Embroker’s
Restaurant Practice

Restaurant owners are regularly exposed to unique business and personnel issues, among them onsite accidents and foodborne illness. Investing in the right risk management program can help reduce costs and improve your bottom line.

An Introduction to Insurance for Restaurants

As a restaurant operator, you know that running a restaurant — let alone a successful one — is a monumental task. To become successful, restaurateurs need to rely on key partners to help them cut costs and maximize profitability. Embroker is here to help create a smart and cost-effective insurance and risk management strategy to protect your restaurant’s future.

We wrote this guide to help you, the reader, understand both the basics of  insurance for restaurants as well as some more advanced considerations. Our hope is that you walk away from this article a more empowered buyer, with a better understanding of the risk you can transfer to other parties via our restaurant insurance product.

If you’d like help, we’d invite you to talk with a broker or get started by creating an Embroker account. Our unique combination of service, technology, and expertise will help you reduce the cost of risk to improve your bottom line. Our technology digitizes all of your insurance including digital policies, certificates, claims, and insurance applications. Our empowered brokers work with that data and leading carriers to make sure you’re getting the best value on the right coverage. When you upload your policies to your Embroker account, the policies are analyzed and reviewed by our team of insurance experts – this is our Risk Review process. For more clarity on pricing, your business will be benchmarked against similar businesses to identify any unforeseen exposures and premium savings opportunities.

How to Find the Right Coverage for Your Restaurant?

At Embroker, we value expertise, and we encourage you to find a broker that has a specialized restaurant practice. Working with a partner that has experience placing restaurants and supporting claims ensures that they will be able to intelligently tailor an insurance program for your business across the following factors:

Coverage:

What’s the right coverage for the risks of your restaurant? How much coverage do you want/need in the event of a claim?

Premiums:

What’s the appropriate cost for your risk on a monthly or a yearly basis?

Broker Expertise:

How well is your broker versed in the risks, claims management, safety protocols, and coverage options for your specific restaurant?

Experience:

Does your broker work to make risk management a smooth experience? Can they help relieve administrative burdens so you focus on running your restaurant?

Why Do Restaurants Need Insurance?

Restaurant owners face a unique risk profile, and the potential for property damage and liability lawsuits resulting from everyday operations is high. Restaurants deal with open flames or red-hot surfaces on a day-to-day basis, and an untimely fire could damage expensive equipment, forcing a shutdown until the situation is resolved. With nearly 8,000 reported fires in the US each year, this is a very real risk every restaurant faces.

Additionally, both customers and employees are at risk for serious injuries in the restaurant setting.The right insurance policy can cover the injury to your employees or third parties and could even lessen the likelihood of a major lawsuit by swiftly covering the injured third party’s medical bills as well.

While most restaurants follow stringent health code requirements and do everything in their power to prevent foodborne illness, mistakes happen, and customers can often file a frivolous lawsuit for damages after claiming that a certain restaurant made them sick.

Finally, if your business sells, serves, or allows any alcoholic beverages to be consumed on your premises, your restaurant could be sued for damages that are often related to intoxication.

Whatever the reason behind them, lawsuits filed against you by employees or guests can be financially crippling to a restaurant. Managing the risk involved in your business operations and transferring that risk to your insurers is an important step in safeguarding your restaurant’s future.

What Insurance Policies Do Restaurants Need?

While every business has a specific set of insurance needs, there are typically core insurance policies that most restaurants should obtain in order to mitigate and transfer risk:

Workers’ Compensation: A policy that provides benefits to your employees for injuries and illnesses related to their employment at your restaurant. Workers comp is typically compulsory in most states, with the exception of Texas.

Business Owner’s Package (BOP):This policy includes three basic insurance coverages — business liability, business property, and business income policies. BOP protects a business much in the same way a homeowner’s insurance policy protects a home and personal possessions. Third party slip and falls and injuries on premises are also covered under the BOP.

As your restaurant grows, so will the need to broaden your insurance program to include additional policies that will extends the limits of your coverage, such as:

Commercial General Liability Insurance: Once your restaurant has outgrown the BOP policy, you’ll need a more tailored solution to protect you against liability. General liability insurance protects against third-party claims such as property damage, bodily injury, or personal injury.

Commercial Property Insurance: This policy will protect your property, including  the buildings your restaurant(s) are based in, contents, equipment, and personal property used in the business from perils of fire, theft, and natural disasters. Additionally, commercial property insuranceoften provides coverage for losses of income caused by these perils, particularly if cases in which the restaurant must shut down for a period of time in order to recover from these damages.

Liquor Liability Insurance: If your restaurant manufactures, distributes, sells, or serves alcoholic beverages, you will be protected from any liability in the case of a patron you served injuring someone or causing property damage.

Commercial Auto Insurance: If you use a vehicle for your business operations, it may not be covered under your personal automobile insurance. Commercial auto insurance acts much like a personal auto policy but also includes coverages specific to business operations.

