A Businessowner’s Halloween Nightmare

By Tracey Waller  |  October 31, 2017

clown face mistThe rain began on a Tuesday. At first, it was soft and light and even welcome after a hot and arid summer. But as the days wore on, the drizzle became a deluge that showed no sign of stopping. The old-timers in town gathered in the diner and, over multiple cups of weak but comforting coffee, discussed the rain. How long could it continue? Would the river overflow its banks and flood Main Street? What would the cleanup of the waterlogged town look like afterward?

One thing the old-timers agreed on was that the last time the town got a soaking like this was way back in the fall of ’88. What no one would mention, though, was the unspeakable horror that had visited the town that autumn. Some things are better left in the past. But it was exactly what the businessowners feared most.

The townspeople who owned the diner, dry cleaner, bagel shop, and tax preparer business had been kids in ’88. When the rain came that year, they were preoccupied with the upcoming homecoming game, excitedly awaiting the freedom that would come with a driver’s license, or holed up in their bedrooms making mixtapes for friends and crushes—regular teenage stuff. But they had heard the stories, the ones about Old Man Smitty.

Smitty had owned a busy restaurant on Main Street. In fact, it was the busiest place in town. To hear the old-timers tell it, you couldn’t get into the place on a Friday night, especially when there was a ball game. In ’88, Smitty’s made close to $20,000 per week and ran at a margin of 38 percent. It was along the riverbank. Old Man Smitty chose that location because of the great views and bucolic setting. He knew this came with inherent risks, so he made sure he carried flood insurance.

Then the rain came. When the river overflowed and flooded the first floor of his restaurant, Old Man Smitty knew this was going to be big trouble. He went to check the safe and pulled out his insurance policies. To his horror, he scoured his flood policy and saw that it only covered the building and its contents—and only up to $100,000. Beyond the water damage, there was extensive damage to the building, including smashed windows, broken equipment, and rotting food. He would have to close for months while he made repairs. How would he survive without that revenue? How would he recoup his losses and return his property to its original state?

Smitty had flood insurance, and he’d had a BOP policy—with a flood coverage endorsement—since he started the restaurant. In the interim, during the previous year, he’d also done a complete renovation of his dining rooms and outdoor deck. That winter, Smitty lived and breathed drywall and copper wire, and the contractors working on the restaurant became like family. The renovations—and the time crunch to complete them in advance of his busy season—consumed him. That’s probably why he forgot to pay his BOP premium amidst all the chaos of remodeling, and his policy lapsed. That was the fatal flaw that ultimately led to his downfall.

Smitty needed additional protection to allow him to stay solvent and pay his bills, such as business interruption insurance to cover the loss of income due to the catastrophe. His BOP property coverage would have filled in some of the gaps and covered property damage his standard flood policy didn’t. He didn’t realize there wasn’t enough to cover roof repairs, replacement windows, and new kitchen equipment.

On that nightmarish night, Smitty stood among the ruins of his once-profitable business. The formerly shrewd businessman was now a broken shell. Suddenly, a red balloon appeared. Smitty thought he was hallucinating, but he reached out and touched the balloon. Bewildered and confused, he looked into the shadows and saw two sinister yellow eyes staring back at him. Then, Smitty saw the clown. He was in the doorway dressed in a silver suit, holding a bouquet of balloons. “Hello, Smitty!” the clown exclaimed. “I’m Poundfoolish the Clown. Pleased to meet you.”

Smitty was confused and unsettled. How did the clown know his name? “I’m your worst fears,” Poundfoolish said. “I feed not on children but on business profits, and I’m here to take yours.”

Smitty’s mind raced. Why had he allowed his businessowners policy to lapse? Why didn’t he immediately reinstate it when he realized he was no longer covered? Smitty foolishly thought he would never need it. He owned the property outright and also held the misconception that his homeowners policy would cover some of his business losses. And most of all, in his hubris, Smitty thought this would never happen to him. After all, he’d been running a wildly successful business for decades and never had to file a large BOP claim. So why spend the money on a “what if”?

Poundfoolish took Smitty by the arm and dragged him into the sewer, into the deadlights where profits go to die—and from which small businesses rarely return. Other businessowners would meet Poundfoolish, and their businesses would similarly disappear. But Smitty’s story is the one the old-timers tell. His restaurant sat unoccupied for years until the land was finally sold. Now, it’s a big box store.

It was the story of Old Man Smitty that the businessowners in town remembered as the rain came down and they flocked to their lock boxes to double-check their insurance policies. They didn’t want to meet up with Poundfoolish, who would most certainly be stalking small businesses. And they were terrified of their profits going into the deadlights. They knew they’d meet Old Man Smitty’s fate if they didn’t carry enough businessowners insurance. Those that did were relieved. Those that didn’t…!

Tracey Waller

Tracey Waller is Product Director, Small Commercial Underwriting.