Though there is no shortage of restaurants and food services, this type of business is a rather niche sector in the insurance marketplace. There are so many aspects that come into play when putting together a program for restaurants. With some teams handling food, some handling people and communications, and others handling equipment-even the employee positions alone call for multiple types of coverage. In the past few years, we’ve seen a huge shift in the industry that introduced new styles of dining. From delivery, takeout, and outdoor dining-all of these exciting expansions bring with them a whole new set of liabilities.
Restaurant insurance can apply to all types of eateries, including bars, cafes, and even food trucks! Though general guidelines should be followed by all types of food service businesses, make sure you review the liabilities specific to you and all the different services you offer to avoid gaps. An insurance program that might be perfect for one, may not be sufficient for another. Keep this in mind as we explore the general insurance considerations you should make if you’re running a restaurant.
What Risks are Associated with Restaurants?
As with anything, there are a lot of risks associated with running a business. Restaurant liabilities are more complex than a standard business model. Though the list is long, there are some main risks associated with the food industry that should be addressed first and foremost:
- Food poisoning
- Equipment breakdown
- Employee Injury or Illness
- Employee Theft
- Data Breach
- Liquor Liability
- Property Damage
- Auto Liability
- Business Interruption
- Employee Lawsuits
- Flood
The severity of these risks will depend on the individual restaurant. For example, a business that primarily serves food and only has beer and wine may not need as much liquor liability as a bar-focused restaurant. Additionally, not all restaurants offer delivery and so every business may not need auto liability coverage. It’s key to do a full evaluation of your services to make sure you’re compliant.
Since COVID-19 the majority of restaurants have shifted to a delivery and takeout model. In fact, we’ve seen more than a 169% increase in the number of restaurants offering online ordering. Even if delivery isn’t the focus of the business, coverage is needed. One mistake a lot of restaurant owners make is thinking that coverage is only needed for primary risks, but this isn't the case. Any amount of risk requires coverage, and unfortunately, all it takes is one claim without insurance to put a hefty financial burden on your business.
Coverage Considerations
It can feel overwhelming to address all the risks associated with owning and operating a restaurant. Luckily, a lot of coverages take care of multiple risks in one.
General Liability
General liability is typically the first policy purchased by any business, including restaurants. General Liability will cover claims associated with customer injuries, advertising injuries (slander, poor PR), and customer property damage. This type of coverage is required for most commercial businesses and in general covers lawsuits and damages related to third parties. It’s hard to believe, but without insurance-these types of claims can put you out of business due to tot the financial cost of claims, legal fees, etc.
Property Liability
A Property Policy will cover risks associated with the physical property of the restaurants. This will cover damage to the building, attached structures, machinery, furniture, and equipment. Restaurants utilize a lot of space and equipment, so when getting property coverage it’s key to list everything accurately. For full coverage in the event of a claim, the details of the property, down to the square footage, must be accurate. You can think of this policy as coverage for physical property that is owned or operated by the restaurant.
Business Owners Policy
A Business Owners Policy, otherwise known as a BOP, is a combination of general liability, property liability, and other business-related coverages. These types of policies are ideal as they include both coverages which can be more affordable than purchasing separate coverages. Most BOPs are customizable, and restaurants may be able to endorse coverage for liquor, delivery, and cyber onto their BOP. Just be sure that the limits allotted in the BOP are compliant with state regulations. In some cases, you may need to purchase separately.
Employment Practices Liability
Employment practices coverage (EPLI) has grown extensively over the last decade with the increase in employee-related lawsuits. This type of policy covers claims from an employee related to wrongful termination, discrimination, sexual harassment, and other behavior-related claims. Without insurance, these claims can be extremely expensive. Unfortunately, they are becoming more frequent as well. Make sure you secure this coverage for your restaurant if you want to avoid paying out of pocket.
Post Covid Considerations
Since Covid-19, new insurance needs have been introduced. Delivery insurance, stronger cyber insurance, and expanded property policies are all new necessities. Most restaurants use digital ordering, delivery apps, and digital payment. Cyber hacks are of huge concern in the digital era, and unfortunately, hackers have hit many restaurants. These cyber claims can be related to identity theft, inaccurate payment, and more. Cyber attacks are unpredictable and devastating to businesses at times, so securing coverage before an event occurs is key to a strong insurance program.
Additionally, new practices like outdoor dining come with new risks! As much as everyone loves the outdoor patio experience, most of these restaurants are building structures partially in the street without a formal area. For these reasons (and more), property and liability coverage for these areas needs to be included in the insurance program. If you have expanded your restaurant business outdoors but have not added the new space to your policy, you may not be compliant. Everything from the structure itself, the square footage, lighting, and heaters should be listed on the policy. If you’re unsure of whether or not something needs to be listed, chances are it should be. But, talk to a professional risk analyst for more information.
Review Your Insurance With ECBM
With each restaurant being unique, it takes a professional eye to understand the risks associated with the business. If you want expert advice on your current insurance program or are looking for coverage for a new business- contact one of our agents today.
