Property exposures are substantial from cooking equipment, electrical wiring, refrigeration units, and heating and air conditioning systems. All wiring should be current, up to code, and well maintained. All grills and deep fat fryers must have automatic fire extinguishing protection, hoods, and filters. There should be fuel shut-offs and adequate hand-held fire extinguishers. The kitchen must be kept clean and grease free to prevent the spread of fire. Filters should be changed frequently. Ammonia used in refrigeration units can explode. Spoilage exposure is very high. A small fire or a power outage of even moderate duration can cause all fresh and frozen goods to be condemned as unfit for consumption or sale due to the potential for contamination. If alcoholic beverages are served, the liquor should be stored in areas inaccessible to customers. Business income with extended time period coverage should be purchased. Losses can be minimized if there is an alternative location to continue operations and not lose customers. Returning to normal operations after a loss is difficult due to the lag time between reopening and returning to full income as regular customers may have moved to a new “favorite” restaurant.

Equipment breakdown exposures can be high as operations are dependent on refrigeration and cooking equipment.

Crime exposures are from employee dishonesty and money and securities. Criminal background checks should be conducted on any employee handling money. If the restaurant uses expensive cuts of meat or serves alcohol, theft of stock could be a problem. Cash receipts may be high. There must be consistent rules on cash drawer management and job assignments. Money should be regularly stripped from the cash drawer and irregular drops made to the bank during the day to prevent a substantial accumulation of cash. Closing time is the most vulnerable time so security procedures should be in place to prevent hold-ups. There must be a separation of duties between employees handling deposits and disbursements and reconciling bank statements.

Inland marine exposures include accounts receivables if the restaurant offers credit to customers, computers for tracking inventories and payrolls, and valuable papers and records for supplier and employee information. Duplicates of all records should be kept off-site. Cash registers, cooking equipment, and office equipment may have computer applications. There may be a bailees exposure from offering coat check services to customers or from storing entertainers’ property. Some establishments will have paintings, statues, or other fine arts on premises.

Premises liability exposures are high due to public access to the premises. Serving of alcoholic beverages can impair customers’ motor abilities and increase the likelihood of trips, slips, or falls. Servers move throughout the premises with trays of food and beverages, generating spills that can result in slips and falls. Spills should be cleaned up promptly. Temperatures of hot beverages must be limited to reduce injuries due to scalding. Lists of ingredients should be posted to prevent allergic reactions. Customers may become ill from ingesting contaminated food or beverages. Cleanliness standards must be monitored. Floor coverings must be in good condition with no frayed or worn spots on carpet and no cracks or holes in flooring. Dance floors must be clean, smooth, and free of debris. Steps and uneven floor surfaces should be prominently marked. All fire exits should be plainly visible from any part of the premises and kept unlocked from the inside during business hours. Backup lighting should be automatically activated in the event of a power outage. Parking lots and sidewalks need to be in good repair, with snow and ice removed, and generally level and free of exposure to slips and falls. Outdoor security and lighting must be consistent with the area. All employees must be instructed in proper customer handling, including how to deal with disgruntled or intoxicated customers.

Products liability exposure is due to food poisoning, contamination, and allergic reactions from food and beverages carried off premises for consumption. Monitoring the quality of food received, posting lists of ingredients, and maintaining proper storage temperature can reduce this exposure.

Liquor liability exposure can be very high in states that hold restaurants liable for injuries resulting from alcohol consumption. The type and amount of alcohol served, and the type of clientele directly impact this exposure. Failure to comply with state and federal regulations can result in the loss of a liquor permit. There must be a set procedure to check ages of anyone attempting to purchase alcohol, as well as monitoring so customers purchasing alcoholic beverages do not then give them to patrons who are underage or intoxicated. All employees who serve alcohol should be trained in recognizing signs of intoxication. A procedure should be in place to deny serving underage or intoxicated patrons. Programs that encourage designated drivers or offer free taxi service can be useful.

Automobile exposure may be limited to hired or nonownership liability exposures from employees running errands. If the restaurant offers delivery services, all drivers must have appropriate licenses and acceptable MVRs. Company vehicles should be used for all deliveries. Maintenance should be documented. If employees use their own vehicles, the vehicles should be checked for maintenance and upkeep. Because most personal auto policies do not provide coverage when the vehicle is used for commercial purposes, requiring proof of insurance will be of little assistance. If the restaurant offers valet parking, garagekeepers coverage should be purchased to cover damage to customers’ vehicles. MVRs and driving records should be obtained for any employee driving or parking customers’ vehicles. If valet parking services are contracted to another firm, the restaurant should be named as additional insured on the contractor’s policy.

