Restaurant Insurance & Operational Hazards
Posted on 15 November, 2018
From typical property damage and liability risks like slip-and-fall and equipment breakdown to less common ones like food-borne illnesses, restaurants face a variety of unique risk exposures.
“Given the range of exposures a restaurant has in their daily operations and their complexity, consulting with a professional insurance broker is very important to a business owner to make sure they receive the right advice for their business risk protection,” so says Mike Donnelly, principal of Donnelly Insurance Brokers located in Adelaide, South Australia.
For example, Donnelly says “a business interruption resulting from one of many possible causes could result in a trading disruption, which could be very costly to a restaurant.”
“On top of this, there might be a potential business income loss as a result of a key supplier’s business disruption” Donnelly adds. “Many restaurant owners might be dependent on a linen service, a supplier or a wholesaler in order to run their business.”
Donnelly also notes that most restaurants may not realise they have a pollution liability exposure. “If they accidentally spill the old grease taken out of the deep fryers and that starts seeping into the sewer system so they may be sued by the EPA,” Donnelly explains.
The same goes for cyber, Donnelly adds: “Cyber-crime is a huge exposure with all the credit card information restaurants receive exposing them to potential customer privacy breaches. In this cyber world today, everyone needs cyber liability cover.”
Donnellys says: “Management Liability cover, previously only available to Corporations is now available to Sole-traders and Partnerships. This policy covers the business owners from many exposures relating to its management, such as a wrongful act, employment practices breach, sexual harassment or litigation from a State or Federal regulatory body. No business can afford not to have this protection!”
Finally, “restaurants need to pay close attention to their approach to liquor sales. Recently in USA, even BYOB restaurants have been found liable for overserving patrons who were later involved in a drunk driving incident,” Donnelly comments.
To find out more about the types of cover offered to the hospitality industry, click here!
Emerging Risk Exposures
Donnelly notes that farm-to-table restaurants can shorten the supply chain for many restaurant businesses. “That might mean the food at the restaurant is fresher, but it might also mean there’s more of an onus on the small business owner to take on some of those quality control measures themselves,” he explains.
Food Van pop-ups are another emerging trend as more restaurants seek “to expand their brand and their reach,” Donnellys says. “A food van is part vehicle, its part plant and machinery, its part public and products liability and changed employees’ work injury risk as well!”
Donnelly adds that while ride-sharing services like Uber have been around for quite a long time, related delivery services like Uber Eats and its local variations are newer developments that are giving restaurant owners more options to consider. “It doesn’t matter if you’re a big restaurant or you’ve just opened up—using a sharing economy-type delivery service allows a restaurant to broaden their scope of influence and touch more customers,” he explains.
But that convenience has consequences: When a restaurant elects to use a delivery service, “it loses some of the element of control in that interaction with the customer,” Donnelly points out. “Should that customer have a bad experience with a delivery person, even though it’s a different party, the customer won’t necessarily associate that bad experience with the delivery service and may wrongly develop negative thoughts about the restaurant’s service.”
As a result, certain segments of the industry in the USA are “starting to try to think of ways to deal with that issue,” says Donnelly, who notes that some larger restaurants are moving away from sharing economy delivery services and toward solutions like online ordering or curbside pickup. “Some of smaller restaurants are still likely to use out-sourced delivery service because they get a lot of bang for their buck.”
Every restaurant has one more major risk management consideration to take into account: slip and fall injuries. Keep an eye out for our next blog about 7 Steps for Reducing Slip-and-Fall Claims.
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