Catastrophe — it’s one of those words you try not to utter in the restaurant industry. But it’s hard not to think about “what if there’s a fire, someone gets hurt in my place, the delivery driver has an accident?” or the infinite number of other scenarios that could take place.
That is when your insurance policy should set your mind at ease. But, is your coverage good enough?
For Dan Collier, owner of Rusty’s Pizza Parlor in Ventura, California, the answer was “no,” costing his shop $100,000 more than an insurance claim paid after a fire. He says he didn’t understand that his $250,000 contents insured amount didn’t cover his building.
“A good insurance broker will review your lease and let you know what is required by the lease,” Collier says of coverage requirements.
Karen Kiernan, business insurance agent with Willis Insurance in Concord, California, agrees. “Every lease is just a little bit different,” she says. She suggests bringing a lease with you when you visit an agent so it can be reviewed line by line. Some leases require tenants to pay for glass breakage or even wiring and lighting.
“Usually if there is a loss, you get a shell to start with and you have to build out from the shell out,” she says. “If (tenants) are responsible for the air conditioning, heating, lighting, all of the light fixtures, carpet, tile … how much is that if they need to replace that? They need to do an inventory list and they actually need to do it on the replacement cost, not what they anticipate they can get it for as a used item.”
The same goes for business contents. What is the replacement value if you have to buy an item new, whether it’s an oven or tables?
Darryl Reginelli of Reginelli’s Pizzeria in New Orleans, Louisiana, thought his contents were covered by his insurance policy after Hurricane Katrina in 2004, along with food spoilage and business interruption. Much of his claim was denied due to flooding and wind damage that was not covered under his policy.
“We spent $500,000 to redo the store,” he says, adding that he only received about $110,000 from the insurance payout.
With demolition, architect fees and the note on the property, Reginelli says, “By the time we got the shell ready, we spent the insurance.”
When his rates rose astronomically after Katrina, Reginelli got insurance savvy about selecting a policy from an insurance company that he felt was stronger, more aggressive and more pro-business. When Hurricane Gustav damaged a Reginelli’s location in 2008, he was confident in his coverage. “They sent out adjusters right away, getting a payment within 30 days,” he says, making interaction with his new insurance company a positive one.Reginelli’s and Rusty’s had a common problem with their insurance: they were underinsured. Kiernan says being underinsured is a frequent
issue. For instance, an owner may have $250,000 in business improvements and business personal property and they only insure for $100,000.
“If they did have a loss…it’s harder for them to rebuild their store if they are working with a value that is half of what they should have had.”
Kiernan says there are key areas of insurance coverage that a pizzeria should have:
All areas but the workers compensation can be grouped into one business coverage package, Kiernan says. The workers compensation carries its own policy.
Kiernan says auto is an important coverage to not be overlooked. “That is probably the No. 1 exposure that they do have because they have their employees on the road at all times and in all weather conditions.”
She also warns that expecting an employee’s personal insurance will kick in is risky. “More and more carriers on the personal line side are adding an exclusion into the policy that says any type of delivery or pizza delivery specifically — then there is no coverage afforded on the policy.”
There are also add-on policy items that might be pertinent to your business specifically. Kiernan says that some of the hot topics right now are data compromise and credit card security. It’s a good idea to see if these areas are covered in your general policy.
Once a plan is in place, Collier advises: “You should meet once per year and discuss any changes to your business. When you leave the meeting, you should know exactly what you are covered for and what you have decided to leave to risk.”
Denise Greer is associate editor of Pizza Today.
Is your business properly insured?
The Insurance Information Institute, a nonprofit organization supported by the insurance industry, offers four important questions to ask your insurance agent to be sure you are adequately insured:
1) Do I have enough insurance to rebuild my business property and replace all merchandise possessions? This includes all personal business property — furniture and fixtures, machinery and equipment; stock; all personal property owned by you and used in your business; labor, materials or services furnished or arranged by you on the personal property of others; improvements you have made (if a tenant); and leased personal property that you have a contractual obligation to insure.
2) Do I have enough insurance to protect the personal property of my employees? This is an additional coverage area to a general policy.
3) Do I have enough insurance to keep my business open? The types of business interruption insurance include: business income coverage, extra income coverage and contingent business interruption insurance.
4) Do I have enough insurance to protect my assets from a lawsuit? A commercial general liability insurance policy covers four areas of business liability claims—bodily injury, property damage, personal injury and advertising injury.