Revenue generating machines, such as sweepstakes, gambling, electronic dart boards and pool tables, have become popular attractions in many businesses. While these machines may make for a great additional stream of income, they can also create coverage exposures when the responsibilities that come with them are misunderstood. Ensuring the proper entertainment machine insurance considerations are in place can help address these unique exposures.
What to Know & Questions to Ask
From an insurance perspective, the presence of a machine in a restaurant or bar is only part of the story. The more important part is how ownership, contracts, and insurance obligations intersect, and whether current insurance coverage reflects that reality.
As a businessowner, start with a few key questions:
Who owns the equipment?- Who is responsible if it’s damaged?
- What happens if cash is stolen from the machine?
- Does your business have a financial interest in the machine?
- Do any contracts make you responsible for losses, repairs, or replacement costs?
The answers often aren’t found on the machine itself. They’re found in the contracts surrounding it. A lease, placement agreement, or revenue-sharing arrangement can shift responsibility for equipment damage, theft, or lost cash, making ownership only one part of the insurance equation.
Reviewing your agreements and understanding the responsibilities you’ve assumed can help navigate the insurance considerations surrounding entertainment machines and determine whether your current coverage aligns with your risks. When in doubt, a conversation with your independent agent can help identify whether additional coverage should be considered.
Don’t Forget About the $$$
It’s important to also consider the cash held in the machines. The coverage considerations may differ from those associated with the machine itself, making it important to understand who owns the money and who is responsible for it. The contractual arrangement often determines who takes the loss if money is stolen.
The cash may belong to the business owner, the machine owner, or a mix of the two, it all depends on the arrangement. Knowing who takes the loss if money is stolen can be just as important as who is responsible for the machine itself.
CLAIMS SCENARIO
When ownership, contracts and coverage don’t align, the consequences for businesses can be very real.
Recently, a business had several leased entertainment machines vandalized while on its premises. Under its contract, it was responsible for the damage, up to $85,000.
AT THE TIME OF LOSS:
▪ $100,000 in Business Personal Property (BPP) coverage
▪ Combined damage exceeded that limit
▪ A 90% coinsurance requirement applied
During the investigation, it was determined that the business had approximately $200,000 in covered property on-site. To meet the coinsurance requirement, they should have carried at least $180,000 in BPP coverage. Because the business was significantly underinsured, a coinsurance penalty applied, reducing the amount payable for the loss.
Considerations by State
Licensing requirements, contractual obligations, and insurance considerations may vary depending on where your business operates. While not a comprehensive list, the resources below provide a helpful starting point for understanding some of the state specific considerations that may apply:
These resources are provided for general informational purposes only and are not legal advice. Laws and requirements vary by state and locality; businesses should review all applicable laws and regulations based on their specific operations and equipment.
Reviewing Your Coverage
Every business and every machine is different, and coverages that you have should reflect the unique risks involved. Equipment ownership, responsibility of cash and the details of your policy all affect whether your current protection is adequate.
A conversation with your agent can help identify potential gaps and determine whether your policy and limits reflect your business’s needs.
Reach out to your local independent agent today to ensure your personal and business policies are up-to-date, providing year-round protection for you and your business.
