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Every restaurant owner has heard the statistics about how tough it is to survive and thrive in the business, but getting adequate insurance at least gives you a fighting chance by mitigating some of the risks.
How can restaurant insurance protect you?
Use the yellow hot spots and explore how restaurant insurance can help protect against common risks.
Liquor Liability
Risk Factor
Any establishment that sells, serves or assists in the purchase or use of liquor is open to a liability claim as a consequence of someone getting inebriated to the extent that injuries or property damage result.
Solution
If you are in the business of selling or serving alcohol, it is critical that you protect yourself from potential financial losses by obtaining a liquor liability insurance policy. Having the right policy in place could help cover your legal costs, court fees and any civil or criminal damages stemming from an incident involving liquor.
Valet Parking
Risk Factor
Providing a valet service is convenient for your guests, but damaging a vehicle or property, or causing injury, is a very real risk associated with offering this service.
Solution
Obtain a general liability policy to protect your business from lawsuits by a third party. Be certain that a garage keepers legal liability policy is also in effect with adequate limits to cover any physical damage to a guest's vehicle or other vehicles on site. If you are using an independent valet service, obtain a certificate of insurance to verify they have the proper coverage with adequate limits. Also make sure that your business is named as an additional insured under their policy.
Business Income
Risk Factor
In the event of a covered cause of loss, most policies include coverage for the income you cannot collect. What happens if one of your key suppliers, such as your food or beverage distributer, is incapable of supplying you with what you need to keep your business running?
Solution
Make sure that your business income insurance includes contingent business income coverage to protect against the loss of potential earnings to your restaurant caused by the inability of a key vendor to provide a component necessary for the completion or execution of your services.
Employment Practice Liability Insurance (EPLI)
Risk Factor
On average, it's estimated that three out of five businesses will be sued by their employees. Restaurants, just like any other business, are vulnerable from the pre-hire process through to a possible reduction in workforce. Claims can stem from just about anything, such as someone taking a "joke" the wrong way and being offended.
Solution
Coverage to protect you against this risk normally comes as a standalone policy. The right coverage is critical to your risk management process as it protects against discrimination, wrongful termination, sexual harassment and other employment-related allegations. Typically, the policy will cover your business as well as your directors and officers. Third party coverage is an added option, usually accomplished via a policy endorsement, and addresses claims made by customers or vendors against you from acts committed by employees.
Sign Coverage
Risk Factor
Exterior signs associated with your business are vulnerable to fire, vandalism and weather. Most commercial property policies offer a sublimit of coverage for signs, but it might not be enough.
Solution
Evaluate your sign exposures and determine if your existing commercial property insurance policy provides sufficient coverage. If not, increase the policy limit as required.
Systems Breakdown Insurance
Risk Factor
Equipment such as freezers, stoves, dishwashers and air conditioning units are vital when running a restaurant. If a power surge or mechanical failure results in equipment breakdown, your business can experience expensive repairs and lost income.
Solution
Make sure you maintain systems breakdown insurance, including business interruption and spoilage coverage so that you can get your business up and running again without suffering financial setbacks.
Flooding
Risk Factor
As exposed by Superstorm Sandy and other significant weather events in recent years, flooding can occur in almost any location and to any business. Are you protected?
Solution
Flood insurance is typically not included in a commercial property insurance policy, but can generally be added by endorsement as long as the property is not in a high risk flood zone. If coverage is excluded from the policy, you should look into the cost to add it. If your property is in a high risk flood zone, you will need to obtain a standalone policy. In either case, it’s important to have coverage.
Cyber Liability
Risk Factor
Just about all businesses rely on technology in some way; it's increasingly used to store sensitive information, such as credit cards, passwords and social security numbers. However, you're at risk if this information is lost, stolen or compromised. In fact, you may even be legally obligated to alert those impacted by the breach and possibly pay for any financial loss incurred.
Solution
Experiencing a data breach is often not a question of if but when. Securing a cyber liability policy can offer coverage for expenses associated with compliance regarding data breach notification laws, securing legal counsel to advise on incident response, credit monitoring services and paying for regulatory defense and penalties arising from privacy law violations.
Improvements and Betterments
Risk Factor
Most restaurant owners remember to insure their contents, such as tables and chairs, but do not factor in the cost of the improvements they have made when selecting a building or contents limit.
Solution
If you have done or are considering a renovation to your restaurant, factor the cost into the building limit if you own the building or contents limit if you lease.
Food Contamination / Spoilage Coverage
Risk Factor
A power outage, mechanical failure or other covered event can cause food to spoil, which then must be discarded.
Solution
This coverage will cover the replacement cost of the spoiled food. Most policies include coverage, but you should confirm the limit is sufficient.
Employee Theft
Risk Factor
Two things a restaurant has easily accessible are food and money. Employees have been known to run scams to pocket money or steal food to take home or give away to friends and family members.
Solution
Make sure you have coverage for employee theft. This can help compensate you for some of your financial losses.
Commercial Auto / Hired and Non-Owned Auto Liability
Risk Factor
If your restaurant offers food delivery service, whether the drivers are using their own vehicles or those owned by the company, you can be named in a lawsuit as a result of injury or damage caused by them while making a delivery for you.
Solution
A business auto insurance policy should be maintained if the vehicles are owned by the company. If employees are using their own vehicles to make deliveries, then hired and non-owned auto liability coverage should be maintained. Both will defend you if you are named in a lawsuit as a result of an employee getting into an accident while making a delivery for you.
Workers' Compensation
Risk Factor
Most states require an employer to provide coverage for any injuries your employees experience while on the job, as well as any job-related illnesses.
Solution
Maintain workers' compensation insurance to provide benefits to eligible employees; otherwise, you can be penalized for every day that coverage is not maintained, as well as for any benefits an employee would have been eligible for in the event of job-related injury or sickness.
It’s well worth considering a custom-built restaurant insurance policy, as this will not only make life simpler but may even cover some risks you hadn’t considered. For example, you’ll usually want to cover risks to property, such as the building and equipment, along with liability to customers and staff.
Remember, there’s an important difference between general liability (such as a customer slipping on a spilled drink) and professional liability (such as a bout of food poisoning from bad food or inadequate preparation).
Other elements that are easy to overlook include the risks of fraud and data theft that come with handling cash and card payments, the risks of spoiled food you have to throw away if there’s a power outage or refrigeration failure, and the risk of lost business if you close for repairs after a fire.
At United, you don’t only get a policy, but you get knowledge, coverage analysis, claims review, contract review and much more.
United Insurance Agency has created a special property/casualty insurance program for restaurants. This program is available through many A.M. Best rate “A” or better insurance companies. United Insurance Agency is able to offer quality insurance protection with competitive, stable pricing. Restaurants can save up to 29% of their current pricings.
Protect your restaurant business by contacting us today.
- Family Style
- Upscale Fine Dining
- Fast Food
- Caterers
- Bagel Shops
- Bakeries
- Delicatessens
- Pizzerias
- Donut Shops
- The United’s Restaurant Insurance Program is available for a wide range of business insurance including auto, crime, equipment failure, general liability, liquor, property and umbrella. Key coverages include:
- Coat check
- Business income on dependent property
- Business income on food-borne illness/Food Contamination
- Food spoilage
- Off-premises Power/Utilities failure
- Water & sewer backup
- Employment Practices Liability
- Liquor Liability