Workers compensation exposures come from slips, falls, cuts, puncture wounds, burns, foreign objects in the eye, hearing impairment from noise, heavy and awkward lifting, and interactions with customers. Employees must be trained on the carrying of heavy dishes between the kitchen and the serving areas. Food and beverage handling can result in passing bacteria or viruses, resulting in illness. While smoking is prohibited in bars in many states, others still permit this. In those states, workers can incur occupational disease from the ongoing inhalation of secondhand smoke. As with all retail businesses, hold-ups are possible, so employees should be trained to respond in a prescribed manner. Cleaning workers can develop respiratory ailments or contact dermatitis from working with chemicals. The employees in many restaurants tend to be minimum wage and turnover may be high. Company incentives to encourage long-term employment are positive signs of management control.

Actual Loss Sustained (ALS) business income is covered for up to 90 days with a 24-hour waiting period. 12-month ALS option available.

Explanation

Business income with extra expense covers the loss of income a business sustains after direct damage to covered property. Coverage also applies to extra expenses that the insured incurs to remain in operation or to resume operations more quickly above and beyond the amount necessary to reduce the business income loss.

Eating and drinking places will sustain financial loss immediately following a direct damage loss. This coverage is vital if the business plans on re-opening.

Business Income Claims Example

Overheated cooking equipment causes an explosion that badly damages Lorenzo’s Restaurant. The business is shut down for 60 days while repairs are being made. Lorenzo has a $50,000 business income limit at this location. The direct damage is the result of a covered cause of loss at a listed location that has actual loss sustained business income coverage. As a result, coverage applies for the actual loss incurred for the time needed to repair the damage up to 90 days from the date of the loss.

Extra Expense Claims Example

It’s Seafood Festival time and the Crab Shack unfortunately suffers a water damage claim resulting in damage to the restaurant and their stock of just delivered seafood. In order to avoid a significant loss of income, the Crab Shack pays for expedited shipping to have their seafood replaced for the Festival and rents a refrigerated truck to store the new supply. The extra expense incurred is covered by their policy.

Spoilage up to $50,000.

Explanation

Equipment breakdown coverage applies to loss or damage caused by, resulting from or consisting of mechanical breakdown of your equipment. Also included is damage from rupture, bursting, bulging, implosion or steam explosion of any equipment or appliance. Coverage is included up to the property limit.

Equipment breakdown coverage includes coverage for reasonable costs to make temporary repairs or to expedite permanent repairs or permanent replacement.

Equipment Breakdown Claims Example

The walk in cooler at Frenchy’s Restaurant suffers a mechanical breakdown. In addition, the food in the refrigerator has spoiled and cannot be consumed. Equipment breakdown is covered up to the property limit. In addition, spoilage caused by the equipment breakdown is covered up to a limit of $250,000.

$25,000 on premises; $10,000 off premises

Explanation

This coverage protects against loss resulting from an inability to collect accounts receivable due to the loss, damage or destruction of books or records of accounts resulting from a covered cause of loss.

Example

Jim’s Barbeque Restaurant sustains a covered loss, and many of the accounts receivable records are lost. His accounts receivable limit is $25,000 for loss or damage to accounts receivable records on premises and $10,000 for loss or damage to accounts receivable records away from the premises.

Not available in New York

Explanation

This coverage amendment changes the General Aggregate limit to apply separately to each of the insured’s locations owned by or rented to the insured and shown in the policy declarations.

Example

Bob’s Pizza has multiple locations around the city covered under the policy. This coverage extension amends the General Aggregate liability limit to apply to each of Bob’s locations. In the event of a bodily injury or property damage liability claim at multiple locations during the policy term, the General Aggregate will apply to each location’s claim instead of sharing the liability limit for those claims.

Explanation

Provides coverage to any person or organization when the named insured has agreed in writing in a contract, agreement or permit to name that person or organization as an insured on the policy. Coverage applies on a blanket basis. Various other additional insured endorsements are available on a scheduled or blanket basis. This additional insured coverage applies on a primary and non-contributory basis.

Explanation

Provides coverage to any vendor the insured is required to cover as additional insured in a contract or agreement but only with respect to bodily injury or property damage arising out of the insured’s products which are distributed or sold in the regular course of the vendor’s business.

