Agents Can Help Control Restaurant Premiums

Agents Can Help Control Restaurant Premiums

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

As agents, our hands are tied as a result of insurance company filings with the states. However, there are certain steps we can take to help ensure that our clients are receiving the maximum amount of credits allowed by the underwriter, while at the same time making sure that their policies have been structured properly and that internal procedures have been put into place from a claims standpoint.

On the property side, one item that should be reviewed is the Insurance Services Office underwriting report. This involves an ISO inspector surveying a restaurant to determine fire rates either immediately after the building is constructed, following a significant change in hazard risk, or if the building has never been rated and it has been requested by a carrier.

Usually, the inspector will arrive with little notice and walk through the building, escorted by the manager or owner of the restaurant.

If, during the walk-through, the inspector finds an extinguisher is not tagged showing that is has been serviced in the last six months, or that a nozzle (part of an automatic extinguishing system) is not directly over a cooking area or surface, or that there is not an installation certificate showing that the hoods and ducts have been installed in accordance with National Fire Protection Association standards, the rates promulgated will usually not reflect maximum credits available, thus resulting in higher premiums.

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

From a general liability standpoint, one of the first items that needs to be reviewed is how the policy is issued. The standard general liability policy, unless endorsed, is going to typically include a medical payment provision. Because the majority of restaurant claims involve bodily injury from a slip and fall or a foreign object found in food, a medical payment limit on the general liability policy puts the restaurant at a disadvantage.

Why? Because according to the medical payment provision of the policy, the carrier will pay for medical expenses for bodily injury caused by an accident at the location of the restaurant regardless of fault.

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

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

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

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

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

Do Not Admit Guilt.

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

Document, Document, Document.

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

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

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

If the person broke a tooth on a foreign object in their food, ask them for the object. This could provide the insurance company with the ability to subrogate, especially if the food item came from an outside vendor or was pre-packaged. If the customer is not willing to provide the object, document that as well.

Timeliness.

It is important to ensure that the incident report is sent to the insurance company as soon as possible so that someone can contact the injured customer. The longer it takes for the insurance carrier to contact the customer, the greater the chance for them to get an attorney involved. Attorney involvement almost always increases the claims expense, and also usually the amount of money for which the claim is settled.

By simply taking some of these simple steps, restaurants can not only ensure that they are getting the best possible pricing, but also that they are structuring a program designed to reflect the pricing and coverage they need and deserve.

Robb Imbus is a vice president in the Charleston, S.C., office of 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 serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.