No matter if your food service establishment is a cafe, deli, diner, or upscale restaurant, all such businesses share certain common risks.
The most cost-effective and efficient method to secure coverage for property and liability is likely through a Businessowners Policy (BOP) tailored specifically to food service risks. While marketed under various names, these policies generally include provisions similar to those found in the property insurance and liability insurance sections of a BOP.
PROPERTY INSURANCE
The BOP extends coverage to the real estate owned by your business. If your business leases or rents its premises, the BOP offers coverage for tenants' improvements and betterments in the event of a covered loss. These encompass fixtures, alterations, installations, or additions made to the space that cannot legally be removed from the landlord's property.
The BOP also safeguards your equipment, tableware, food supplies, and other business assets. Your fundamental policy is likely to incorporate two coverages that are crucial for business continuity in the aftermath of a disaster: Business Income and Extra Expense Insurance, also known as Business Interruption Insurance. Business Income Insurance aids in covering ongoing expenses during business downtime after a loss and helps compensate for lost profits. Extra Expense Insurance facilitates a quicker recovery by reimbursing additional expenses incurred due to the loss, such as temporary quarters' rent. If these coverages are not part of your basic policy, they can typically be added for an additional premium.
Any food-serving business faces the risk that its products could lead to food poisoning or the transmission of communicable diseases. By adding the Food Contamination Endorsement to your policy, you gain coverage against this risk. In most cases, the insurer will cover lost income if the restaurant is shut down by government order, as well as expenses for cleanup, food replacement, medical tests for affected employees, and extra advertising expenses to restore your reputation.
Other valuable property coverages include:
Spoilage: Compensation for property value lost due to temperature control system breakdown beyond your control.
Mechanical Breakdown: Protection against mechanical or electrical breakdowns in your boilers, refrigeration systems, pressure vessels, mechanical and electrical machinery, or apparatus utilizing mechanical or electrical power.
Outdoor Signs: Coverage for non-attached outdoor signs.
Burglary and Robbery: Protection against theft by external parties.
Employee Dishonesty: Coverage for certain theft risks involving your own employees.
LIABILITY INSURANCE
Liability risks are inherent in any business undertaking. A BOP covers a broad array of potential liability scenarios, ranging from slip and fall accidents to claims of defamation or slander.
However, there are liability risks not encompassed by a BOP. One example, particularly relevant for businesses serving alcohol, is liquor liability. If you serve alcohol to someone already intoxicated, you could be held liable for any harm caused. A Liquor Liability Endorsement provides coverage for your defense and any damages up to the policy limit.
BUSINESS VEHICLE INSURANCE
Your personal auto policy may extend coverage for some business use of your vehicle. However, if the vehicle primarily serves business purposes, a personal auto policy is unlikely to provide coverage. It also won't cover vehicles owned by your business. For such vehicles, a business auto policy is necessary.
In the event that you use your personal vehicle for business reasons and are liable for an accident, an injured party could sue you personally. If your personal auto policy's coverage falls short, a lawsuit could target your business. If you employ personal vehicles for business purposes, ensuring sufficiently high coverage limits to safeguard your business is crucial. Discuss this matter with your insurance agent.
WORKERS' COMPENSATION INSURANCE
Different states have varying regulations regarding when employers must offer workers compensation insurance. If your business employs three or more individuals, it's recommended to consult your state's department of workers compensation to determine whether providing workers comp insurance is mandatory.