Each year thousands of new restaurants open in the U.S. There are company owned chain expansion units, franchised locations owned by large corporations, privately owned smaller chains and one unit locations owned by individual entrepreneurs. From fine dining to fast foods to specialty eateries and coffee shops, these restaurants all represent a very large investment by their owners, so insuring them properly is essential. Let’s break down some of the variables in quoting an eating establishment.
- Is the restaurant a dining in, carry-out, or delivery only?
- How many locations are there?
- How many years of restaurant experience do the owners have?
- What is the age and construction type of the building?
- Are there other occupancies in your building?
- What is the age of the roof, HVAC units and has plumbing and electric had any updates?
- Do you own or lease space in the building?
- What is the seating capacity?
- What is the total square footage of the building? What is the square footage of the dining/seating area?
- Are alcoholic beverages served?
- What are the total annual sales?
- What is percentage breakdown between food sales and alcoholic beverage sales?
- How many full and part-time employees do you have?
- Is deep frying done?
- Do you have a proper fire suppression system in the kitchen that meets current fire codes?
- Is there live entertainment or games on the premises?
As you can see, there is an extensive information gathering process that must be done to set the foundation for the coverages that each establishment will need. Liquor Liability for example, is usually an endorsed coverage based on annual sales and is subject to an annual audit as are gross food receipts. Not all restaurants have the need for liquor liability, but must be aware that it is not automatically included in your Restaurant Package Policy.
Since restaurants have a large number of employees, both full and part-time the need for Employment Practices Liability Insurance (EPLI) is a necessity. This covers the owners for legal action brought against them for wrongful hiring and termination practices, discrimination and sexual harassment to mention a few areas. EPLI is one of the fasted growing areas of claims in the insurance industry. Average claims including defense costs, can easily exceed $75,000, a burden an average owner cannot bear personally.
Worker’s Compensation is a required coverage for any business that has employees. Premiums are based on ESTIMATED annual payroll, and is audited usually within 60 days of the policy renewal or expiration. Worker’s Compensation in Indiana and many other states is the sole remedy for persons injured in the workplace. This policy provides unlimited medical expenses for injured employees.
Work Comp policies can be given an Experience Modification Rating (EMR) based on the restaurants claims experience. That EMR can be debited (go up) for bad experience and frequent claims, or be credited (go down) for a positive claims history. Therefore the restaurant owner has a vested interest in maintain a safe workplace for the employees and stressing safety during structured staff meetings.
Other areas to be considered are:
- Business property limits. This includes seating, utensils, dishes and glassware as well as food and beverage inventory. In addition if there was a interior build-out for the restaurants specific needs, the cost of the build-out should be covered by the insurance policy as well.
- Loss of income coverage will provide an ongoing revenue source to pay bills, key employees, rents or mortgage payments in the event of a covered loss that renders the business inoperable.
- Money on and off premises should be covered for a maximum amount of loss at any time. This will cover robbery, burglary or theft while in transit to a bank or night depository.
- If there is a delivery exposure or if any employees use their personal vehicles for company business, such as banking, picking up supplies or running other errands on behalf of the business, the a commercial auto policy is needed or at least a non-owned and hired auto endorsement should be added to the package policy.
- If any employee benefits are provided, such as health insurance, life insurance, 401K plans or any other type of benefit which is administered by the company itself or through a third party administrator, there needs to be Employee Benefits Liability coverage in place. This protects the owner from claims arising out of negligence or errors in administering the plans.
An important thing to remember when insuring a restaurant is how to choose an insurance agent. Make sure the agent has experience in writing restaurant policies and that the agency they represent has a solid reputation in the community. The company the agent represents should have an A.M Best rating of at least A/Excellent or better, to give you confidence in their financial status and ability to pay claims. The insurer should also have a specialty program or niche for restaurants. This will give the owner confidence that the coverages available are geared towards restaurants specifically and that the claims adjusters have experience in handling losses that occur in restaurants.
Each restaurant is individual and should be provided insurance coverage specific to its own risk characteristics. For more information or questions you may have regarding coverage for your establishment , click the link below to be linked to our website.