When Mark and Sue opened Marley’s Bar & Grill in 2013, they thought their struggles were behind them. After quitting their corporate jobs two years before, they worked tirelessly to make their dream of opening a restaurant on the Halifax waterfront a reality.
Running through their check-list leading up to opening day, they carefully crossed off each item. However, as the weather grew warmer, they became eager to open their restaurant before the patio season began. When it came to ‘purchase insurance,’ on their check-list, they quickly considered their risk exposure.
Being on the waterfront, they knew there was a higher risk of slip-and-fall injuries, and a commercial general liability insurance (CGL) policy could cover them if a patron injured themselves and decided to sue.
After a quick search, they narrowed their options down purchased the first policy offered to them; a basic Business Owner’s Policy (BOP) with a $2M limit, which included commercial general liability insurance (CGL), commercial property insurance and business interruption insurance.
They had also been offered a restaurant insurance package from another company but felt the cost was too high, and the additional coverages were irrelevant to their business.
After a successful opening season, Marley’s Bar & Grill became a home away from home. After being in business for a year, they finally felt themselves being able to relax and enjoy their new role as restaurant owners. Until a quiet Tuesday morning in the fall of 2014 when Mark arrived at the restaurant to find the front windows shattered and recently installed CCTV cameras ripped from the walls.
After calling the police, Mark called his insurance company and got to work taking pictures of the damage and creating a list of what was missing from the restaurant so that he could file a claim. In the process, he discovered that Sue’s wedding ring, which she had left by the sink, had been stolen, as well as the $3000 left in the cash register overnight.
When Bad Insurance Happens To Good People
What they hoped would be a seamless claims process turned became an unsettling ordeal. To begin with, Mark and Sue did not have glass coverage, which is oftentimes included as a rider in a comprehensive commercial property insurance policy. Instead, they had assumed that because they rented the space, it was the property owner’s responsibility to ensure they had the additional coverage required to protect the building.
In their hurry to insure their restaurant in time for patio season; they had not confirmed with their landlord who was responsible for additional coverages. This miscommunication led to Mark and Sue spending $8,000 to replace the glass panels and sliding doors.
From their understanding of commercial property insurance, Mark and Sue believed that in addition to the physical property, the cost to repair or replace the physical contents of their business would be covered as well. However, when it came to covering the cost to replace their CCTV camera system, they hit another roadblock. Since the cost to repair the system was below their deductible, they weren’t able to pay for a replacement and spent $2,200 on a new system and installation.
The stolen ring and cash were not covered either, as there had been a clause in Mark and Sue’s policy explaining that coverage only applied to what was kept in a safe and included in an inventory list used to define the policy terms.
Mark and Sue had some luck with the business interruption coverage they had purchased as part of their BOP, which the broker who sold them their policy said covered the net income lost during the time they had to close the restaurant to repair the windows, in addition to their employee’s wages and monthly overhead costs. However, their accountant was unable to report on their revenue for the last year, meaning they had to pay out of pocket while the accounts were sorted.
In total, Mark and Sue ended up paying over $60,000 for repairs, employee wages, overhead costs, their accountant’s fees, and legal expenses once the perpetrator had been caught. After months of financial and emotional hardship, they reopened Marley’s to a sympathetic crowd but couldn’t help but feel they had failed as business owners.
How Can Restaurant Insurance Protect My Business?
While it seems farfetched, situations like Mark and Sue’s happen all the time to business owners, regardless of experience. Here’s where they went wrong. By rushing the process, they neglected to calculate their risk exposure and purchase coverage that would cover their specific business needs in favour of a cheaper policy. In doing so, they failed to properly secure their business.
