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Restaurants and Bars are close to everyone’s heart at one point or another. They have their own category of general liabilities that has wide range of risks that make them vulnerable to crippling liabilities and lawsuits. Some of the most form of problems both entities’ faces are kitchen mishaps, food spoilage, foot traffic, food poisoning, employment protection liability, food contamination, and assault and battery. For every bar and restaurant, the insurance rate will differ vastly due to number of reasons –alcohol consumption ratio compared to other services revenues, hours of operations, types of services provided, number of employees, and location of the business.

The following businesses will fall in the broader family of Bar’s & Restaurants. If you own a business that is any of the below you may want to read through the end and see what risks your business is facing:

Second, below are the list of coverages that are essential and will protect your financial risk and liabilities:

This covers your business from claims made against you, such as bodily injury – cost of care, the loss of service, and the reinstitution for any death that results from injury, property damage – coverage for the physical damage to property of others or the loss of use of that property, products-completed operations– provides liability protection if an injury resulted from something your business made or service your business provided, and products liability–product specialized liability insurance unique to your business to protect you against lawsuits from product-related injury or accidents.

This is the most important part of your insurance coverage. Due to the Dram law each bar and restaurant serving alcohol must comply and maintain a proper liability coverage.Dram Law holds a business liable for serving or selling alcohol to minors or intoxicated persons who later cause death, injury, or property damage to another person. Dram law is active in all state except six states as listed: Delaware, Kansas, Maryland, Nevada, South Dakota, and Virginia. This coverage will help pay legal expenses and claims brought against your business by any customer or individual who was consuming at your location.

This protects your physical property/ structures from damages incase of fire, theft, wind or hail, and other calamities.

This will cover your business from food spoilages and helps reimburse you for the cost of your lost food, beverages, and other edibles. This coverage helps protect your business against certain risks like –

  • Prolonged power outage: power outage beyond your control leading to shut down of your refrigerator or freezer units in absence of backup generators causing the perishable goods to unsafe temperatures and humidity levels.
  • Equipment breakdown or failure: breakdown of any equipment such as walk-in freezer, beverages coolers, or other temperature-controlled food storage equipment.
  • Mechanical breakdown coverage: this will reimburse your business for repairs or replacement costs for food-storage-related equipment including but not limited to the refrigeration systems, mechanical, electrical, and piping for such equipment.
Food-related losses are not limited to spoilage coverage mentioned above. Food might be improperly handled or stored. Food that your business received in delivery might be contaminated with microbes such as bacteria most commonly – E. Coli that could make your customers ill. Often employees could unknowingly transmit a virus or bacteria during food preparations. For any resulting issue of illness outbreak this coverage will help you reimburse for expenses such as:
  • Medical tests or vaccinations for affected employees.
  • Loss of income due to shut down.
  • Required sanitation of equipment.
  • Replacing contaminated food.
  • Advertising to help your business restore its reputation.

This liability covers wrongful acts that arise from the employment process. The most common types of claims under this coverage includes:

  • Sexual Harassment.
  • Discrimination.
  • Wrongful Termination.
  • Retaliation.

It also helps with variety of other types of inappropriate workplace conduct, employment related:

  • Invasion of Privacy.
  • Failure to Promote.
  • Defamation.
  • Deprivation of career opportunity.
  • Negligent evaluation.

Most business owners think that EPLI is for big businesses which is utterly false. Please below just a few common types of claims made on small businesses:

  • Retailer prohibited employee from using wheelchair on the job, and subsequently fired him. Plaintiff Settlement: $35,000
  • Restaurant server, fired immediately after reporting her pregnancy, sued for pregnancy discrimination. Plaintiff Settlement: $30,000
  • Male worker in building materials supply company claimed sexual harassment after rejecting advances of female supervisor. Plaintiff Verdict: $50,112
  • Contractor/Concrete supplier terminated 76-year-old employee who alleged age discrimination. Plaintiff Verdict: $77,000
  • Graphics company sued for retaliatory discharge of employee who testified on behalf of a co-worker. Plaintiff Verdict: $255,000

What would you have done in the above scenarios if you did not have the EPLI? We must agree that prevention is better than cure.

