The restaurant industry is a vibrant and dynamic sector that plays a crucial role in our society. However, ensuring the smooth operation and profitability of a restaurant requires more than just customers, food, employees, equipment, and a great location. As a restaurant owner, it is important to consider additional insurance coverages beyond general liability, building, and business contents.
To determine the optional coverages a restaurant should consider, here are some key questions to ask:
1. Is alcohol sold at the restaurant?
Insurance policies typically exclude liability associated with liquor sales. By purchasing a liquor liability endorsement, the exclusion is amended to provide coverage for bodily injury or property damage arising from the selling, serving, or furnishing of alcoholic beverages. Be sure you know what percentage of sales are from alcohol as that is often a factor that determines eligibility.
2. Does the restaurant provide delivery services to customers?
Before handing the keys to an employee, consider purchasing a Hired and Non-owned Auto policy. This provides coverage for bodily injury or property damage arising from the use of a leased, hired, or borrowed auto for business purposes, such as delivery, by the insured or their employees.
3. Does the restaurant have employees?
Consider purchasing an Employee Dishonesty endorsement, which provides insurance coverage for losses of money and/or securities due to dishonest acts committed by employees.
4. Does the restaurant have an outdoor sign?
Outdoor signs are crucial for advertising and driving business. It is important to ensure that the standard limit provided in a BOP policy is sufficient to cover the full replacement cost of a large sign. Consider adding an increased limit to adequately cover potential damages.
5. Does the restaurant rely on specific equipment or utility services to operate?
Equipment breakdown coverage is essential to protect against losses due to mechanical or electrical failure/breakdown of vital equipment such as refrigeration systems, HVAC systems, or furnaces.
Restaurants heavily rely on utilities such as water and power. Utility Services coverage can help alleviate the cost of damages incurred by service interruptions, which could lead to property damage and/or loss of income if the restaurant is unable to open.
6. Would the restaurant operations be impacted if food was contaminated or spoiled? What are the repercussions of contaminated or spoiled food?
Consider adding endorsements such as Spoilage coverage, which provides a separate limit of coverage for damage to perishable food due to a covered cause of loss. Additionally, a food contamination endorsement can protect the restaurant by covering equipment clean-up, replacement of ruined food, and assistance with advertising to restore the restaurant's reputation after a forced shut-down due to suspected food contamination.
In addition to these considerations, there are a few additional coverages that should not be overlooked:
Restaurant Endorsement on BOP policies
This endorsement combines a number of smaller coverage endorsements into one form, including:
- reward payments,
- brands and labels (to mitigate possible reputational damage, cost to remove labels or branding from damaged or salvaged goods),
- ordinance or law for equipment (older equipment damaged by a covered loss may require additional upgrades when replaced, typically based on city code changes),
- lock replacement,
- sub-limit for delivery errors & omissions (potential costs and liabilities associated with mistakes, delays, or failures in the delivery process, such as incorrect shipments, missed deadlines, or incomplete deliveries),
- merchandise withdrawal expense (helps mitigate the financial impact of removing and replacing the affected merchandise in the event of a recall),
- it also provides basic limits for food contamination and spoilage, making it a valuable addition to the insurance package.
Business relationships
Restaurant owners should understand their business relationships to determine if other individuals, such as franchise owners or landlords, have an insurable interest in the restaurant. It is important to be aware of contractual obligations that require these individuals or businesses to be listed as additional insureds on the insurance policy.
Building the right comprehensive property and liability package for your restaurant involves contemplating a multitude of risks. By asking the right questions and considering these suggested coverages, restaurant owners can invest in their success by protecting their business and reducing stress about losses, providing more time to focus on creating memorable experiences for customers.
For information about how to add an endorsement to your policy, please talk to your insurance agent.
Please note that this list provides guidance on additional endorsements/coverage for top risks restaurants may wish to address, but it's not an exhaustive list of available coverages.