Flooring Company Insurance: What to Have on Day One

Before the first crew goes out, a new flooring company owner usually needs five core policies in force, in the right company name. They are general liability that includes completed operations, workers' compensation, commercial auto for the vans and pickups, cover for tools and stock on the move, and property cover for any showroom or warehouse. Pollution, professional liability and an umbrella may be added, depending on the work you do and the contracts you signed. This guide is for the buyer who inherited the seller's policies and wants to know what to have, what is specific to floors and what to confirm in the first two weeks.

The short answer

Floors are walked on the moment the job ends, so completed operations (the part of liability cover that responds after the work is done) is the first line to read.
Workers' comp comes next. Class codes follow the type of work (carpet and resilient, wood, tile, showroom), and pay to uninsured installers can enter the premium at audit.
Vans and pickups should be on your auto policy in your company's name. Installers who drive their own pickups on company errands are a gap to check.
Rolls, cartons and sanders in a van or at a job site are away from the shop. Ask how inland marine or an installation floater treats them.
Hidden wording can matter more than limits: a silica exclusion, the subcontractor exception, the pollution exclusion and how customer property is handled.

Which policies does a flooring company need on day one?

Start with the policies you already hold. The table pairs each way a flooring company gets hurt with the policy meant to answer it. Read it against the declarations pages you inherited. What a policy pays depends on its form, endorsements and limits.

Flooring exposures and the policy that answers each
What happens	Policy	What is specific to floors	Ask first
A customer or visitor is hurt, or property is damaged, after the job is finished	General liability with products and completed operations	A lifted seam, a slippery finish or water damage can surface months later. The standard form gives completed work its own aggregate limit (the most it pays in total for the policy period)	What the completed operations limit is, and whether an endorsement removes the usual exception for work done by subcontract installers
An installer or sander is injured	Workers' compensation	Sanding, finishing and adhesive work generally involves dust, fumes and machines, which is why the insurer asks what each crew member does	Which class codes apply, and how installer payroll is reported
A van or pickup is in a crash	Commercial auto	Crews drive to every job with rolls, boxes and machines loaded	Is every vehicle and driver scheduled, and what about employee-owned pickups used for work
Stock, tools or samples are damaged or stolen away from the shop	Inland marine, such as an installation floater, or a property extension	An installation floater is inland marine cover for property a contractor is installing. Material waiting in a van or at a site may fall into that gap, depending on the property form	Whether stock in transit and at job sites is covered, and for how much
A showroom or warehouse is damaged	Commercial property and business income, often in a business owner's policy	Stock, display samples and wood stored to acclimate. Business income responds to direct physical loss to covered property	Valuation (how a loss is priced), coinsurance (a penalty if the limit is too low for the value) and the waiting period

Depending on your work you may also need contractors pollution, contractors professional liability and an umbrella. See coverage gaps new flooring owners find and contracts, licenses and bonds for when each comes up. See general liability and inland marine for the basics.

Which kind of flooring company did you buy?

"Flooring company" covers several businesses that insurers treat differently. The federal industry definition covers installation, while selling flooring sits in retail trade. Work out which mix you own before you judge the program.

Where the weight falls in each kind of flooring business
Business you bought	Where the weight falls	First question
Installation only, residential	Workers' comp, auto, completed operations, customers' homes and belongings	Who are the installers, employees or subcontractors, and who carries which policy?
Supplier that also installs	All of the above plus product exposure and inventory. A company that sells flooring can be pulled into product claims even when it did not make the product	What do supplier agreements say about indemnity and insurance?
Commercial flooring contractor	Contract wording, additional insured status, higher limits, sometimes a wrap-up program (one program covering many contractors on a project)	Which customer contracts set the insurance terms, and does the program meet them?
Retail showroom with its own installers	Property, business income, cyber and crime for the store, plus the installation exposures	Is installation payroll separated from store payroll? Rating bureaus can classify store staff and installers differently. See workers' comp and payroll for a flooring company

What should you confirm in the first two weeks?

Whose name is on each policy. Under the standard workers' comp policy, and typically under other commercial policies, rights cannot be transferred without the insurer's written consent, so in an asset purchase the seller's policies do not simply become yours. If you bought through a limited liability company (LLC), make sure it is a named insured. Do not count on the automatic cover the standard general liability form gives a newly acquired organization: it excludes LLCs, lasts at most 90 days, helps only a buyer that already has its own general liability policy and does not cover injury or damage from before the acquisition. See keep the seller's insurance or start over.
The vehicle list. Match vans and pickups to titles, drivers and the auto schedule. Depending on how the policy is set up, a vehicle added mid-term may be covered only if you report it within 30 days.
The workers' comp ownership report. The policy expects notice of an ownership change within 90 days, and the seller's experience mod (the multiplier built from past claims) usually follows the business. See how to review the experience mod.
Installer status and certificates. Ask how each installer is paid and whether each subcontractor has a certificate of insurance on file.
Certificates the seller issued. Homebuilders, general contractors, property managers and showroom landlords may hold certificates that name the seller's entity. Ask the broker for the holder list, starting with the accounts that supply the most revenue. See certificates the seller issued.
Lender terms. If you used a Small Business Administration (SBA) 7(a) loan over $50,000, the lender will want property insurance on the pledged collateral, which here usually means vans, sanding and cutting machines and flooring stock. For equipment and inventory, the SBA rulebook calls for:
- full replacement cost, and
- the lender named as loss payee (paid first on a claim), with at least 10 days' notice of cancellation to the lender.
It sets no minimum liability limit, though your lender may ask for one. See SBA lender insurance requirements.
Licenses and bonds. Whether a flooring license exists depends on the state, and it may not move with the sale. See contracts, licenses and bonds for a flooring company.