For restaurants equipment breakdown covers five main categories as follows:

  • Refrigeration and AC Breakdown: breakdown of refrigerators or freezer units, as well as air conditioning units are covered.
  • Boilers and Pressure Equipment Breakdown: if your restaurants use boiler or various types of pressurized equipment, this will cover your repairs or replacement costs.
  • Mechanical Breakdown: any equipment breakdown might include generators, engines, water pumps, motors, elevators, or specialized manufacturing or production equipment.
  • Electrical Breakdowns: this will cover breakdowns of electrical pedals, transformers, or cables.
  • Computers and Communication Breakdown: this will cover common commercial systems, such as phone systems, fire alarm systems, voice mail systems, security systems and other systems as deemed appropriate by the insurance for your business.
This covers liability you assume under an indemnity agreement (transfer of losses from one party to another) contained in a building lease, construction contract, equipment rental agreement, or other covered contract. So here is an example to understand this liability coverage: Mike owns and operates a cafe called Mike’s Cafe in retail space he rents from Ponzi Realty. Mike has insured his business under a standard general liability policy. Mike’s Cafe’s building lease contains a clause that requires Mike’s business to indemnify the landlord for all claims, damages, costs, and defense expenses that arise from the cafe’s business operations in the leased space. Mike’s Cafe is liable under the lease for any third-party claims against the landlord for bodily injury or property damage that arises out of the cafe’s operations. One day, Daniel (a cafe customer) is entering the restaurant when he trips and falls on a broken tile, sustaining a head injury. Danielsues Mike’s Cafe and Ponzi Realty, claiming they are jointly liable for his injury because both knew the tile was broken and neither bothered to replace it. Daniel agrees to settle the claim for $125,000 and the defendants agree to share the damages and claim expenses equally. Ponzi Realty pays its half of the costs and then demands reimbursement from Mike’s Cafe, citing the indemnity clause in the lease. Mike forwards the demand to his liability insurer, which reimburses Ponzi Realty. The landlord’s demand is covered because it arose out of Mike’s assumption of liability under a building lease (an insured contract) for third-party bodily injury or property damage. Suppose that Mike’s lease requires him to indemnify Ponzi Realty for all damages resulting from third-party claims arising from the cafe’s operations and to defend it against such claims. To fulfill his obligations under the contract, Mike must hire an attorney to defend his landlord against Daniel’s suit and pay all legal costs until the suit is resolved. Mike must also indemnify Ponzi Realty for any damages it pays to Daniel.

If your policy isn’t enough to pay for the damages, lost wages, or medical expenses of an accident or a lawsuit, then an umbrella insurance policy will be able to cover you. Umbrella coverage is above your standard coverages of a liability policy. Once you exhaust your standard liability coverage your insurance will tap into the umbrella coverage to settle claims and lawsuits against your business. Umbrella coverage is provided in increments of $1 million dollars and can range anywhere from $5 million to $250 million or more to satisfy any business’s limit options. Think of Umbrella coverage as a vault door behind the regular door. If any individual manages to break-in the first door than you have the vault door to protect you without which you would be exposed. It’s always good to have an extra layer when you know your business is prone to heavy liability claims.

Your restaurant will need this coverage if your staff delivers food using a personal vehicle or you have an independent contractor. You might be able to avoid this if your business solely operates on uber eats, door dash, grub hub, and others. This coverage will cover your business from any claims against your business from bodily injuries or property damage by your delivery drivers.

This will help cover the cost of potential lawsuits, property damage, medical bills, and other expenses arising from an accident. Additionally, it will cover your commercial auto from damages due to theft, vandalism, or weather events like hail or storms.

