Description

When I first heard the term “artisan” as it refers to insurance, I immediately thought of oil painters, sculptors, and jewelry makers. Over the last couple of decades in my commercial insurance career, I’ve learned artisan encompasses a much broader spectrum of prospective clients who use their hands to build and create stuff.

The commercial insurance industry breaks them into two major categories of insureds: those who build things that are usually attached to the ground or a solid structure, and those who create or assemble objects that are unattached to any structure. There are exceptions to these two broad categories. For example, walls made of lumber and siding can be fabricated in one place and transported to a building site and then assembled by a licensed framing contractor.

Although a lot of contractors don’t think of themselves as creative, it does require a tremendous amount of skill and experience to follow plans and instructions all the while working within code guidelines. One missed step could cost a lot in time and money to correct an error. Imagine being a plumber or electrician and having to disassemble a complicated network of pipes or wires because a necessary fitting or part was left out.

The artisan category also relates to those who create, manufacture by hand, and distribute uniquely finished goods through various channels like farmers’ markets, craft fairs, novelty shops, or online stores.

Activities

The location where the artisan conducts the assembly or manufacture of the finished product will often define the subcategory they fall under. If you install or assemble copper, steel, or plastic pipe or wire at a fixed location intending to deliver liquid, gas, or electricity from one location to another with all the proper fittings to manage its distribution, you are probably a plumber or electrician and must be licensed. If you assemble those same materials together artfully in a studio without the intent to deliver liquid or gas, then you are probably an artist or sculptor. Both artisans do essentially the same work, but the finished product provides completely different results. One is functional and often not meant to be seen, while the other serves no functional purpose but to please the eye or make a statement.

Risks

Some risks that trade contractors and handmade crafters face are the same. Many are different. Injury to themselves, to their employees, or to others on or near the physical assembly or installation site may occur at any time along the life cycle of the project. Physical harm may begin as early as the acquisition of the raw materials and as late as the completion and delivery of the product. Sometimes the risk continues after the project is completed as assembled materials may prove harmful to others by collapse, breakage, or explosion due to defects in the materials or workmanship. Maybe the artisan missed a bolt or didn’t properly seal a joint.

The attention to loss has slowly shifted over the years from physical damage to property to a more human focus. As medical costs rise and income loss due to injury increases disproportionately to the cost of materials, protecting the human resource becomes more important now than ever before. We rely more and more on automation and tools, which means artisans and their employees can focus more on skill rather than labor, making them even more valuable.

Damage to property in the course of a construction project or the manufacturing of a product caused by negligence or failure to act properly has always been a threat in any artisan endeavor. A contractor might break a pipe or sever an electrical line while cutting, excavating, or drilling. The client’s house might burn down if the flame of a plumber’s blowtorch ignites flammables. An electrician might fall through the ceiling while stringing a line from one end of a building to another up inside an attic.

Management

When an artisan first asks, “How do I manage these risks in my business?” the obvious answer often relates to insurance. Before even considering the insurance question, the artisan should examine every aspect of a project’s life cycle to identify weaknesses and threats that could cause injury and damage. Simple things like wearing protective gear, such as safety glasses, helmets, hard hats, harnesses, masks, and gloves, can go a long way in protecting the endeavor’s most significant asset: the human. Next, the artisan should assess potential injury and damage caused by the movement and handling of materials. Injury can occur due to the object’s weight, temperature, or chemical composition.

Keeping track of who is allowed on the job site or in the studio can reduce the potential number of people exposed to injury. Has the artisan done all they can to secure the premises from unauthorized personnel? Does the artisan allow tours by visitors or hold classes? Each invitee can pose a potential injury risk.

When the artisan has done all they can to keep humans safe from injury and illness, then the focus can shift to the material. Are tools and raw materials properly stacked, stored, and secured against exposure to the elements or perils like fire or theft? Will the product be safe once delivered to the client or buyer and it is placed in use? What guarantees has the artisan given verbally or in writing about the quality of function and workmanship when completed? Costs to repair, replace, or refund must also be calculated.

After all these approaches to risk management have been analyzed and procedures to reduce loss have been implemented, the artisan can then turn to insurance. What type of insurance is available for each risk exposure? How much does it cost? And how much can the artisan pay out of pocket should an injury or property damage loss occur?

Liability insurance is probably the most important risk management tool an artisan can use. It’s so important that government agencies overseeing artisan licensing and activities require it by law. It pays on behalf of artisan activities resulting in injury or damage to others caused by their negligence or that of an employee while completing a project.

If an artisan employs workers, they are responsible for paying for medical expenses and lost wages if the employee is injured or exposed to something causing them illness while performing work duties. Workers’ compensation laws are just as strict and enforceable as liability insurance laws. The artisan must purchase this coverage for their employees and may include themselves.

Often, property insurance is required for materials and projects that are in various stages of completion if the artisan has borrowed money from a financial institution that will be paid back at the time the contract is complete or when the finished product is delivered. If the artisan has purchased tools and materials from their own funds, then property insurance is optional. The material value might be so low that insurance might not be important, or it could be so high that its loss might cause a significant burden on the artisan.