How Your Restaurant Insurance Needs to Evolve with COVID-19

(When your services and operations change during a pandemic so does your insurance.)

Restaurants and Covid-19

As a restaurant owner, you may be going through some hard times as a result of the COVID-19 pandemic and finding your business is having to adapt. Some of these changes, like delivery, takeout, food truck and drive-through services, were not a part of your regular operations. Many restaurant owners are trying to stay afloat the best they can through this virus and are having to do things they never thought they'd do, like serving fine T-bone out a window. 

There are some coverages that need to change and apply as well with your restaurant insurance, and knowing what those are is good practice. After all, you are in uncharted territory and you may not know what you don't know.

How Can Insurance Protect My Restaurant from the COVID-19 Crisis?

Some insurance policies may help your restaurant during this time, and if taken out in advance would be relevant protection. For most insurance policies disease/illness outbreaks are not an exclusion to the policy. 

Communicable Disease Insurance for Your Restaurant and COVID-19

If you haven't already purchased communicable disease insurance, you won't be covered for the coronavirus. That insurance would have had to have been purchased before the coronavirus was identified, which happened in December. Communicable disease insurance is about the risk of the unknown.

For those considering purchasing communicable disease insurance for the future, the cost varies depending on how far in advance the insurance is purchased. According to the Centers for Disease Control and Prevention, there are over 125,000 hospitalizations and about 3,000 deaths from foodborne illness each year infecting 50 million Americans in total. The most common causes are norovirus, Salmonella, Clostridium perfringens, Campylobacter, and Staphylococcus aureus. The more serious ones are Clostridium botulinum, Listeria, E. coli, Vibrio, and hepatitis A.

The biggest risk factor for restaurants is contamination from employees who are sick or have dirty hands. This is what COVID-19 is made of, and it can cost your restaurant thousands if an outbreak occurs and your restaurant is the culprit in the exposure.

As a restaurant owner, you are the leader of your establishment and you can help protect customers from foodborne illness by educating your staff. This includes having them avoid handling food if they are sick, and making sure washing their hands is a mandatory task before, during and after food handling. Also, providing gloves for employees to wear.

While it might be too late to get this coverage to protect against any COVID-19 claims that may arise, there is no time like the present to plan for future risks that may occur. Get with your independent insurance agent to discuss it. 

Will an Accidental Death and Dismemberment Policy Help Restaurant Employees?

Some restaurant employees have accidental death and dismemberment (AD&D) policies through their employers. These policies offer only limited coverage for certain types of accidental deaths or disabilities (plane crashes, accidental falls, etc.). Since a disability or death from COVID-19 would not be accidental in nature, an in-force AD&D policy would not pay benefits. 

How Can Insurance Protect My Restaurant from the COVID-19 Crisis?

Restaurants of all kinds are wondering if they’ll have any insurance coverage to mitigate the huge losses they will face from shutdowns or limited operations due to the coronavirus outbreak. The answer is that in most cases, your insurance coverage for this situation is quite limited. However, you can adjust coverages so you are better protected while you adapt your operations.

Restaurant Guide to Insurance When You Have to Adapt Your Operations

So let's talk about how you are having to adapt in these perilous times. If you get the majority of your business from being a come-in-and-sit-down restaurant, aka a full-service restaurant, then your operations have probably already drastically changed since the pandemic began. Most mayors and governors are putting in place executive orders for 14 to 30 days of mandatory social distancing. This includes requiring restaurants to close their inside dining spaces and either adapt with the times or close their doors.

So what does this mean for your restaurant? Well, that depends on what operations and services you have chosen to expand. Looking at a few options below and what insurance coverages look like will be key in making sure your insurance policy responds in the way it needs to. 

If you've now started offering grocery packs

A lot of restaurant owners are stuck with an inventory of ordered food that is rapidly declining with no one to feed it to. You may be like some restaurateurs who have decided to put together grocery packs for customers including everything from raw meat to fruit, vegetables and premade items. This has even included alcohol to be delivered. While it's great to be able to offer this service to customers during these uncertain times, you need to be sure coverage is there so you don't add insult to injury. 

Coverages that may be needed:

  • Delivery coverage: If you are letting an employee deliver these items to your customers, then there is added risk. If they are driving a company car, you'll want to be sure your commercial auto policy covers delivery services and the vehicle is equipped to carry food. If you are letting the employee drive their own vehicle, then you will need to make sure they have proper personal auto insurance with an added business use endorsement on their policy and their vehicle is properly equipped to carry food. In some states, legislators are stepping in with an order requiring insurance companies to cover delivery services. This includes the employee's personal auto policy, as well as the restaurant owner's commercial auto policy, at no additional cost to them during the COVID-19 pandemic.
  • Spoilage: Any time you are transporting perishable items like fresh produce and meat, it needs to be temperature-controlled. Following the FDA's safe handling instructions is key. Insurance needs to be in place to handle any spoilage and damage while in transit.
  • Food poisoning: The last thing you want your restaurant's food to do is to cause foodborne illness, especially during a pandemic. You'll want your restaurant policy to respond if a customer files a claim against your restaurant as a result of foodborne illness that your food may have caused.

