonka, MN.