Direct Damage – $25,000

Explanation

Covered Causes of Loss – Special Form is amended to apply to the insured’s covered property if damaged by water that backs up or overflows from a sewer, drain or sump. Coverage does not extend to any loss of income or extra expense that results from this direct physical loss to the covered property. The limit for this coverage extension is $25,000.

Example

During a severe thunderstorm, the sump pump at Betty’s diner failed resulting in water damage to the diner. The direct physical loss to Betty’s property is covered up to $25,000.

$5,000 Coverage Limit

Explanation

Coverage applies to loss or damage to credit card slips while located at the described premises as a result of a covered cause of loss. The limit for this coverage is $5,000.

Example

Westside family restaurant suffered a theft loss where money and credit card slips were lost or stolen. The policy will cover the credit card slips up to $5,000 and a separate limit applies to the money.

$40,000 Equipment; $10,000 Data & Media; $10,000 Extra Expense

Explanation

Coverage applies to loss or damage to electronic data processing equipment, data and media at the described premises caused by or resulting from a covered cause of loss. This extension also includes coverage for Extra Expense caused by the covered cause of loss. The covered cause of loss includes damage by virus. The coverage limits are $40,000 for electronic data processing equipment, $10,000 for data and media combined and $10,000 for extra expense.

Example

A employee at Wings and Things opened up a link in an email and unfortunately downloaded a virus to the restaurant’s computer network. The cost to repair or replace the data is covered under this coverage extension up to the limits mentioned above.

$25,000 Coverage Limit

Explanation

Coverage is included for loss or damage to Business Personal Property and Money and Securities resulting from dishonest acts committed by any of the insured’s employee. Eating or drinking places provide multiple opportunities for employee dishonesty, starting with the ordering of supplies and parts, continuing with the cash register and ending at the back door as monies, services and items are disbursed. Coverage limit is $25,000.

Example

An employee at Easy Going Restaurant steals merchandise from the walk-in cooler and sells it to friends. This loss is covered up to $25,000.

$15,000 Coverage Limit

Explanation

Coverage applies for the cost of recharging the fire extinguishing system or fire extinguishers resulting from the discharge of the fire extinguishing agent. The discharge must be caused by a covered cause of loss; or the discharge is accidental; or the discharge is intended to prevent or control a covered cause of loss; or the discharge is from a malfunction of the fire protection equipment. The coverage limit is $15,000.

Example

An employee at Barb’s Breakfast bar was using the cooktop and accidentally spilled grease near the open flame and a fire ensued. The extinguishing system activated and put out the fire resulting in no damage to the building or contents. The cost to recharge the extinguishing system is covered under this coverage extension.

$10,000 Coverage Limit

Explanation

Covers when someone – not an employee or owner – forges a signature on a check or other monetary instrument in order to obtain money that belongs to the insured. Forgery caused by an employee is covered as part of employee dishonesty. Eating and drinking places are very busy places with many people milling around. Even with the best of intentions, doors are left unlocked or ex-employees may enter with a key. There are many opportunities for checks to be taken and then forged. The limit for this coverage is $10,000.

Example

Peter breaks into the China Palace and steals checks from the bottom of a stack he finds in the comptroller’s office. During the next few weeks, Peter writes checks against China Palace’s account until the controller discovers the unauthorized check cashing.  The loss would be covered up to $10,000.

$5,000 Coverage Limit

Explanation

Coverage applies for replacement of premises locks or keys caused by the theft of the insured’s keys from the premises. Limit for this coverage is $5,000.

Example

Vito’s Italian Restaurant suffered a burglary loss where property was stolen. During that burglary the locks were damaged and the keys stolen. The cost to replace the locks and keys is covered up to $5,000.

$15,000 Coverage Limit

Explanation

This coverage pays the medical expenses for bodily injury caused by an accident on the insured premises because of the insured’s operations. These payments are made regardless of fault. Covered expenses include first aid administered at the time of the accident; necessary medical, surgical, X-ray, and dental services; and necessary ambulance, hospital, professional nursing and funeral services. The limit for this coverage extension is $15,000 or the medical expense limit shown in the policy declarations.

Example

Paul is having dinner at his favorite local family restaurant and unfortunately a foreign object in his food results in Paul cracking a tooth. The necessary dental expense to fix Paul’s tooth is covered under Medical Payments for up to $15,000 or the limit shown on the policy declarations.

