What are the insurance requirements that an Aunt Millies Bakeries borrower must maintain to avoid default?
Aunt_Millies_Bakeries Franchise · 2025 FDDAnswer from 2025 FDD Document
3. BORROWER COVENANTS: Borrower covenants and agrees as follows**:**
- a) to execute all proper financing statements for filing.
- b) to pay and perform all of the Obligations secured by this Agreement according to its terms;
c) to defend the title to the collateral against all persons and against all claims and demands whatsoever;
d) to submit to Secured Party, in form satisfactory Secured Party, quarterly business financial statements, within 30 days of the close of each calendar quarter, and annual tax returns within 30 days of the date on which they are due;
e) to obtain and maintain, at Borrower's expense, throughout the term of this Agreement minimum levels of occurrence form insurance coverage with a reputable and established insurance company, acceptable to Secured Party, in such amounts as may from time to time be reasonably required by the Secured Party, which as of the date of execution of this Agreement are as follows:
- (i). Comprehensive general liability insurance, including product liability (to include broad form contractual liability coverage) with $2,000,000 combined single limits;
- (ii). Automobile liability insurance with minimum limits of $2,000,000 combined single limits, on all vehicle(s) used in Borrower's business;
- (iii). Collision and Comprehensive damage coverage for the actual cash value which shall also cover Borrower's computer with a deductible no greater than $500 and all vehicle(s) used in Borrower's business;
In the event a substitute vehicle is used by Borrower coverage, with the exception of collision and comprehensive damage coverage, will automatically apply to the substitute vehicle. In addition, the Distributor must carry policies or riders providing cargo insurance in an amount of not less than $2,000, and Inland Marine coverage of not less than $5,000.
Source: Item 23 — RECEIPT (FDD pages 44–196)
What This Means (2025 FDD)
According to Aunt Millies Bakeries' 2025 Franchise Disclosure Document, a borrower must maintain specific insurance coverage to avoid defaulting on their agreement. The required insurance includes comprehensive general liability insurance with product liability coverage, including broad form contractual liability coverage, with $2,000,000 combined single limits. Additionally, the borrower needs automobile liability insurance with minimum limits of $2,000,000 combined single limits on all vehicles used in their business.
Furthermore, the borrower is required to have collision and comprehensive damage coverage for the actual cash value, covering the borrower's computer (with a deductible no greater than $500) and all vehicles used in the business. If a substitute vehicle is used, coverage (except for collision and comprehensive damage) will automatically apply to the substitute vehicle. The distributor must also carry cargo insurance of not less than $2,000 and Inland Marine coverage of not less than $5,000. If the equipment to be insured exceeds the value of $5,000, additional Inland Marine coverage must be purchased.
The insurance policies must be with a reputable and established insurance company acceptable to the Secured Party. The insurance should be in a form acceptable to the Secured Party, naming them as an additional insured and a loss payee on any collision or comprehensive damage policy for physical assets with a lien. The Secured Party must receive 30 days' advance written notice of any material changes or cancellation of coverage. Upon request, a certificate confirming the coverages are in effect and primary over any other applicable insurance must be delivered to the Secured Party. Failure to maintain this insurance as required in Article 3 constitutes a default by the borrower.