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What’s Cooking? Unexpected Gaps in Your Restaurant Insurance Program

Posted by Parker Beauchamp on Sep 23, 2015

Piaxabay-restaurant-table-chairs-987827-editedBetween kitchen fires, food borne illnesses and liquor liabilities, there is plenty of room for disaster in a restaurant. According to the U.S. Fire Administration, an estimated 5,900 restaurant building fires are reported each year, resulting in an average of $172 million in property loss.

But loss isn’t always caused by property damage and spoiled food. For example, the popular Mexican-style restaurant Chipotle is being hauled to court for allegedly deceiving customers. The lawsuit claims that the fast-casual restaurant serves food made with GMOs, “despite advertising itself as GMO-free.” If founded to be true, Chipotle could suffer both financial and reputational losses.

Most responsible restaurateurs assume they have sufficient coverage for their operation, but that might not always be the case. Unique security and reputational exposures, oftentimes not included in standard food service programs, can be equally detrimental to your business.

Ensure that your insurance program protects your restaurant against every avenue of risk. General liability, liquor liability, workers compensation and property and casualty insurance are essential, but your company may still need more coverage.

3 Common Gaps In Restaurant Coverage

  1. Cyber Insurance

Few restaurants today are “cash only” operations. If your business accepts checks and credit cards, your payment system houses customers’ personally identifiable information (PII), which can put your business at risk to cyber threats.

Furthermore, your business’ website and social media accounts are subject to intrusion. Though your restaurant may be small-to mid-sized, its digital presence is still a target. In August, ISIS supporters hacked a Cincinnati restaurant’s website and defaced its homepage.

You can, however, protect your business and patrons with cyber insurance coverage to recover losses associated with a cyber hack. Preventative risk-management measures can also be employed to ensure your restaurant’s network and web domains are secure.

  1. Reputational Damage Insurance

Following a major injury, alcohol-related accident, employee defamation issue, cyber hack or food-borne illness outbreak, your restaurant will wish it had reputational damage insurance to cover associated losses.

A worst-case scenario, such as a death or major food recall, could lead to severe financial and reputational losses. Restaurant owners and operators can cover costs associated with PR and marketing efforts, or even legal fees, with the help of reputational damage insurance.

Most importantly, this insurance program should go hand-in-hand with a thorough crisis communication plan, which can offset financial and reputational offenses prior to an event. Work closely with your legal counsel and insurer to determine the best crisis management course, and consider working with an external PR firm to develop a plan to effectively reach customers and stakeholders in the moment of an emergency or crisis. 

  1. Personal and Advertising Injury

Your menu, brochures and broadcasted sound bites are integral components to communicating your restaurant’s offerings to patrons. Advertising and promotional materials are assets to your brand identity and public image. Any copying of defamation of your official materials can smear your image in the public eye.

General liability will cover your business from perceived copying of another party’s advertising, or allegations of copyright or brand infringement. Personal protection can also protect your restaurant from non-physical damage claims, like libel or slander, to a patron or other organization.

As with any business or individual with complex needs, each restaurant insurance program should be customized to fit the specific needs of the operation. While liquor liability or property and casualty insurance may be top-of-mind for a restaurateur’s coverage policy, the risks above are just a few to consider.

Do you know if your business is adequately covered and prepared? What potential coverage gaps could exist in your restaurant’s insurance package? Work closely with an independent insurer who can learn about the dynamics of your restaurant, including its exceptional risks and opportunities.

Learn more about INGUARD's specialized program for those in the accommodation and food service industry.

Specialized Program


Topics: Business Insurance