cs641

I'm a small frame builder that makes a little less than 100 frames per year. We are trying to get established with QBP and JBI but they want us to have general liability insurance. Everybody we've talked to will NOT do general liability for frame builders.

Who are you guys using for insurance?

unterhausen

All frame builders in the U.S. are insured by NIPC. Same as most shops. There is an agency that specializes in NIPC insurance, Westlake serves a lot of people. https://www.isuwestlake.com/bicycle-insurance
You should be able to get NIPC insurance through a competent local insurance agent, should you deal with one.

Andrew R Stewart 

I'll add that having built for others without insurance coverage is plain wrong, to your family and your customers. I assume that you never sought out advice from a lawyer or accountant, or you ignored their advice.

Sorry to be so harsh but this is a teaching moment for all the other budding builders. I feel there's a moral/ethical obligation to be able to back your work with your $ when something really bad happens. And remember it's not always the frame customer who does the suing. Another person or entity that was harmed can sue. Andy

squirtdad

I seem to recall the even once a person stops building frames, they need to keep some sort of insurance to protect from claims in the future? or am I imagining. Also seem to recall the LLC or INC the business will help somewhat separate liablility from personal assets, I would double check. All it would take would be one lawsuit to wipe out a person financially

cs641

Thanks for the lead on Westlake, on the phone with them now.

It's not that we have been purposely trying to dodge the insurance game, we've been unable to acquire it. We've been told numerous times that our operation was too small, had too few employees and that we needed over $250,000 in revenue per year with a history of 5 years insurance with no claims in the past.

unterhausen

The NIPC is claims made insurance, so you have to continue with it until you aren't worried about suits any more. It does cover you for past mistakes, even if you weren't insured then. In medicine, there is something called "tail" insurance, which covers past years. I don't think the NIPC insurance has such a thing.

David Tollefson

Not sure where you heard this from -- I've never been told anything of the sort.

unterhausen

I'm pretty sure he was talking to someone that didn't know about the NIPC program. Bike shops use it, and most of them don't do that kind of volume. I can imagine that most widely available insurance for manufacturers is only for higher volumes.

cs641

Westlake is a no-go due to the type of bikes we build. Very similar to the Rhoades Car.

Any other leads?

stevel610 

As has been mentioned, set up an LLC or Corporation to protect yourself.

Good luck.

unterhausen

A corporation is not going to help if there is a product liability suit. And that can happen because of factors beyond the control of the OP.

Andrew R Stewart 

I've come to the opinion (and I tread into deep waters now...) that liability insurance is for the harmed party to be made as whole as $ can do this. Not for the builder to shelter their assets. Maybe it's because I've been on the other side of the fence before and found the value of the other party having had insurance, or more that some one's insurance was going to be available for my claim (uninsured motorist coverage costs so little and can be so worth it if the bad happens with a driver who is without coverage)

It is from this place that I make my moral/ethical stand. So as creative and productive crafters are we doing the world/customers any favors by running naked without coverage? I say we are not. Others will have their opinions and do what they think they can "get away with".

The business world is not always fair or played on an even field. It never was and will favor the smart and well capitalized. Remember the rules are made by the winners. Andy

unterhausen

It's a bit of a conundrum if he can't get insurance though. There must be some other avenue, but I have no idea what it would be. Start a bike shop maybe

Andrew R Stewart 

When I had my shop I asked the insurance agent about frame making and the commercial liability insurance I had. The answer was a not really as frame building was considered as manufacturing, yet frame repair would be a repair service. At the time I wondered if it had more to do about who else would share the liability, as in a fresh build would not have as many deep pockets behind me and a frame repair would have included the bike company in the liability line. It was around this time that I also began my shift to my current thoughts about why one has insurance. Richard Sachs's writings was a big factor in how my opinion changed. Andy

LMQCycles

I spoke with Westlake and they were helpful and well informed about both frame building as well as component assembly. It seemed that this would be a decent way for "hobby" scaled builders to carry insurance. The agent also mentioned, as was stated above, that insurance would need to be carried from now on, unless the insurance is carried for an LLC or corporation. Then when the corporation is dissolved, the insurance would no longer be necessary.

I agree with Andrew Stewart, that the insurance would be to try and "make right" any damage that was caused directly or indirectly due to an issue with your craftsmanship. While I believe that the intent of every builder is to make a solid, well designed, sturdy frame things may happen.

Currently, I have not made a frame for anyone other than myself, but in considering making frames for family or friends I am thinking that it would be right to carry insurance and in that light, to form an LLC to allow for a time in the future when I would no longer want to be in the "business" of making frames and maintaining insurance.

Some of the details that the insurance requires are things like failure testing. How are hobbyist, small-builders going about such things? Are there places to send frames to have them stress tested? When I took a frame-building class, the instructor was doing stress tests on his own work, but I seem to recall it was primarily for the carbon work he was doing. Any other thoughts on this?

Kim

unterhausen

They require testing or they are thinking about it? You can get a bike tested, and my understanding is it's not that expensive, but it probably doesn't make sense to use the test frame afterwards. The European tests lead to way overbuilt steel frames. It's unfortunate.

Since I decided not to go into the business, I will not build for anyone outside of my immediate family. And I haven't built for anyone other than myself. Too much stuff out of my control. Insurance is a big cost and doesn't make sense for me. That's a lot of money wasted for a few frames a year. I would rather not build the frames that would necessitate it. One guy in his garage probably isn't going to be protected by an LLC if a lawyer decides there is enough money at stake. It's obviously a single proprietor business masquerading as a corporation and lawyers will just laugh at the ruse.

repechage

One might have to go the full corporation route like many doctors do. In California, the cost difference between the two is narrowing, The S corporation for example has more annual paperwork, therefore more money out the door.
The other side is at some point in the future, it can be terminated, and then no more coverage required.

Odd category products are a problem, I don't have an answer for that.

In my business, there is a whole class of repairs I won't do, I know enough that what I do will most likely work, but I cannot guarantee it will 100%.
That pinches. So it goes.

unterhausen

What do you repair?

I have come to the conclusion that I don't really want to do most frame repairs. You own all the problems that got built into the frame in the first place.