If you've opened a drive-through service and delivery service

If you didn't have a drive-through or delivery service before the COVID-19 pandemic, you do now. A lot of restaurant owners are taking their fancy food to the window and out the door and offering drive-through and delivery service, complete with wine and everything. Hey, if you have to go through a pandemic, you might as well have fine food that you can get in the clean comfort of your car or front door, right?

Coverages that may be needed:

  • Delivery coverage: Again, if your restaurant did not offer delivery service before, then chances are your restaurant's commercial auto policy will not have coverage for you or your employees who are delivering your food to the public. You'll need to get with your independent insurance agent and make sure coverage is added to your commercial auto policy for delivery services. If you do not have a commercial auto policy, you'll need to get one. There are several ways to go about it, such as re-titling your vehicle in the business name and adding employees as drivers so they are protected. If you are allowing employees to deliver food in their own vehicles, you need coverage that will extend because they are still on the clock and still working for you. You will also want to make sure that their personal auto policies will have a business use endorsements, meaning they can use their personal vehicle for things like delivery.
  • Liquor liability: In these uncertain times, a lot has happened in legislation and loosening of rules and laws in order to keep some restaurants in running order. Liquor delivery is one of them. Most of the time, customers can't leave a restaurant with a drink in their hand, but now drinks are being handed out the drive-through or delivered to their doorstep. You'll want to have a talk with your independent insurance agent to make sure your insurance policy's liquor liability insurance will respond to this if a claim arises.

If you've opened a mobile food truck

Desperate times call for desperate measures, and what better way to get to the people then to drive your mobile restaurant right to them? Some restaurant owners have expanded their food delivery services in the form of food trucks parked in neighborhoods and on street corners, allowing no more than 10 people standing 6 feet apart at a time to get food. This has helped some businesses survive right now, and is making it even more convenient for consumers.

Coverages that may be needed:

  • Food truck coverage: This is a separate commercial auto food truck policy. It will give you commercial auto liability, comprehensive and collision coverage, medical payments, and coverage for your mobile restaurant on wheels like inventory, business property for any non-permanently attached items, and food inventory. Of course, your food truck will have to meet safety regulations and guidelines like a cleaned and regularly inspected oven, stove and kitchen and proper food storage and handling.
  • Spoilage: Yep, you'll always need this coverage for your restaurant's food. You'll be doing your best to make sure the food you have does not spoil, but if it does due to a freezer going out or loss of temperature control, this coverage will kick in.
  • Liquor liability: if you're selling alcohol out of your food truck, be sure to get this coverage in place. You'll want to have coverage if a liquor-related claim occurs when a customer gets injured as a result of alcohol you've served them. A good example is if your food truck gives alcohol to a patron and that they decide to get behind the wheel and drive drunk. If they cause an accident and injury or kill themselves or others, your restaurant could be liable.
  • Food poisoning: You'll want your restaurant policy to respond if a customer files a claim against your restaurant as a result of foodborne illness that your food may have caused.

Will My Restaurant's Workers’ Compensation Insurance Help During COVID-19?

The purpose of workers’ compensation insurance is to protect employees when they have a work-related injury or illness. So if an employee contracts COVID-19 as a result of their job or in the course and scope of their work, then their expenses and lost income would be covered by your workers’ compensation insurance. 

But keep in mind that it’s likely that the insurance carrier will investigate any workers’ compensation claim for a COVID-19 infection, and proof that the infection was work-related would have to be provided. This may be easier in the case of a healthcare worker than for someone who works in a restaurant where the source of the infection could be hard to trace or prove. Employees will be required to provide documentation of business and personal travel and potential contacts with the virus so it can be proven that the exposure is work-related. 

Testing for the Coronavirus and Workers' Compensation

Two tests must be satisfied before any illness or disease, including the coronavirus, qualifies as occupational and thus compensable under workers' compensation: 

  1. "The illness or disease must be occupational," meaning that it arose out of and was in the course and scope of the employment. 
  2. "The illness or disease must arise out of or be caused by conditions peculiar" to the work.

Whether an illness arises out of and in the course and scope of employment is a function of the employee's activities. The simplest test to determine whether an injury arises out of and in the course and scope of employment is to ask: Was the employee benefiting the employer when exposed to the illness or disease?  This test is subject to the interpretations and intricacies of various state laws. 

Qualifying as occupational is a relatively low hurdle. A higher hurdle is whether the illness or disease is peculiar to the work. If the illness or disease is not peculiar to the work, it is not occupational and thus not compensable under workers' compensation. An illness or disease is peculiar to the work when such a disease is found almost exclusively in workers in a certain field or there is increased exposure to the illness or disease because of the employee's working conditions. 

