Restaurants Face Growing Range of Threats Not Covered by Conventional Insurance Policies

Challenged by a growing and broader range of threats to the safety and security of their daily business operations, small to medium sized independent restaurant owners are increasingly finding that conventional insurance policies have huge gaps in coverage — gaps that could cripple a restaurant should a tragedy strike. 

Restaurant Guard Insurance, introduced last month by the U.S. Risk Insurance Group LLC, is designed specifically to address these gaps in coverage and provide restaurant owners with total peace of mind when it comes to managing their business.

Restaurant specific coverage dates back to the early 1990s, when a Jack in the Box served burgers contaminated with ecoli, costing the lives of four children and leaving 178 other victims with permanent injury including kidney and brain damage. Since then, large brand names and corporate entities have been educated on the risks of food borne illness outbreaks and how they can use specialized insurance to protect themselves. Smaller and mid sized restaurants never received the same lessons, according to Restaurant Guard Insurance Vice President & Program Director Crystal Jacobs.

“Many restaurant owners believe that their standard business interruption Insurance will cover incidents involving issues like foodborne illness, malicious or accidental contamination, but standard business interruption does not cover these expensive cases,” she said. “Our program is tailored to provide vital protection against the specific threats that restaurant owner/operators face each and every day.”

The problem for owner/operators is that standard business interruption insurance treats a restaurant like any other business. Their coverage only applies when there is physical damage at a location. In actuality there are a whole host of other scenarios that interrupt business and cost owner operators money. U.S. Risk Insurance Group recognized this need for a specialized solution in the restaurant channel.

As a major specialty lines underwriting manager, U.S. Risk has a long history of developing insurance programs that are customized for individual industries, including live event production and touring entertainment, staffing services, parking garages, hospitality, healthcare, energy and environment, community associations, financial institutions, transportation and more. 

“We understand the risks that threaten individual channels in unique ways, and we create customized programs that offer each channel comprehensive insurance protection against these unique threats,” Jacobs said. “Restaurant Guard Insurance is the program that can best meet the needs of small to medium sized independent restaurant owners in ways that no other policy can.”

According to Jacobs, a single food borne illness outbreak in North America could cost a restaurant anywhere from a couple thousand to over a million dollars. Costs are often dependent on the severity of the outbreak; lawsuits and legal fees; fines incurred for health violations and the number of employees and customers affected by the incident.

“A food borne illness outbreak can bring upon enormous costs, enough to eat into a restaurant’s annual profits,” Jacobs said. “The effects are particularly devastating for small, independently run establishments who are not able to sustain a massive financial blow.”

Even if a restaurant does not produce the contaminated goods, the owner can still be held liable for distributing them. They are also responsible in cases where an employee or customer deliberately infects the product or attends work while sick. In the event of an outbreak, health department requirements state that the restaurant must make a public media announcement.

“A food contamination announcement immediately stokes public fear and could lead to long-term reputational disaster,” Jacobs said. “It creates a domino effect in which the public loses confidence in the business, stops spending money there and tells others to do the same.”

Damaged reputations are perhaps more prevalent than ever in the social media age. Historically, contamination would be a local news story and not a national exposé. If there is a food-borne illness outbreak in 2019, within seconds almost everyone will know about it.

“With social media today, contamination stories go worldwide almost instantaneously,” Jacobs said. “small and mid-sized businesses are at a massive risk for financial ruin.” 

Restaurant Guard exists to pay for the loss of revenue, manage the restaurant through the outbreak and remarket the restaurant to get it back to normal operations and income. The solution includes costs to replace contaminated food, required equipment cleaning, loss of income from shutdowns, medical tests or vaccinations for employees. They also set the restaurant up with a crisis management and marketing team to deal with the media, government, disgruntled employees and angry customers.

In addition to this, the program adds whatever coverages a restaurant owner needs, from personal, professional and staff liability to valet parking, employment practices liability and terrorism, malicious tampering and workplace violence, as well as adverse publicity and product extortion. Owners and operators can submit an application here to be a part of the revolutionary Restaurant Guard program.