RISKY BUSINESS

When restaurants were forced to shut down during the COVID-19 pandemic, many owners learned some hard but valuable lessons about insurance and risk.

PERHAPS THE BIGGEST LESSON was that most insurance policies contain exclusions for Communicable Disease or fear or threat of a Communicable Disease. In the absence of any physical loss or physical damage occurring during the policy period, claims for business income loss related to pandemic related exposures are typically not covered. “Many Restaurant Owners did not realize that there has to be physical property loss to trigger a business interruption claim,” says Graeme Finnell, AVP, Liability & Broker Relations, at Excess Underwriting.

Many Restaurant Owners did not realize that there has to be physical property loss to trigger a business interruption claim.

- GRAEME FINNELL

Every business comes with risks, it’s simply part of the territory. But being aware of potential risks for your specific operation can be one of the best ways to be prepared. So, what other risks are there that restaurant owners might want to be proactive in managing to prevent claims from occurring?

“Restaurants are not an easy class of business,” Finnell says. There are many risks associated with restaurant operations that owners can help mitigate by taking on a more proactive role in trying to manage their risk. We asked Finnell about a few of the biggest insurance risk exposures that restaurant owners face on a day-to-day basis.

STAFFING The foodservice industry has struggled to maintain adequate staffing, especially on the service side. “During the pandemic, a lot of servers and wait staff were laid off because restaurants were not allowed to operate. Employees realized they couldn’t afford not to work and had to seek alternate employment to make ends meet. When restrictions eased and allowed restaurants to re-open, owners and operators found that they were not able to bring back former staff as many had secured other jobs. Scrambling to fill the void with inexperienced serving staff had a ripple effect on service levels causing poor experiences for patrons and in some cases leading to poor reviews for the restaurants themselves.”

The Solution: Hire experienced staff whenever you can, and when that’s not possible, train your new hires thoroughly. A well-trained team member is an investment worth making when the customer experience (and your reputation) is at risk.

NOT ENOUGH INSURANCE OR LACK OF ATTENTION TO RISK MANAGEMENT The biggest complaint most brokers hear, according to some of the top clients that support Excess Underwriting, is that insurance rates are too high! The result is that many restaurant owners are focused on reducing insurance pricing and any expenses related to insurance, which is understandable given the struggles they have had over the last 3 years. The problem with worrying excessively about premiums or insurance costs is that it may take their focus off risk management. Insureds that don’t think about risk management make it more difficult for insurers and underwriters to control exposures, reduce claims, and ultimately bring insurance rates down.

The Solution: Seek alternate quote options through your broker. If you think you’re paying too much, Finnell recommends shopping around “Most restaurant owners are busy and hyper-focused on the bottom line, and most say ’they’re too busy to compare prices’ – but it’s worth doing. You need to find a broker who can understand your exposures, recommend risk control efficiencies and changes to the way you run your business and then find the right coverage and insurer that works best for you.”

RISK EXPOSURES – SLIP AND FALL With winter right around the corner, we can expect a surge in slip and fall claims, especially in bigger restaurants. Slip and fall claims for any retail exposure is always a challenge for underwriters. “The more space you have, the more foot traffic and the greater your risk,” Finnell says.

The Solution: Fortunately, steps can be taken to prevent/mitigate slip and fall claims. More importantly, the more action you take, the more attractive a risk becomes to a potential insurer which may result in lower rates and pricing. Finnell recommends simple solutions like ensuring all floor surfaces are clean and dry. If you have washrooms in the basement, have railings, and make sure the space is well lit and free of debris. Never allow food or drink near the stairs. Installing cameras inside and outside the building can help capture claim events which could be useful should issues arise. Finally, having a 3rd party contractor (with proof of insurance) can be a very useful tool helping transfer risk to that 3rd party for their errors and/or negligence in snow removal and salting to prevent slip and falls, as well as for any general maintenance or repair issues required inside (such as plumbing repairs and cooking apparatus cleaning and maintenance on semi annual basis).

Talking insurance isn’t the most exhilarating conversation that can be had, but it is one that is critical to manage risk and keep premiums down.

When was the last time that you reviewed your coverage? If it’s been a while, consider setting some time aside to ensure the coverage you have is the coverage you require! Meet with your broker as often as needed as they are experts in risk management and will help mange your risk for your restaurant.