$25,000 on premises; $10,000 off premises

Explanation

Coverage for money, securities and credit card slips is included at a limit of $25,000 inside the premises and $10,000 outside the premises subject to a $250 deductible. Higher limits may be purchased. The loss of money and securities must result directly from theft, disappearance or destruction. Additional limits for inside the premises coverage are available.

Example

Vinny’s Steakhouse suffered a theft loss where property including money were stolen. This coverage extension provides up to $25,000 for money stolen at the premises.

$1,000,000 building; $500,000 Business personal property

Explanation

If the policy covers a building, coverage is extended to apply to new buildings while being built on the described premises and buildings the insured acquires at locations other than the described premises intended for similar use or to be used as a warehouse. The limit for this coverage extension is $1,000,000. If the policy covers business personal property, coverage is extended to apply to business personal property you acquire at a newly acquired location or newly constructed buildings at the described premises. The limit for this coverage extension is $500,000. This coverage extension until the following first occurs: the policy expires; up to 180 days from when you acquire the property or begin construction; or the insured reports the values to the company.

Example

The owners of the Beach Club Restaurant acquired a second location with a storage building to be used in conjunction with their restaurant. Shortly after they acquire the building a wind loss occurs damaging the roof of the building. As the loss occurred within 180 of acquisition, this coverage extension will cover this loss up to $1,000,000 for the building.

$20,000; no more than $250 for any one tree, shrub or plant

Explanation

Insurance provided by the Building and Personal Property Coverage form is extended to apply to loss to outdoor fences, radio and television antennas, satellite dishes, trees, shrubs and plants, including debris removal expense, caused by or resulting from a covered cause of loss. The limit for this coverage extension is $20,000 but no more than $250 for any one tree, shrub or plant.

Example

A severe wind and hail storm causes damage to the fencing, satellite dish and some trees at the Smith Family Restaurant. This coverage extension applies to this loss up to $20,000 but no more than $250 for any one tree, shrub or plant.

$10,000 Coverage Limit

Explanation

Insurance provided by the Building and Personal Property Coverage form is extended to apply to outdoor signs, whether or not attached to the building that are within 1,000 feet of the described premises and are damaged by a covered cause of loss. The limit for this coverage extension is $10,000 including debris removal expense.

Example

The outdoor sign at the Panda Chinese Restaurant was damaged when a vehicle hit the sign. The vehicle left the scene. The damage to the sign is covered under this coverage extension up to $10,000.

$10,000 Coverage Limit

Explanation

The insured’s business personal property coverage is extended to apply to personal effects owned by the insured, officers, partners and members, managers and the insured’s employees. In additional, personal property of others in the insured’s care, custody or control, including customer’s property is also covered. The limit for this coverage extension is $10,000 at each described premises but no more than $1,000 for personal effects or property of others owned by any one individual. Each loss is subject to a $100 deductible.

Example

The Billy Bob Barbeque Restaurant is burglarized and personal effects belonging to the owner and partners are stolen. This coverage extension will apply to the loss for up to $10,000 but more than $1,000 for each individual’s personal effects.

$50,000 Coverage Limit

Explanation

Coverage applies for loss of perishable stock caused by breakdown or contamination or power outage. Breakdown or contamination means a change in temperature or humidity resulting from mechanical breakdown or mechanical failure of refrigerating, cooling or humidity control apparatus or equipment at the described premises and contamination by the refrigerant. Power outage means a change in temperature or humidity resulting from complete or partial interruption of electrical power, either on or off the described premises, due to condition beyond the insured’s control. The limit for this coverage is $50,000 subject to a $1,000 deductible.

Example

A vehicle struck a utility pole near Rose’s Parkside Café resulting in loss of power to the refrigeration equipment at the restaurant. The resulting food spoilage is covered under this coverage extension up to $50,000 subject to a $1,000 deductible.

$25,000 Coverage Limit

Explanation

Coverage is extended to provide coverage for direct physical loss caused by an interruption of electrical power or water supply services to the described premises. The interruption must result from a covered cause of loss to any of the following property away from the described premises: water mains, pipes, aqueducts or other similar means of transporting water or steam; generating plants; switching stations, substations or pumping stations; transformers; transmission lines, except overhead lines. The limit for this coverage is $25,000. This coverage extension does not include coverage for any loss of income or extra expense that results from the utility services direct damage.

Example

Lightning struck a utility pole outside the LaBamba Mexican Restaurant and a resulting power surge damaged some of the equipment in the restaurant. The resulting damage is covered by this coverage extension up to $25,000.