4 Key Aspects of Restaurant and Bar Insurance Coverage

by David DeLorenzo

One of the most important things a bar or restaurant owner will have to manage in their business is their insurance. Intended to help protect owners against a host of issues, proper insurance coverage can truly “make or break” a business. It’s essential to work with a professional, experienced agent who knows the ins and outs of the hospitality industry, as this type of insurance has some very unique specifics and circumstances.

It’s also important to work with an agent who is up to date on current and ever-changing rules and policies of the industry in general. When getting new insurance or renewing an existing policy, bar and restaurant owners should consider these four aspects:

Liquor — Proper coverage for establishments that serve liquor is non-negotiable, and their policies and protection should be defined in no uncertain terms. Beyond being covered properly, bar and restaurant owners need to maintain best practices within their establishments when it comes to liquor — that is one of the restaurant staff’s biggest responsibilities.

This includes things like monitoring how much liquor is served to guests, having background checks done on security guards and other staff, staying up to date with all certifications that are associated with serving liquor, and providing clear written protocols for employees regarding liquor policies. This ensures they are aware of the rules of the restaurant when it comes to liquor — and that they are following these rules. This is in the best interest of all parties involved.

Liquor liability is taking on a hard market in the current industry, which means restaurant and bar owners who serve liquor may be faced with increasing premiums or that some insurance companies may be unwilling to negotiate terms. This is not an area where bar and restaurant owners have leeway to cut back. A very tight policy when it comes to liquor is vital; those in the industry who serve liquor need to be able to protect themselves and their staff if an incident arises.

Employment Practices — Employment practices covers a wide range of things such as hiring, not hiring and firing policies; equal opportunity employment practices; and sexual harassment. And this is another key area where bar and restaurant owners should be properly covered. There are many instances in which a restaurant or bar owner could become liable even if they had nothing to do with an incident (such as in the case of sexual harassment) if they aren’t properly covered. And in today’s litigious society where people are inclined to sue, it’s important to have airtight employment practices coverage in place.

Ratings — Ratings are based on a number of different variables, and restaurant and bar owners should know what they are rated on when it comes to their insurance policies. An establishment’s rating could be based on the property’s square footage or on their sales, for example. However, the latter in particular could change from year to year — particularly in the case of post-COVID restrictions, which may require some establishments to be operated at limited occupancies.

Consider, for example, a restaurant that is rated on its sales. If the establishment hasn’t revised its policy to reflect current post-pandemic sales, they may be being rated on sales numbers that are much higher than what they are making. Updating these numbers can help save bar and restaurant owners money. Additional factors that can impact ratings include restaurant expansion and purchases necessary to operate the business, such as large pieces of equipment or vehicles.

Exclusions and Endorsements — Finally, it’s important to review any policy exclusions and endorsements. These are the terms that refer to what the insurance policy covers and, perhaps more importantly, what it does not. Bar and restaurant owners need to make sure they understand what their policies include, especially as it relates to today’s conditions. For example, bar and restaurant owners may want to review their weapons exclusions due to the increase in shootings and other weapon-related incidents that are occurring more often in some bar and restaurant environments. Another example is the case of to-go liquor sales, which increased greatly during the height of the stay-at-home restrictions of COVID.

As with the increase in to-go liquor sales, partnerships with third-party delivery services increased during the pandemic. Restaurants and bars that have been working with these types of companies should ensure their policies reflect that and that their partnership contracts clearly state the responsibility of each party. Also under this umbrella, things such as inventory should be included, and restaurant owners should have their insurance agent review their property lease on any new locations.

There are many things to consider when getting or renewing bar and restaurant insurance. Working with a professional agent who has first-hand knowledge of the hospitality industry can ensure bar and restaurant owners are properly covered for all the areas that are specific to their businesses. Keeping in close contact with their agent and letting them know about any major changes (such as sales increases and decreases and new equipment expenses) can help ensure the policy is as up to date and accurate as possible.

Out of his passion to serve the restaurant and hospitality industry, David DeLorenzo created the Bar and Restaurant Insurance niche division of his father’s company, The Ambassador Group, which he purchased in 2009. He is an ASU graduate, an avid health and fitness guru and a recent first-time author.

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