By Norris W. Parker, Manager, Texas Insurance Advisory Association, Austin, Texas
From AA&B March 1955
Newspapers enjoy no immunity from the many perils that confront business in general. In fact, the business of publishing newspapers faces a number of unusual hazards that are not common to other enterprises.
In a discussion of these hazards, it seems logical to begin with fire insurance, the best known and most frequently bought insurance. Let us assume that buildings, machinery, paper, furniture and supplies are insured against loss by fire, lightning, hail, hurricane, windstorm, explosion, riot, and a number of other coverages incorporated in the Extended Coverage Endorsement which most businessmen have attached to their standard fire policies.
If the plant is a comparatively modern one, the chances are that an automatic sprinkler system has been installed. If so, it will lower the rate for fire insurance and, in case of fire, could prevent even more costly losses, but sometimes sprinkler systems do not operate perfectly - and they have been known to flood a building when there was no fire. So, if there is a sprinkler system, there should be Sprinkler Leakage insurance, also.
These two coverages go a long way toward protection of newspaper property against physical damage. Should there be a fire, the flames, heat and water contacting the intricate machinery can mean a costly repair job or expensive replacement - a bill the insurance carrier will pay. But physical loss is only one of many that can arise from a fire, and sometimes the indirect losses from fire cost more - and are not insured against.
When, for any reason such as a fire, a plant has to cease operation, the publisher's income is immediately curtailed or stopped altogether. With no income, there is no money to pay the fixed charges and overhead that continue whether the presses are rolling or not; no money to pay salaries, accrued taxes and interest and, of course, there is no profit.
No Need to Worry
Today a publisher need not worry about the loss of income. The insurance industry, recognizing the need for just such a coverage, has created Business Interruption insurance, which might just as well be called "health and accident insurance for business." This type of protection simply provides that, in the event of damage or destruction from a peril such as fire, insurance will come close to providing the same monetary income that the newspaper had been producing.
Such a policy will pay continuing expenses such as taxes, and services which cannot be cancelled. It will pay the same salaries key employees have been receiving, and will pay these salaries until the presses are rolling again. And it will pay the publisher a normal profit based on his past earnings and the profit that might reasonably be expected if no loss had occurred. It will keep on paying until his plant is restored or he runs out of insurance.
Paper Published Anyway
If something happens to disable a newspaper plant, readers expect the paper to be published anyway. Under such circumstances, a publisher moves his operation to another press, perhaps to the plant of the nearest competitor, but this costs money. Insurance, however, can be purchased to pay this extra expense.
Extra Expense insurance means exactly that. Such a policy agrees to pay the necessary extra expense incurred by a publisher to continue, as nearly as practical, the normal conduct of publishing following damage to, or destruction by, fire or any of the other perils insured against. This policy starts paying extra expenses on the date of the loss, and continues paying them for the length of time that shall be required, with the exercise of due diligence and dispatch, to repair, replace or rebuild the building, additions thereto or contents thereof as may be destroyed or damaged.
Extra expenses can be a major item to any newspaper. Some years ago, when the LaSalle, Illinois, newspaper burned at the peak of the Christmas advertising season, the publisher didn't feel too badly because he carried $10,000 in Extra Expense insurance. But he found that additional help and overtime in getting out his paper after the fire cost him $7,000; another $5,000 went to a friendly newspaper for the use of its plant; $2,000 was spent in transporting employees from LaSalle to the other community; another $1,000 went for the rental of temporary office furniture; another $1,000 went for trips out of town to arrange financing, etc. The total extra expense was $24,000. That's why, when this newspaper moved back into its rebuilt plant, the publisher raised his Extra Expense coverage to $40,000.
Coverages Do Not Overlap
At first glance, it may seem that Business Interruption and Extra Expense insurance may duplicate coverages or overlap in some way. They do not. The Business Interruption policy restores the money required to take care of the fixed charges and expenses, plus necessary payroll and in addition, profit, if any would have been developed. The extra Expense policy is, also, just what the name implies; it provides for the additional extra expense to which a newspaper must go in order to continue publishing after a fire or similar loss.
It is an interesting sidelight to note, however, that apparently most newspapers don't carry both.
I have asked various insurance companies and adjustment organizations to review the losses they had paid on newspapers during the last few years and I was amazed to learn that, while most newspapers did have Business Interruption insurance, not a single loss reviewed showed that an Extra Expense policy was carried.
Every newspaper - in fact, every public service business - should have both Business Interruption and Extra Expense coverage. But if the budget permits the purchase of only one, I would be inclined to recommend the Extra Expense coverage. That is because profits in newspaper publishing fluctuate with Christmas, Easter and special promotions which provide stimulus for certain months of high profits during the year. Should a loss occur in a newspaper plant during a period of subnormal advertising revenue, a Business Interruption policy might not be called on to pay any profit, although fixed charges and expenses and insured payroll would be paid. On the other hand, the paper must be printed after a fire whether it occurs in the high advertising revenue period just before Christmas or in one of the months when revenues dip downward. For that reason, an Extra Expense policy is a must.