Restaurant insurance is a policy package specially designed to protect restaurant owners from risks common to their business. While restaurant insurance wouldn’t have been able to cover the accountant’s mistakes, it could have provided the additional financial coverage they needed. Here are two examples where restaurant insurance provided adequate coverage:
- Kerry and Blake own a steakhouse in Calgary. On an unseasonably warm spring day, a power surge damages their refrigerator system. As a result, all of their meat was spoiled and had to be thrown out, plus they had to shut down the restaurant while repairs were made temporarily, and a new system was installed. Luckily, they had purchased a comprehensive restaurant insurance policy package, which included: equipment breakdown coverage to cover the cost to repair the refrigerator system ($22,000) and replace the spoiled meat ($12,940).Like Mark and Sue, their policy also included business interruption insurance, which covered the business income lost during the time it took to repair the system ($11,321). In total, Kerry and Blake were covered for $51,161.
- Nora and Johannes own a vegan schnitzel restaurant in Vancouver. On Wednesdays, their produce is delivered by a local supplier. A new employee, unaware of the weekly delivery schedule, mops the floor before the delivery man arrives and ends up slipping on the freshly mopped floor and falls, breaking his shin by smashing it on a table, which requires immediate surgery and physical therapy. Unable to work until he has healed, the delivery man sues Nora and Johannes for $75,000 in medical costs and lost wages. Like Kerry and Blake, they had a comprehensive restaurant insurance policy, which included commercial general liability insurance covering the costs.
How To Choose The Best Restaurant Insurance Policy
So, what can we learn from stories like these? After an accident occurs, it’s what happens after that matters the most. Your business is your livelihood, and its survival can be threatened in a matter of minutes. By insuring your business, you take the guesswork out of what happens after.
A good broker will make sure your business is covered from all angles. Still, when it comes to protecting your business, there are steps every business owner should take to ensure they are getting the most comprehensive coverage possible:
Understand The Basic Coverages
While every business is unique and deserves a policy package tailored to their business needs, there are a few insurance policies that apply to most businesses and form the basis of a comprehensive restaurant insurance policy:
- Commercial General Liability is a foundational insurance policy that provides coverage for common claims alleging third-party bodily injury or property damage as a result of your business operations. For example, if a patron slips on the stairs leading to the bathroom and injures themselves or your delivery man accidentally causes property damage when delivering a pizza, your commercial general liability insurance would cover the associated legal and medical expenses.
- Commercial Property Insurance: Regardless of whether you rent your space or own it, commercial property insurance is important coverage to have as it provides financial coverage for loss or damage to your property and physical assets caused by an external disaster, such as a kitchen fire, theft or vandalism.
- Equipment Breakdown Insurance is a critical policy for restaurant owners to have as it covers the cost to repair or replace equipment that has broken down due to an internal cause, like an electrical or mechanical issue.
- Business Interruption Insurance is a form of coverage that covers the income lost during the time it takes to restore or replace your restaurant following a disaster. In addition to covering income, business interruption insurance may also cover overhead costs, including rent and electricity, as well as your staff’s wages.
Use Your Risk To Drive Your Research
Insurance is driven by risk and each business has its own unique set of risks based on location, size, and traffic. For example, a Chinese takeout restaurant located in a mall food court is exposed to different risks compared to an upscale seafood restaurant located on the water.
Understanding what your risk exposure is, whether it’s high or low, is important for determining the type of coverage you need to include in your restaurant insurance policy package. Don’t be afraid to explore your options.
We know you’re busy running a restaurant and finding time to research policies may not be at the top of your priority list. At Zensurance, we do the shopping around for you and find the best policy to cover your unique business needs.
Know Your Limits Before You Sign
When purchasing insurance for your restaurant, it is critical to understand your risks and reasoning behind specific coverage options. Just as every restaurant is unique, so too is the insurance policies designed to cover them. Still, insurance can be confusing, and knowing what you have coverage for is just as important as knowing what you’re missing.
At Zensurance, we’re focused on making insurance as accessible and transparent as possible. If you need help understanding your policy, our brokers are happy to break it down for you.
Running a business is stressful, but your insurance shouldn’t be. Whether you’re opening your first restaurant or you’re a seasoned veteran, insuring your restaurant should always be a top priority.
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