An example of an exposure that is peculiar to the work is a restaurant worker contracting an infectious disease such as hepatitis A as a result of contact with infected food from the restaurant that was eaten by the employee while training and testing food for the job. The worker's unusual or peculiar exposure to such diseases results in an illness that is occupational and compensable. 

No one test is available to determine whether an illness or disease is compensable or non-compensable; each case is judged on its own merits and surrounding circumstances.

Concluding that an illness is occupational, peculiar to the work, and ultimately compensable is not necessarily based on the disease in question, but rather on the facts surrounding the worker's illness. Factors investigated and considered by medical professionals and the courts include:

  • The timing of the symptoms in relation to work: Do symptoms worsen at work and improve following prolonged absence from work (in the evening and on weekends)?
  • Whether coworkers show or have experienced similar symptoms 
  • The commonality of the illness to workers in that particular industry
  • An employee's predisposition to the illness (an allergy or other medical issue)
  • The worker's personal habits and medical history. Patients in poor medical condition (overweight, smokers, unrelated heart disease, etc.) and/or with poor family medical histories may be more likely to contract a disease or illness than others in similar circumstances. Bad habits and poor medical history (and heredity) cloud the relationship between the occupation and the illness. For example, smokers may be ill-equipped to fight off the effects of illnesses to which others may have no problem being exposed.

How Does the Coronavirus Affect Workers' Compensation? 

If it is proven that the employee has an increased risk of contracting the virus due to the peculiarity of their job, the coronavirus will be considered occupational and thus compensable. Remember, compensability as an occupational illness requires that there is something about the job that increases the risk of exposure and illness. 

Since they are face-to-face with sick people all day, healthcare workers may be able to prove the necessary peculiarity to assert a compensable injury. 

Which Policy Responds to Qualifying Occupational Illnesses and Diseases?

While the coronavirus has a relatively short gestation period, other occupational illnesses and diseases often have long gestation periods. Employees may be exposed to the harmful condition for many years before the illness manifests. It is also possible that the employee won't contract the disease until years after the exposure ends. 

Workers' compensation policies specifically state that the policy in effect at the time of the employee's last exposure responds to the illness, even if the employee is working for another employer, or is even retired, at the time the disease manifests.

The coronavirus may result from human exposure rather than exposure peculiar to most occupations. Contracting the virus at work is not enough to trigger the assertion that it is a compensable occupational illness. To be occupational and compensable requires that something peculiar to the work increases the likelihood of getting sick. It is unlikely that both the occupational and peculiar thresholds can be satisfied to make most illnesses compensable for the vast majority of individuals; the same is true of the new coronavirus. 

Restaurant Business Interruption Coverage Will Not Be Applicable

Business interruption coverage is also referred to as business income coverage or loss of use coverage. It is part of your commercial property coverage, and helps your business recover lost income and continue to pay expenses when there has been physical damage to the commercial property caused by a covered peril. That means if your business is damaged or destroyed by a fire or a severe weather event, your business interruption coverage will help keep you afloat while you make repairs or rebuild and restock. 

In the case of COVID-19, businesses, and especially restaurants, are closing and losing revenue out of necessity (health and safety of employees, significant drop-off in demand, government guidance, or in some areas government mandate). Because the closures and lost revenue do NOT involve physical damage to your property, there will not be coverage under your business interruption policy. 

In fact, many business interruption and property insurance policies are silent in their policy language regarding viruses, bacteria, and pandemics because these types of perils or events are not likely to lead to physical losses of property. While your policy may not specifically exclude coverage for a pandemic, it won’t be listed as a covered peril either. That’s because diseases and pandemics don’t cause physical property damage, so business interruption coverage simply isn’t applicable. 

What about Business Income Insurance, Will That Help Me?

Some businesses, like restaurants, hotels, and other food service businesses, may wonder if they have some business income coverage if the pandemic interruptions lead to food spoilage and food loss. Here too, the answer is probably no. In order to be covered under a food contamination and spoilage endorsement, the business would need to experience a utility loss that leads to the food spoilage before the policy would respond. 

What Should My Restaurant Do If I’m Planning to Make a Claim?

The most important thing you can do now is to understand that all policies are different. Read your restaurant insurance policies, call your insurance agent, and document how and why the virus is affecting your business if you plan to pursue some type of insurance coverage for your losses.

Work with an Independent Insurance Agent for the Best Coverage

Independent insurance agents have access to multiple insurance companies, ultimately finding you the best coverage, accessibility, and competitive pricing while working for you. And as the coronavirus pandemic evolves, they'll be there to help you adjust your coverage, up or down, to make sure you're properly protected without overpaying. 

And most importantly, they can help you navigate the coverage that you have today, so you’ll know where your insurance coverage might be able to help you through this difficult time. 

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