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Protecting your business with food service liability insurance

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Could a lawsuit bankrupt your food service company? Whether you’re operating a restaurant, a bakery, a food truck, a coffee shop or a catering company, you run the risk of being sued by customers, employees and even competitors. Food service liability insurance can help protect your business from a financial disaster caused by an unexpected lawsuit.

Risks for Food Service Businesses

When you’re working with hot appliances, handling liquids, dealing with customers and rushing to get an order done, a lot of things can go wrong. For example:

  • A customer could experience an allergic reaction. Food allergies to ingredients like nuts, milk and eggs are common. Cross-contamination and overlooked ingredients – such as peanut oil in a dish that’s supposed to be peanut-free – could lead to severe reactions and even death.
  • Customers could get food poisoning. coli, salmonella and other types of contamination can cause serious and potentially life-threatening illness. Although robust food safety practices can reduce risk, this is still a threat for any business in the food service industry.
  • A customer could be injured. For example, a customer could slip on a wet floor or collide with a worker. Burns are another possibility; a hot plate could burn a customer’s hand, or a steaming hot beverage could scald the customer, as in the famous McDonald’s hot coffee lawsuit. In fact, according to CBC, there have been multiple lawsuits involving burns caused by hot beverages.
  • Employees could be injured. A kitchen can be a dangerous place. If employees are injured on the job, the employer may be liable for medical costs and lost wages.
  • An intoxicated customer could cause a crash. Many states have laws that hold businesses liable for overserving customers or for serving alcohol to minors. If an intoxicated customer causes a car accident, gets into a fight or otherwise causes injury or property damage, your company could be held responsible.
  • Your workers could damage someone’s property. For example, a worker could spill spaghetti sauce or wine on a customer’s outfit, a delivery driver could crash into someone’s car or a fire could spread to property belonging to someone else.
  • Your advertisements could lead to a lawsuit. You want your advertisements to catch the attention of potential customers, but they may instead catch the attention of lawyers. For example, a competitor could sue you for defamation over a claim you make in an advertisement, or an artist could sue you for copyright infringement because you used music or images without permission.

General Liability Insurance

General liability insurance is a core insurance policy for many businesses, including food and beverage businesses.

Commercial general liability insurance provides coverage for third-party claims involving bodily injury, property damage and personal or advertising injury. For example:

  • A customer slips on a wet floor and is injured.
  • A waiter spills red wine on a customer’s silk dress and destroys it.
  • Your business is sued for libel or slander.

If you experience a covered claim, general liability insurance could also help with legal costs, including awards or settlements up to the policy’s limit.

However, there are many claims that general liability insurance does NOT cover, including lawsuits brought by current, former or prospective employees and other various excluded losses. As a result, most food service businesses will need additional types of insurance coverage.

Other Food Service Business Insurance Options

In addition to commercial general liability insurance, your food service business may need the following types of insurance:

  • Auto liability insurance. If your company owns any vehicles, you will need to insure them with commercial auto insurance that meets your state’s minimum insurance requirements, and you may want higher liability insurance limits to protect your business. If your workers ever use personal or rented vehicles for business purposes, you may also want to secure a hired and non-owned auto insurance policy so your business is protected (Note that your employees will still need to maintain personal auto insurance on their vehicles).
  • Workers’ compensation. In most states, workers’ compensation insurance is a requirement for a majority of businesses. This means that if you have employees, this coverage is likely mandatory – and even if you live in a state where it’s not a requirement, such as Texas, it’s still a wise idea. If a worker is injured on the job, workers’ compensation insurance helps to cover medical costs and lost wages.
  • Employment practices liability insurance. Although this type of insurance is not legally required, it’s a good idea for businesses with employees. Employment practices liability insurance (EPLI) provides coverage for a variety of claims involving alleged violations of workers’ rights, such as harassment, discrimination and wrongful termination.
  • Liquor liability insurance. If your business serves, sells, manufactures or distributes alcohol, liquor liability insurance provides important coverage in case you’re sued because of injury or property damage resulting from intoxication.
  • Cyber liability insurance. Most food service businesses rely heavily on computer systems, and it’s common to have sensitive customer information, such as payment details, stored on these platforms. Cyber liability insurance provides coverage in case your business faces cyber threats like a data breach or cyberattack.

These are common insurance policies for food service businesses. However, depending on the nature of your business and your exposures, you may benefit from additional coverage types as well. Make sure to consult with your business insurance broker to determine the policies that your operation needs.

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Do you have the business insurance you need?

Litigation can be devasting for businesses. Without sufficient insurance coverage in place, your business might not survive a lawsuit. To help ensure that you have enough coverage, consider the following questions:

  • Are you meeting all state requirements? Most states require certain types of insurance, such as workers’ compensation or auto liability.
  • Are you meeting all contractual requirements? When you sign a contract to lease a business location or take on a job, you may be agreeing to maintain certain insurance coverages. Check your contracts so you know your responsibilities regarding liability and insurance.
  • Do you have uncovered exposures? Review your current coverage for exposures and gaps. If you have uncovered exposures, consider securing an endorsement to add coverage to your existing policy or securing a separate policy.
  • Are your limits sufficient? Lawsuits can be expensive, especially when they involve serious injury or death. Consider raising your limits or adding umbrella insurance coverage to bolster protection levels.

In addition to the policies mentioned above, your business may need commercial property insurance, equipment breakdown coverage, business interruption insurance or other specialized policies. If you’re not sure where to start when it comes to reviewing your insurance needs and risk exposures, Higginbotham can help. We offer insurance solutions specifically designed to meet the needs of restaurants, food trucks, caterers and other food service businesses. Talk to a business insurance specialist today to learn more.

Not sure where to start? Talk to someone who wants to listen.

A great plan starts with a conversation. Let’s talk about what you need.

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