Remember the woman who sued McDonald's for servingher a hot beverage? For many, that notorious case is the posterchild for frivolous lawsuits. The fact that the woman wassubsequently awarded nearly $3 million in damages seems extreme tomost people and, no doubt, to McDonald's product liabilityinsurers.

Food-related restaurant claims are unique within the universe ofclaims, and one must be well-equipped to handle them. Which raisesthe question: As a claims adjuster, are you sufficiently preparedto handle food claims involving your clients in the restaurantbusiness?

To some, restaurant insurance seems like any other type ofcoverage and similar to that of most other businesses because itmostly boils down to commercial general liability insurance.However, restaurants have their own unique liability considerationsthat can range from the mundane to the outright bizarre.

What kinds of liability do restaurantshave?

The answer is in the nature of the business. First, they areopen to the general public, which means restaurants have the samekinds of liability exposure as other open areas. Then there is thepotential for grease and wood-burning fires from cooking.

Liquor liability is another exposure for any business with aliquor license, and then there is product liability exposure, whichcovers any food-related claims that arise. These claims may involvea diner who suffers from food poisoning or an allergic reactionfrom the restaurant's food.

The law requires that goods sold by a company be free fromsafety defects. Food poisoning generally falls under the categoryof defective product liability, because a client (the restaurant)sold a defective product (food) that injured a diner.

Food poisoning and allergic reactions are a major source offood-related risks for restaurants. For example, in 1977, one ofthe largest botulism outbreaks in U.S. history occurred inMichigan, when 58 customers of Mexican restaurant Trini &Carmen's suffered food poisoning caused by hot sauce that was madefrom improperly home canned jalapeño peppers.

In another case, an outbreak of hepatitis A at a Pennsylvaniarestaurant caused the death of three people. The outbreak was dueto contaminated green onions used by the restaurant.

It is because of incidents like these that restaurants needcomprehensive insurance coverage that includes product liability toprotect them against claims of personal injury caused by theproducts they sell. What happens when the food or beverage arestaurant supplies does cause harm? It falls on claims adjustersto handle the claims process.

To be fully effective in this area, we must understand theunique risks of businesses operating within the restaurant sector,and fulfil the promise made by the insurer at the time the policywas sold. However, we must also protect the assets of the insurerso that only the claims owed are paid.

Related: Food recalls in the digital age

An adjuster must do a thorough investigation of a restaurantclaim to capture any critical details before they are lost orforgotten. (Photo: Shutterstock)

The claims process

It is the adjuster's responsibility to respond to the claimantand conduct an investigation of the claim as soon as possible. Anydelay on the adjuster's part, however minor, could have an impacton the ability to obtain necessary evidence and properly adjudicatethe claim.

It is important to never take anything for granted. Howeverconversant an adjuster may be with the client's policy, theparticulars of the case and the claims adjustment process, it isbest to approach a case as if we know nothing. Take the time tolearn and understand the scope and type of the insured's business;the product itself (in this case the food the client serves); theanticipated reasonable use of the product and the issues involvedin the incident.

Here are six key steps to approaching these types ofclaims:

1. Become familiar with the details.

Start by closely examining the loss notice, which is the reportthe insured submits giving notice to the insurer. From this it ispossible to identify key details like the type of injury beingclaimed, when and where it occurred, who the claimant is, theparticulars of the insured restaurant and the nature of thecoverage it holds.

It also identifies who to contact, whether there is anythingthat requires special attention (such as hospitalization), as wellas the details of any independent witnesses.

2. Read the policy.

Next, review the client's policy. The set of facts in each casemay show some nuances that affect coverage. There may be language,terminology or provisions in the policy which raise a differentinterpretation in light of the circumstances of each case. Once weunderstand how the policy applies to a case, it is time to meet theparties involved.

3. Meeting the insured and claimant.

Personal, prompt contact is important in the claims process andshould be prioritized, so call or visit as soon as is practicable.Try to establish a rapport with the people involved, since thishelps smooth the communication and investigation process. It takestime, but try to find common ground with the people you will beinterviewing as this will make it easier for them to trust you andbe more open.

Begin by explaining who you are, your role in getting theirclaim settled and how important their cooperation will be to theinvestigation. Their cooperation is a requirement of their policy,but it is good to remember that the client and insurer may need topresent a joint defense to a claimant's suit.

It is also good to meet with the claimant to obtain his or herside of the story on what happened. If the claimant is representedby an attorney, only communicate with the attorney, since it wouldbe a violation of the attorney/client relationship to speak to theclaimant without the attorney present.

Witnesses, such as restaurant employees or other restaurantpatrons who might have observed relevant facts, can providevaluable information. For example, did the claimant inform his orher server that she was allergic to a particular food whenordering? A food-related product liability claim may also requiretesting the food in question and interviewing those who know thefood product, so speak with them as well.

Related: Something's fishy: Scallops spoiled, but willcoverage provide the net?

Talk to the claimants, the policyholder and any witnesses aspart of the investigation. (Photo: Shutterstock)

4. Obtain statements and documents.

Get a detailed statement from the different parties. It ispreferable to record the claimant's statement in order to get moredetail and clarity. Don't forget to obtain copies of all relevantdocuments such doctor's reports relating to the injury to theclaimant.

5. Write the captioned report.

After meeting with the parties, write the captioned report toexplain what has been discovered so decision-makers can makenecessary choices. Reports should include an explanation of theextent and nature of the injuries and damages identified by theclaimant, as well as an estimate of the loss.

Information like medical reports and other documents can be usedto support the estimate. If an adjuster believes the claim is notjustified, or has uncovered any information that indicates it couldbe a fraudulent claim, make sure to include this in the report withsupporting documentation.

6. Resolve the claim.

Some claims are easier to resolve than others. When a claim isnot resolved after a first report, continue to provide monthlysupplemental reports that detail the progress of the claim until itis resolved.

With food product liability claims, it is best to settle whereit makes sense, since the costs of defense are extensive and oftenexceed the cost of indemnity. If the investigation establishes thatthe liability of the insured is reasonably clear, it is best toresolve the claim by settlement – that way the client can go backto business as quickly as possible.

Frank Medina ([email protected]) has worked as a claims adjuster on both personaland commercial claims for nationally recognized insurance carriers,and is the principal of Frank Medina Insurance.

Related: Tips to reduce workers' comp claims inrestaurants