This is a must coverage if your business serves alcohol for on premise consumption. If a fight breaks out and one or several intoxicated people cause injuries to one another, this coverage will pay for any medical bills resulting from these injuries and even injuries sustained by bystanders. The following is also covered under A&B coverage:

  • Robbery: a customer getting mugged while leaving your premises.
  • Physical and Emotional injuries: in case of a severe assault and battery case, emotional harm sustained by the witnesses to a crime can be considered as serious as the physical harm. This coverage will also help cover the expenses if any bystander to a A&B incident files a claim for emotional injury due to the witness of such crime.
  • Sexual Assault: if an employee or a customer receives unwanted or forced sexual attention, the victim has a right to file a lawsuit against both the initiator and your business. This coverage will help you absorb the cost of such claims protecting your business.

The most common mistake made by bars and restaurant owners is thinking or assuming that:

  • Third-Party Vendor protection extends to their businesses.
  • General liability will cover cyber liability instances.
  • Hoping IT team will protect their business.
  • Cyber liability insurance is too expensive.

Any restaurants or bars deals with a lot of customer data including but not limited customer loyalty programs, credit or debit card information exchanged for bill payments, advertisement communication, and any other information collected from customers to render services needed. Cyber liability insurance will help your business cover any claims due to the loss of customers data which my expose their financial risks to hackers. Here is short partial list of the areas to consider for cyber liability coverage for your business:

  • Network Security: restaurants and bars have web-based computer systems which are prone to data breach. Any attacks on your computer systems can result in dissemination of personal information and/or the transmission of virus to a third party. This could result in expenses to restore or replace your computer systems, data or programs damaged or destroyed due to the breach.
  • Web Site Publishing: restaurants or bars may be held liable for wrongful acts associated with the posted contents on designated websites. A wrongful act might include actual or alleged errors, infringement of copyright, trademark, service mark, or right to privacy, and misstatements or misleading statements.This could result in lawsuits against your business from other parties in the similar industry as your business. Often such claims require a higher coverage under cyber liability.
  • Extortion Threats: this is very fast-growing crime. In such scenarios the cyber criminal will demand for money to avert or stop the attack. Extortion for bars and restaurants can result in loss of customer data, your businesses data, threat to publish your clientele’s personal data or to destroy your businesses lifetime data stored in your web-based systems. This could be very damaging for any business specially for the one’s that rely heavily on the loyalty ran campaigns. Cyber liability coverage will help cover the damages and replacement of such contents and lawsuits brought against your business from customers if their information was exposed or if there was a privacy breach due to the cyber attack on your business.
  • Loss of Income: Any of the above-mentioned scenarios could lead your business to sustain heavy losses or complete shut down resulting in loss of income. Most common type of instance for a loss of income is the virus or malicious attack that damages or destroys your commercial computer systems vital to the operation of your bar or restaurant. This coverage will also help with the loss of income due to cyber related scenarios.
one instance of a commercial crime is an employee stealing customers credit or debit card information. This coverage will protect your business from employee dishonesty, computer frauds, forgery, kidnap, funds transfer fraud, ransom, extortion, and money laundering. Depending on the depth and scope of your coverage, it will help your business defend you at trail, fines, or judgements awarded by a court of law.

This coverage will help protect your employees including but not limited to chefs, servers, bartenders, and caterers. In a busy kitchen, cuts and burns are almost inevitable. Workers’ compensation will help pay an injured employee’s medical bills, ongoing medical costs, physical rehabilitation, ambulance and emergency room visit, and help recoup lost wages as a result of such instance. If the affected employee decides to sue your business than this coverage will help cover attorney’s fees, court costs, and settlements.

Any business interruptions as defined by the insurance that cause a loss of business income due to the gap or shut down of your business. Some common examples include physical property loss due to natural disaster, vandalism damaging business premise, and any other type of incidence that deems your business inoperable. This coverage will help reimburse your business for loss income for the time period it takes to recover, repair, and restart your business back to normal. Period of restoration, net income and losses sustained are calculated and evaluated by your business and your insurance.

Covers the risks of theft by your own employees which can include products, equipment, or cash. This coverage will protect and reimburse your business in case of theft, alteration, fraud, and forgery.
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