The hospitality industry, ironically enough, is not all fun and games. While patrons can enjoy the full sensory and emotional smorgasbord that going out ideally entails – engaging in a sumptuous dinner, wailing along at a sold out show, knocking back a few friendly pints at an Open Mic Night – the businesses that provide these necessary, fulfilling human experiences run the risk of facing catastrophic losses if they are not protected by the right insurance package.
Hospitality operators face myriad exposures, both behind the scenes and front of house. Kitchens can go up in flames and burst pipes regularly paralyze business operations. A simple slip and fall can lead to a massive claim depending on the circumstance and the injuries suffered. And then there’s the wild card any venue, bar or restaurant must account for: alcohol.
“Liquor liability can cause some significant exposures to a bar or restaurant owner,” says Burns & Wilcox’s Director of Property and Casualty, Tyson Peel. “It is the responsibility of the owner to provide a safe internal environment, as well as monitor the consumption of patrons and provide alternative means of transportation, to mitigate risk or help prevent future claims.”
Peel relates a recent, unfortunate example wherein a bar overserved a patron who then drove home. The patron arrived safely, but then drank more and decided to drive a friend home, at which point he struck a pedestrian. “The bar still was liable for 25% – about $125,000,” Peel says. “The problem with host liquor liability is that a judge almost always finds some degree of liability on the establishment if it is determined that the co-defendant was drinking there.”
While liquor can fuel some of the most damaging and salacious claims, Peel explains that the financial consequences related to foodborne illness are not to be taken lightly, adding that coverage for businesses providing refreshments should include protections against loss of revenue and the clean-up costs that inevitably follow an outbreak. “And, because we know that it’s not just lost revenue from reduced customers at stake,” he says, a strong hospitality policy should also work to “protect and restore a restaurant’s reputation.”
In addition to host liquor liability, which would cover any liquor-related claims against a legally licensed business, Peel says typical hospitality packages should also include first-party coverage for the insured’s stock or equipment, as in the case of a fire or water damage, and crime coverage to protect the insured from employee dishonesty or a holdup/burglary.
For brokers considering a venture into the space, Peel warns that they should be aware of price increases across the board on both new and renewal business, as well as a reduction in capacity from existing markets. Some markets, he says, are pulling away from the class entirely.
“The hospitality sector has been one of the first to transition to a harder market. This has been caused by poor overall claims results for this class of business,” says Peel.