Which wording in the inherited policies should you look for?

A program built for the seller's way of working may simply not fit yours. Find these in the policy itself, because each can change what a claim pays:

A silica exclusion, which matters if crews cut or grind tile or concrete.
A total pollution exclusion, which matters for old flooring, adhesives and finishes.
Whether the usual exception for subcontractor work has been removed.
How customers' furniture and belongings are treated (care, custody or control wording).
If you carry an umbrella, whether it names the auto and general liability policies as underlying cover. If professional liability is written on a claims-made basis (it responds to claims made while the policy is in force), whether its retroactive date (the earliest date of work it covers) carries over to you.

Each of the first four is explained in coverage gaps new flooring owners find. None of these is standard on every flooring policy, so look rather than assume. Work finished before closing is a separate question. The standard form's definition of your work has no matching wording for a predecessor's work, although its definition of your product does reach goods sold by a business whose assets you acquired. How that plays out depends on deal structure, state successor liability law and the wording. See completed operations claims on the seller's past jobs.

What can go wrong in the first week?

A hypothetical example. A buyer closes on a Friday and buys the assets into a new LLC. The seller may cancel its own policies after closing. On Monday six vans go out, and two installers also drive their own pickups with samples and tools. That afternoon a homebuilder asks for a certificate before it releases the next job.

Each item needs an answer by Monday. A policy in the new company's name should be bound before the first van moves, vehicles and drivers belong on the auto schedule, and the employee-owned pickups should be addressed in writing. A certificate should go out only for cover that is in force. A quote is not coverage, so get written confirmation that the carrier has bound the policy.

When should you ask for a review?

Ask before the first renewal, and sooner if a customer, lender or investor is waiting on proof. A review reads the policies you inherited against the business you run: the work mix, installers, vehicles and customer contracts. Morrow can review the declarations pages, loss runs and key contracts, flag gaps and request quotes. Any new terms depend on carrier underwriting. The insurance checklist for buying a business and the first 90 days give the wider timeline, and workers' comp and payroll for a flooring company covers the largest people exposure in detail.

Keep reading

Frequently asked questions

Can I keep running on the seller's policies after I close?

It depends on the deal structure. In an asset purchase, a policy generally cannot be transferred without the insurer's written consent, so you usually need your own. In a stock or membership interest purchase the company keeps its policies, but the insurers still need to be told about the ownership change. Check with each carrier first. For a flooring company, also ask who answers for open jobs, warranty callbacks and the certificates builders hold in the old entity's name.

Do I need workers' comp if my installers are subcontractors?

That depends on state law and on whether each installer's own employer has workers' comp. Employees on your payroll generally must be covered under state law. Texas is the main state where most private employers may opt out, and in North Dakota, Ohio, Washington and Wyoming the coverage comes from the state fund. At audit, the insurer can add pay to uninsured subcontractors to your premium base, so collect certificates before work starts and ask your insurer and attorney how your state treats each installer.

Does my lender set my liability limits?

The Small Business Administration's rulebook sets no minimum general liability limit and does not require the lender to be an additional insured. It generally requires property insurance on pledged collateral for loans over $50,000, at full replacement cost for equipment and inventory, with limited exceptions for loans of $500,000 or less. Your lender may ask for more, and customer contracts set their own limits, with builders and showroom landlords the usual source of those asks.

What does a flooring showroom need beyond an installer's program?

A showroom adds property cover for stock and samples, business income cover, and often cyber and crime cover for deposits and card payments. Ask your insurer whether installers and store staff sit in separate workers' comp classes, which depends on the state and the rating bureau.

Are the rolls and sanders in my van covered?

Not necessarily. Material and tools away from the shop are often outside a basic property cover. Ask whether an installation floater or other inland marine cover applies, for what amounts and at which locations. A quote or request is not coverage. Cover starts only when a carrier binds it.

References

Just bought a business? Get your insurance reviewed.

Send Morrow the declarations pages, loss runs and key contracts you inherited. Morrow can review them against the business you bought, flag gaps and request quotes where it makes sense. Any new terms depend on carrier underwriting.

Request a review Check a contract

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This article is general information, not legal, tax or financial advice, and not a coverage determination. Coverage depends on the actual policy wording, carrier underwriting, your purchase agreement and your contracts. Ask your attorney and accountant about deal and legal questions.

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