Terry's Restaurant Insurance Blog


Restaurant Insurance And Cyber Liability – 4 Mistakes Restaurant Owners Make

Cyber liability is a very new area of risk that restaurants owners face.  As more and more customer data is obtained and stored by restaurants on their clients, the chances of a data breach, emanating from either the inside or outside of the restaurant increase each year.  There are many criminals, often operating beyond the reach of our legal systems who are working hard to find a way to access your data and use it to turn a quick profit for themselves.  And in the midst of of this are some very dangerous misconceptions and beliefs held by restaurant owners that keep them from taking the steps needed to better understand and perhaps to insure this catastrophic risk.  Let’s take a look at 4 of the most common mistakes that restaurant owners make in this area of risk management.

Assuming that general liability insurance will protect them.  Most restaurant owners purchase businessowners insurance policies which have a general liability component built in to the policy.  Many mistakenly believe that this general liability insurance will protect them from cyber liability losses.  In short, this is just not the case.  Your general liability insurance policy alone does not anticipate, or in any way protect you from cyber liability losses.  You must purchase cyber liability insurance for this protection.

Assuming that cyber liability insurance will be unaffordable.  While this protection is not always inexpensive, it is a relatively new form of insurance and is currently evolving.  Over time I expect that more and more insurance companies will spread this risk of this protection out over many clients by adding it as an optional coverage on their businessowners insurance policy form.  But for now that is rare and you will generally need to purchase cyber liability as a stand-alone product.  While it may be expensive, it could also be very affordable and you must go out and shop the marketplace to determine the truth of this question.  The risks of loss may be too great to ignore this protection.  Not investigating this closely is akin to just sticking your head in the sand, not a great strategy for taking care of your restaurant’s risks.

Assuming that your firewalls and your IT guy will protect you.  Keep in mind here that many data breaches occur because of an employee error or an inside job from rogue employees.  From handwritten passwords taped to computer screens to opening suspicious emails or downloading malware or even losing smartphones with connections or memorized passwords, your employees pose huge risks to the safety of your cyber data.  And don’t forget that a data breach can occur with paper files as well if they are not well protected or disposed of properly.

Assuming that the use of a third party vendor for reservations or credit card transactions is protection enough.  While this might give a restaurant owner a bit of hope, chances are that you are still responsible for protecting your client’s data as it passes through your system.  What will the costs be to your restaurant if the third party vendor doesn’t agree or fights you on the question of who is responsible?

Cyber liability losses can strike with little to no warning and leave you with tremendous clean up costs from data recovery to rebuilding your restaurant’s reputation.  If your current quiver of insurance policy policies does not include cyber liability, then you owe it to your restaurant and your employees to investigate this protection and risk in much more detail before you decide to not worry about it.  At Clinard Insurance Group, we insure hundreds of restaurants, all across North Carolina, South Carolina, Tennessee and Georgia.  If you would like to discuss your cyber liability risks and the possible insurance protections available to you, please call us, toll free, at 877-687-7557.


Could Coinsurance Render Your Business Income Coverage Worthless?

Any restaurant owner who has taken the time to carefully evaluate the risks that he or she faces after a major catastrophic loss will know that loss of income, extra expenses and the risk of ongoing expenses with no incoming revenue are a huge liability.   Very few restaurant owners fully understand how their business income protection really works and even fewer have studied the coverage forms in detail to know if they have the proper amount of coverage.  For restaurant owners, business income protection, while often considered a side dish, is really a vegetable that you need on your insurance plate to keep your restaurant healthy after a loss.

The bad news is that for restaurants that are using the commercial package policy, business income protection is an add-on and might be overlooked.  Worse, even if you do add this protection, without attention to the coinsurance requirements in the policy form, you may find yourself with insurance protection that will only partially respond and may leave you holding the bag on much of your loss of income after a large fire or other catastrophe.  So what are the options for restaurant owners with package policies that have business income coverage that is subject to coinsurance requirements?  There are three shortcuts that you might want to consider.

Maximum Period of Indemnity – This option gives you the opportunity to trade in your coinsurance requirements for a limited coverage period, usually limited to 120 days.  This saves you the uncertainty of having to calculate estimated annual expenses and revenues in line with coinsurance requirements.  The down side of this option is that all coverage will cease after the 120 day time frame and that may not be a realistic amount of time for you to get your damaged restaurant repaired and back in business.

Monthly Limit of Indemnity – This option essentially allows the restaurant owner to avoid making annual calculations of cash flow and income and expenses in favor of choosing a monthly amount of insurance that will prove sufficient.  Usually you will have three monthly limits, one third, one fourth or one sixth of the total amount chosen.  You still need to come up with a full annualized amount against which your fraction will be multiplied to generate your monthly coverage limit.  But this option will allow you to waive the dreaded coinsurance clause that can cause so much pain after a loss if you turn out to be underinsured.  Be wary though, if your monthly revenues and cash flows vary widely, then this option is probably not a good idea for your restaurant.

Agreed Value – This approach is a bit trickier and in the end may not actually solve the coinsurance problem.  This form will require you to complete an approved worksheet, providing all the needed accounting information to make a proper calculation of the coverage estimated to be needed.  Then you will need to agree to carry at least the amount of coverage indicated by the worksheet, multiplied by the coinsurance percentage chosen.  If you do all of this, then the coinsurance penalty can be waived. 

