Faced with the harsh reality of closing their doors completely or making drastic changes to their business strategy, restaurant owners and operators reimagined their dining and service experience in 2020. Many of these changes introduce potential coverage gaps that insurance agents and brokers should be aware of, as they work alongside their restaurant clients to update or draft new policies.
“I’m Sorry, But That Item Isn’t on the Menu”
Like most business owners, restaurateurs didn’t anticipate a global pandemic when they were first shopping for insurance. They were, understandably, caught off guard when they learned their existing coverage, in most circumstances, wouldn’t accept business interruption claims resulting from situations related to pandemics and viruses.
This unwelcome surprise has caused many restaurant owners and operators to take a more engaged role in understanding the ins and outs of their insurance policies. Given the number of operational and practical adjustments restaurants made to survive the pandemic, they’ll benefit from additional guidance from their insurance providers to avoid any potential coverage gaps in the future.
Changes in Operations Mean Changes to Existing Policies
Restaurants rethinking and changing their daily operations may deal with a list of new insurance coverage considerations. Below are some of the most common changes we’re seeing that can create coverage gaps in their existing policies and need to be reviewed by an insurance professional.
1. Introducing or Expanding Takeout Options
Restaurants quickly ramped up their takeout options when the pandemic hit. By January 2021, a staggering 90% of US restaurants offered takeout. Some restaurants chose to pivot away from in-person dining completely, opting to join the growing trend of “ghost kitchens”—restaurants only offering carry-out or delivery. To support this new emphasis on take-out, restaurants employed tactics such as expanding or adapting their menus, setting up new workflows, or putting in place new ways of placing orders—all of which may require upgrades or additions to equipment or facilities.
2. Setting Up Online Ordering
The growing demand for takeout caused many restaurants to adopt new tools to place orders online, rather than over the phone. Online ordering platforms—like ChowNow, Bento, and Grubhub—surged in demand at the start of the pandemic. Processing orders online means restaurants are dealing with customer data—names, addresses, payment information—in different ways. The need for Cyber Liability protection has always been present for restaurant operations, but the changing business environment provides a great opportunity for agents to discuss this important coverage with their clients.
3. Offering Alcohol To-Go
Many states temporarily allowed restaurants and bars to offer alcohol with delivery or take-out orders, and for some states—such as Florida and Texas—this is the new legal norm. Offering pre-mixed drinks to-go can introduce major liability concerns, and each state regulates the sale of alcohol a little differently.
4. Providing Delivery Options
Over 80% of restaurants now provide delivery options. Some restaurants decided to outsource their delivery to services like UberEats and DoorDash. But often those services take a substantial cut of the order sale, prompting restaurants to consider handling deliveries themselves. Insurance needs change dramatically with employees driving their personal vehicles and even commercially owned vehicles.
5. Opening or Expanding Outdoor Dining
Many restaurant patrons feel safer eating in the open air and restaurants have accommodated the growing demand by creating outdoor dining spaces or expanding on their existing spaces. New outdoor spaces often means newly built structures and attached/detached property, beyond just the purchase of all-weather chairs and tables.
6. Increasing Measures to Protect Personnel
In addition to the daily measures restaurants take to keep their staff safe and healthy, like rigorous cleaning and sanitizing practices, restaurants want to provide the necessary support for their employees, should they become exposed to COVID. Workers’ Compensation coverage in relation to COVID-19 is still a major point of discussion across all industries—particularly as time passes and we learn more about the effects of long-term COVID symptoms. Now is a good time for businesses to confirm with their insurance agents that their Workers Compensation policies are up-to-date.
Restaurants have had to get creative with how they serve their customers and insurance agents may also need to get creative helping their restaurant clients build policies that adequately account for their new business model.
Jencap specializes in crafting customized insurance solutions for our agency partners and we fully understand the unique complexities of the restaurant industry. Contact our expert brokers today to ensure your clients’ have the most competitive and comprehensive policy that is available in the marketplace. You can also read more industry insights here.