Employment Practices Liability Insurance (EPLI): EPLI provides protection against employee claims related to issues such as wrongful termination, harassment, and discrimination. With the recent rise in employment-related litigation, it’s wise to have employment practice liability coverage.

Cyber Insurance: A cyber insurance policy enables restaurants to transfer the costs involved with recovery from cyber-related attacks. Cyber security is a growing issue for restaurant owners, and the right cyber insurance policy can protect from expensive data and security breaches that could compromise the data of your partners, customers and employees.

Things to Consider Before Binding Coverage

  • Your XMod Worksheet May Contain Errors

Experience Modification Rates (XMods) are mathematical formulas that insurance carriers use to compare similar businesses. An insurer compares a company’s estimated losses to actual ones over a three-year period, then assigns a number rating, with the hypothetical “average” being 1.00.

If a company has more losses than average, the score climbs above 1.00 thereby “taxing” the business for past claims. If a company outperforms its peers in safety and experiences fewer claims, the score drops below 1.00 and counts as a “credit.”

The Inspection Bureau, which promulgates experience modifications, does occasionally make mistakes. It’s advisable to review the worksheet yearly to confirm accuracy. Learn how Embroker helped Mixt reduce their XMod by 26 points. This is why we recommend you work with an experienced and knowledgeable broker who’s committed to protecting your restaurant from excessive costs.

  • No Two Policies Are the Same

When it comes to your insurance coverage, don’t assume that your policies have “standardized” coverage terms — they don’t. The devil is in the details.

For example, your broker should help you consider important details and ask the right questions, such as:

How do I want my Business Interruption coverage written? Is it on an “actual loss sustained” or “stated” limit? Which one is better for me?

Should I buy earthquake or flood coverage? What’s the difference between Earthquake Sprinkler Leakage coverage and EQ coverage?

How does my policy provide funds to rebuild to current codes?

Is my general liability policy premium based on square footage or sales? Is one more advisable than the other?

Does my general liability policy respond to off-site catering claims?

Does my employment practices liability policy respond to wage and hour allegations?

  • Report All Staff Claims to Your Workers’ Compensation Carrier

Are you inclined to pay for small, medical-only claims so they don’t affect your workers’ compensation premium (this, by the way, is a common practice to avoid higher car insurance premiums)? If so, you’ve made a wrong assumption. In some states, it’s illegal to not report a work-related claim (such as an injury) then pay the medical bill out of pocket. XMod worksheets also favor the reporting of all claims. For example, minor medical-only claims could be reduced by 70% on the worksheet and have little impact on your rate.

  • You Can Request a Free Space Inspections from Insurance Carriers

Many carriers offer site reviews, and provide feedback on safety issues as a free service. This usually leads to better lower premiums and safer working spaces.

Examples of Insurance at Work for Restaurants
  • B’s Cracklin’ Barbecue, an award-winning restaurant in the Riverside neighborhood of northwest Atlanta, went up in flames. It is the second time its chef has lost his restaurant to fire.
    See: Popular Atlanta Bbq Restaurant Destroyed By Fire
  • Milk and Honey, a Nashville eatery, was sued for serving salmonella-tainted short rib gnocchi to patrons in August 2018, causing over 20 patrons to fall ill.
    See: Milk & Honey Sued Over Salmonella Outbreak
  • Three Greenville restaurants were sued in connection to a fatal DUI wreck involving a 19- year-old driver. The complaint alleged that 19-year-old was served alcohol the three restaurants, before driving on Interstate 385, where the wreck took place.
    See: 3 Greenville Restaurants Sued After Teen Served Alcohol
  • Dallas-based Brinker International, which operates over 1,600 Chili’s outlets worldwide, stated that it had suffered a data breach which may have exposed clients’ credit card information.
    See: Chili’s Restaurant Chain Suffers Data Breach

Restaurant Insurance Costs

As is the case with any industry, there are many different factors that need to be considered before determining how much your restaurant insurance is going to cost. Cost drivers will always be different based on the policies you choose, the unique risks your restaurant faces, the value of your equipment, the size of your establishment, your turnover rate, and other key factors.

Working with the right partner will ensure they are not only negotiating the right coverage but the best possible pricing options for your restaurant as well. Embroker believes in giving our clients better choices using data and transparency. We benchmark your policies against similar businesses in your vertical then procure quotes from multiple insurance carriers for coverage you may not carry and might want to consider purchasing. We also cross-reference your costs with restaurants of comparable size, policy limits, claims history, and risk tolerance so we know your premiums are as competitive as possible.

Getting Started

Now that you have a better understanding of insurance for restaurants, you may be wondering how all of this affects your business and where to go from here. If you need more help or information, you can reach out to our team of expert brokers. If you prefer to get started on intelligent quotes, create your Embroker account today.

Restaurants require unique insuring expertise and experience. Our restaurant practice is redefining the way insurance is purchased, combining technology with deep insurance expertise and genuine understanding and care for your business.

Embroker is the easiest way to intelligently insure any business. We’re here to help!