Agents Can Help Control Restaurant Premiums

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When sitting down with new restaurant clients or prospects, oneof the most common questions they ask is what can be done to helpcontrol the rising costs of insurance premiums.

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As agents, our hands are tied as a result of insurance companyfilings with the states. However, there are certain steps we cantake to help ensure that our clients are receiving the maximumamount of credits allowed by the underwriter, while at the sametime making sure that their policies have been structured properlyand that internal procedures have been put into place from a claimsstandpoint.

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On the property side, one item that should be reviewed is theInsurance Services Office underwriting report. This involves an ISOinspector surveying a restaurant to determine fire rates eitherimmediately after the building is constructed, following asignificant change in hazard risk, or if the building has neverbeen rated and it has been requested by a carrier.

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Usually, the inspector will arrive with little notice and walkthrough the building, escorted by the manager or owner of therestaurant.

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If, during the walk-through, the inspector finds an extinguisheris not tagged showing that is has been serviced in the last sixmonths, or that a nozzle (part of an automatic extinguishingsystem) is not directly over a cooking area or surface, or thatthere is not an installation certificate showing that the hoods andducts have been installed in accordance with National FireProtection Association standards, the rates promulgated willusually not reflect maximum credits available, thus resulting inhigher premiums.

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By obtaining an ISO underwriting report, it can be determinedwhether any deficiencies were found. Once the deficiencies havebeen corrected and proof sent to ISO, the proper credits can beapplied, which will result in a property premium reduction.

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From a general liability standpoint, one of the first items thatneeds to be reviewed is how the policy is issued. The standardgeneral liability policy, unless endorsed, is going to typicallyinclude a medical payment provision. Because the majority ofrestaurant claims involve bodily injury from a slip and fall or aforeign object found in food, a medical payment limit on thegeneral liability policy puts the restaurant at a disadvantage.

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Why? Because according to the medical payment provision of thepolicy, the carrier will pay for medical expenses for bodily injurycaused by an accident at the location of the restaurant regardlessof fault.

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The biggest complaint from restaurant owners is: “Why did theinsurance carrier pay for that claim when I was not at fault?”

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If it can be negotiated with the general liability carrier,every attempt should be made to exclude medical payments from thegeneral liability policy. If the carrier is not willing to excludethem altogether, an attempt should be made to reduce the limit toas low as possible.

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With this coverage eliminated, the burden of proof is now on thecustomer to show that the restaurant was negligent in causing hisor her injury. Most would be surprised to learn the number ofattorneys who will not take a case if the general liability policydoes not include medical payment limits.

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Another commonly asked question is what should or shouldnt bedone when faced with a claim. The first thing to remember is thatthe best defense an insurance company will have is the informationand documentation the insured can provide from a claim.

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First and foremost, all restaurants, no matter how big or small,need to have internal claims procedures in place. It is alsoextremely important that all employees are trained on theseprocedures. Some important items that need to be part of claimsprocedures include:

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Do Not Admit Guilt.

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Believe it or not, a simple statement like, “We will submit thisto our insurance carrier and they will take care of your doctorbills,” can be construed as admitting guilt. Just let them knowthat you are concerned, and state that someone will contact themshortly. Ask them if they need to see a doctor or go to thehospital, but do not tell them that your insurance will take careof the costs.

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Document, Document, Document.

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Remember, the restaurant owner or manager is the front line forthe insurance company and, ultimately, their own claims experience.It is imperative that every restaurant has a claims investigationform filled out for every incident, whether it turns into a claimor not.

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If a customer slips and falls, the restaurant needs to make surethat it has statements from witnesses. Make sure that thestatements include the type of shoes the person was wearing, thecondition of the floor, when and where it occurred, and whether theperson had been drinking or not.

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If alcohol is a factor, a copy of the customers food and drinkticket is important evidence.

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If the person broke a tooth on a foreign object in their food,ask them for the object. This could provide the insurance companywith the ability to subrogate, especially if the food item camefrom an outside vendor or was pre-packaged. If the customer is notwilling to provide the object, document that as well.

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Timeliness.

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It is important to ensure that the incident report is sent tothe insurance company as soon as possible so that someone cancontact the injured customer. The longer it takes for the insurancecarrier to contact the customer, the greater the chance for them toget an attorney involved. Attorney involvement almost alwaysincreases the claims expense, and also usually the amount of moneyfor which the claim is settled.

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By simply taking some of these simple steps, restaurants can notonly ensure that they are getting the best possible pricing, butalso that they are structuring a program designed to reflect thepricing and coverage they need and deserve.

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Robb Imbus is a vice president in the Charleston, S.C., officeof Palmer & Cay, a retail brokerage headquartered in Savannah,Ga.


Reproduced from National Underwriter Edition, January 6, 2005.Copyright 2005 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.


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