Newspapers Make Enemies
Other coverages deserving attention are Explosion, Riot, Vandalism and Malicious Mischief insurance. Making some enemies is a part of the newspaper business as there are people in every community who resent a policy of reporting the facts.
Thus, vandalism, and even riot, explosion and malicious mischief, become a very real possibility. Explosion, riot and civil commotion are covered in the Extended Coverage Endorsement, and for very little more money. Vandalism and Malicious Mischief insurance can be added.
Liability
In this day of easy lawsuits and high awards, it is important that newspapers carry complete public liability coverage for bodily injury or property damage. Failure to carry Public Liability insurance on property and business operations has saddled more than one businessman with a judgment that has forced him to sell his business and spend a lifetime paying off the injured party.
If a plate glass window in a newspaper plant is broken, it may cost $100 to replace it, but it won't seriously hamper operations. Or if a staff car is burned, wrecked, or stolen, the $1,500 or so won't seriously impair the business. However, if some member of the public is killed or injured by some business activity, a publisher couldn't even make a close guess about how much it would cost to settle the expected suit for damages.
Very normal, harmless situations can result in financially crippling lawsuits. From time to time, all newspapers help sponsor such activities as soap box derbies, sports shows, Golden Gloves boxing tournaments, cooking schools, Christmas parties for underprivileged children or, at least, picnic outings for their newsboys.
Those who undertake these outside activities should have their public liability policies checked carefully by a qualified local insurance agent or, through him, by an insurance company specialist who has had experience with the dangers surrounding these activities. Uninsured, or improperly insured accidents arising out of such activities, can wreck a newspaper.
Newspapers are also exposed to damage suits through arrangements with firms which haul paper and supplies to the plants and handle the distribution of papers and printed material. Insurance should be checked to see that claims arising out of these independent contractor relationships are covered.
Independent Contractors
Particular attention should be paid to the possibility of a change in the status of the independent contractor which might classify him as an uninsured employee. This is a situation that can arise particularly in the case of newsboys. Most publishers have established something like the "Little Merchant" plan whereby newsboys are independent contractors who are not covered under Workmen's Compensation insurance. Under most of these plans, probably no difficulty has arisen. Yet there is a real possibility of danger because the courts tend to handle independent contractor relationships on an individual basis, according to the facts existing in the particular case.
An independent contractor can be given very limited instructions in a general manner and retain his status. But when he is given instructions that are frequent and too specific, his status, in the opinion of the court, can become that of an employee with the possibility of an uninsured claim against the "employer." Whenever any question exists as to liability in this respect, it is much safer to pay some extra money for insurance and avoid the possibility of having to pay for an expensive lawsuit and a heavy judgment.
No real peace of mind and security are possible without a comprehensive General Automobile Liability policy with high limits covering all operations, including the use of automobiles and trucks. Automobiles and trucks operated in connection with a newspaper are almost certain, now, to be insured against loss from fire, theft, tornado, hailstorm, hurricane and other external causes, against loss through collision and against claims for damage arising out of the operation of such equipment. Public liability protection should also cover automobile equipment that may be hired or that may be used by employees while gathering the news or delivering the paper. A publisher is legally liable for any accidents that may occur in the operation of any leased or rented automobile equipment such as trucks to deliver papers.
A publisher may, also, need coverage for liability for damages or injury resulting from the operation of automobiles owned by employees which are used by them in the conduct of the employer's business. Thus, if a reporter, driving his own automobile, is in an accident while en route to cover a story, the publisher may be liable for damages. Non-ownership Automobile Bodily Injury and Property Damage insurance offers protection for such situations. It is not an expensive coverage.
Libel is a danger that is ever-present in a newspaper editorial office. Few insurance companies in the United States write it and the few that do limit the protection but newspapers naturally seek protection against this hazard.
In the space available it is impossible, of course, to analyze and survey adequately the types of exposure to which a complex business like newspaper publishing is subjected, and the types and kinds of insurance available to cover them. But it's the local agent's job to survey such insurance needs. After he has completed his survey, developed the rates and arrived at the approximate cost of these coverages, he should sit down with the insured to discuss his potential exposures to loss and the possible consequences of such losses and to help the insured determine which potential losses he can afford to stand himself and which he must insure against.
A 33-year veteran of the insurance business, Mr. Parker had worked with the Rochester American, the Phoenix Assurance, the National Union and the Loyalty Group before he accepted his present position as manager of the Texas Insurance Advisory Association in 1951. He is the author of the article "What Makes a Good Fieldman?" which appeared in the September, 1954, issue of THE LOCAL AGENT. In this article, Mr. Parker presents the ideas he used in a talk before the Mid-Winter Meeting of the Texas Press Association.
