HUB International Highlights Need for Toymakers to Explore Dependent Property Coverage

For an industry that is based upon international supply chains and relationships, dependent property coverage is a “must have” for toymakers in today's fluctuating business climate.

Dependent property coverage protects a business from losses that are suffered from a property it does not own. Think about this pertinent example: an American toy company who works with an overseas manufacturer has its final product ready for shipment, but the packaging is damaged at the manufacturer's location before the product can be shipped. The overseas plant still requests payment with the caveat that they are withholding future orders until damages are paid. What type of risk management plan would protect the toy company in this situation?

As an overview, there are four types of dependent properties. A contributing location supplies materials or parts essential to the toy company's production. A recipient location is an external property that buys a substantial amount of the toy company's output. A manufacturing location is an external property that produces goods under contract and ships them directly to the leader location. A leader location is responsible for attracting the bulk of a toy company's business.

“If your operations rely on a manufacturer's single location, or if one major supplier is responsible for a large percentage of your manufactured products, you have to treat those locations as though you own them and incorporate them into your overall risk management program,” said Ben Thrush, Vice President of Business Development at HUB International Northeast. “Ignorance of risk has the potential to disable or destroy a business.”

Along with a properly placed insurance product, there are additional risk management procedures that companies can adopt to reduce these dependent property exposures, Thrush continued. He adds that an important part of preventing your business from these types of crippling losses is by reviewing a risk management program with a tenured insurance advisor.

TIA members who have questions about dependent property coverage, or who would like a free analysis of their current policy, may contact Mr. Thrush at 1-800-706-3023. Additional information on HUB's business insurance offerings to the toy industry is available online at www.hub-tia.com.