The restaurant industry is a driving force in the economy with about 1.6 billion dollars in daily sales and employing one out of every ten working Americans. Every restaurant has their own identity, whether it be their physical location (in a metropolitan museum, on a historical landmark), the type of atmosphere they seek or the style of food they serve. Some restaurants have dancing and live music, others offer a movie or comedy performance with dinner, but at the end of the day, a restaurant’s identity is what makes the exposures it faces unique. Whether a restaurateur seeks to be the next “hot spot” or the staple of the town, Swingle Collins stays in front of the curve with the cutting edge coverage a restaurant needs for the always evolving exposure.
Property
- Restaurants can be responsible for extensive amounts of property. Consequently, they will often require the same fire protection considerations as any large property risk. Bolted down cooking equipment is insured as a part of the building value not the business personal property value. There is a distinctive difference in the rate charged for the building and personal property.
- Power Outage at a restaurant can be a huge headache for an owner and even a shut down for a short period of time can prove disastrous Do you have coverage in the event of a power outage? A basic commercial property insurance policy does not cover loss due to failure of power or other utility service to the described premises if the failure occurs AWAY from the premises. If, for example, lightning were to strike utility equipment or power lines not on the insured premises, there would be no coverage for the loss of business income due to the power outage. Please remember, however, that if the failure of the power line or utility service results in a covered cause of loss (such as fire) there is coverage for loss or damage from the covered cause of loss. Off premises power must be endorsed to most policies and there is a distinct difference in whether the policy provides coverage for power lines or utility services or both. Swingle Collins will walk you through each coverage available to make sure you are fully aware of how off premises power works and the exposure you have to it.
- Due to the inherent nature of this industry, product freshness and purity are of utmost importance. Accordingly, product loss due to contamination, spoilage or other related factors can have special significance to the restaurateur. Take the same example from above, lightning strikes utility equipment or power lines not on the insured premises. There would be no coverage for the spoilage of food due to the power outage. Spoilage coverage is available by endorsement, but you must be very careful to make sure the endorsement covers what you intend it to cover.
- Wine spoilage must also be considered from a valuation perspective. In the case of loss, are you going to receive the market value (retail selling price) or your cost to purchase the wine. This coverage is available by endorsement, but there are many provisions to be aware of when evaluating wine.
- A restaurant’s reputation is its most valuable asset. One of the first steps a restaurant owner should take to preserve its reputation in the event of a food borne illness outbreak is to voluntarily close its doors until the problem is identified and corrected. Food contamination coverage provides coverage if the Board of Health orders the premises closed or if either you or the government makes a statement warning the public of a health hazard due to suspicion of contaminated food. This coverage will cover the loss of revenue during the time your operations were suspended, the expense to clean your equipment as required by the board of health, replace the food which is, or suspected to be contaminated, the expensed to provide necessary medical tests for your exposed employees, and additional advertising expenses you incur to restore your reputation. This coverage is available by endorsement and the limit should be discussed with your agent to assure you are being adequately covered. Swingle Collins has a relationship with carriers that understand the food contamination exposure and have the ability to afford the proper level of protection.
- Special events and holidays may generate an unusually high level of revenue not anticipated under the normal business income coverage. Consequently, an insured may carry inadequate limits of coverage or be subjected to a coinsurance penalty in case of a loss. Swingle Collins takes the time to understand how your restaurant operates from the inside out to mitigate this risk.
Liability
- The selling and/or serving of alcoholic beverages can be a large exposure for a restaurant. The basic general liability policy excludes coverage for most liquor liability exposures, therefore coverage must be endorsed to the policy.
- Many restaurants today may be known for their drinks. A recent trend lends to high prices of drinks which will increase the total revenue of liquor sales. This trend is important to the insurance industry because many carriers will not underwrite a risk with more than 50% of total revenue in liquor sales. It is important to work with an agent who understands how to explain this exposure to the carrier and underwriters.
- The public that comes on premises creates one of the establishment’s largest liability insurance exposures which is third party claims for injuries from trip and fall hazards.
Auto
- Delivery may be incidental or part of daily operations of a restaurant and the insurance exposure lies on whether the employees make deliveries in company vehicles or their own personal vehicles. Non owned coverage is detrimental if employees are using their own vehicles. If, for example, an employee is making a delivery in their own vehicle and gets into an accident. The injured party can place claim against the individual and the company. If non-owned coverage is not on the policy, there is no coverage available. It is important to check the validity of employees insurance coverage and the limits they carry.
- Valet Parking is also another consideration that should not be overlooked when considering coverage. Is an outside company contracted to park the vehicles? Does the restaurant have a contract in place to list the restaurant as an additional insured on the valet’s insurance policy?
Crime
- Due to the nature of a restaurant’s operations and the large amounts of cash that may be on hand, precautions need to be taken to mitigate employee dishonesty.