Restaurant owners have a significant fire risk that could result in a total loss.  With this risk hanging over your head, careful consideration of your business income coverage is critical to your long term survival.  Many restaurants have business income coverage included in their businessowners policy form.  This is a good thing in that it helps keep this protection from being overlooked.  It is also a bad thing as it allows too many restaurant owners to gloss over this protection and not study it in detail to make sure that they are buying what they need in the event of a catastrophe.

Clinard Insurance Group insures hundreds of different restaurants all across North Carolina, South Carolina, Georgia and Tennessee.  If you would like help with your restaurant insurance, please feel free to call us, toll free, at 877-687-7557.


Restaurant Insurance – Don’t Forget Your Awnings And Signs

Restaurant owners are busy people, often tasked with having to solve immediate and demanding problems almost continuously in order to keep their establishment running smoothly.  So it is little wonder that few restaurant owners take the time to fully understand the ins and outs of their insurance policies.  One of the areas where we often see coverage gaps, besides the most common, which is a lack of workers compensation insurance, is in the area of protection for signs and awnings.  And let’s face it, what is a restaurant without a sign to attract business?  Well, it is probably one that won’t be serving meals for long.

So how do you insure your awnings and signs?  Let me start by saying that insurance policies are different from one state to another and from on insurance company to another so what I describe in this blog may or may not reflect your particular situation.  The information that follows is a general guideline but you should always study your policy’s language and consult with your insurance agent to make sure that you have the protection that you want for your restaurant.  With that in mind, the most basic guideline for awnings and signs coverage is that as long as these items are permanently attached to your building, then their values can be added to the building coverage on your businessowners insurance policy. 

But a large percentage of restaurant owners don’t own the building that houses their restaurant.  So how can they cover their attached signs and awnings?  Generally this is done by adding coverage called tenant’s betterments and improvements.  This coverage will apply to any items that are permanently attached to the building such as the interior paint job you paid for or for the wall to wall carpeting that you installed before you opened.  It is important that when you calculate how much tenant’s betterments and improvements coverage you need, that you add in everything that is permanently attached to the building.

But this conversation has left off a situation that can leave restaurant owners short of coverage even if they own and insure the building itself.  That is protection for free standing signs that are not attached to the building.  If you have a free standing sign, then you will need to add specific sign coverage to your policy to cover your free standing signs.  In this case you will need to purchase a limit of coverage specific to each free standing sign that you have.  Each sign will be listed individually on your policy with a specific limit of coverage for each sign.

Now, one last tip for those of you who own signs and awnings attached to a building that you do not own.  Most insurance companies will ask you to cover them by adding the above mentioned tenant’s betterments and improvements coverage to your policy.  The rates for this coverage are based on the building insurance rates for your building.  In almost every case, the rate per $1000 of coverage for building coverage is far below the rate per $1000 of coverage that you will pay for your contents coverage on your businessowners policy.  Here’s the tip:  There are a number of insurance companies who will take your improvements and betterments coverage and simply note the file as to the amounts and what is covered, then simply increase your contents limit to reflect these items.  While this may at first seem more convenient as you have just one coverage limit to manage, in the end this process will cost you much more as you will be paying contents rates instead of the lower building rates for this protection.  In addition, building coverage is often much broader in scope than contents coverage so you could be buying an inferior insurance protection.

If you own signs, awnings, or any other items that are permanently attached to the building where your restaurant is located, it is important that you have a conversation with your insurance agent to make sure that you have the protection that you need for these investments.  If you would like help with your restaurant insurance, please feel free to call us, toll free, at 877-687-7557.


A Social Media Risk Checklist For Your Restaurant

In my previous blog I discussed social media risks for restaurants and how these risks can be categorized into three distinct groups, reputational risks, legal risks, and operational risks.  In that blog I promised that the next offering will have a 5 step checklist that you can use to help get control of these risks.  And remember, even if your restaurant does not actively participate in social media, you still need to spend some time managing these risks because they can still have a huge negative effect on your restaurant’s success.  This is because it is extremely likely that your employees are engaged in social media in ways that could create risk exposures for your restaurant.  In addition, your clients are also engaged in social media in ways that could have an impact on your restaurant, whether you choose to use social media or not.   So, take a moment to review the 5 step checklist below and implement as needed to help protect your restaurant.

Assess Your Social Media Environment:  You should start by conducting a broad assessment of general social media activities related to your restaurant with a sharp eye toward discovering potential risks.  Keep in mind the three broad risk categories mentioned above and evaluate each link in the social media chain with each different risk group in mind.    If you are actively using and designing social media campaigns, try to evaluate each campaign’s specific risks to your restaurant.  You want each campaign to align with the culture of your organization and your overall marketing strategies, and the risks associated with each branch of social media must be measured against the overall perceived benefits of each campaign.

Identify Key Players:  For each and every type of social media interaction, you will need to carefully identify all of the people who will be involved in that process.  Make sure that everyone understands what they can and can’t say, what they can and can’t do and what their limitations are with regard to that social media platform.  Develop a system that will allow you to track their actions on that social media platform.  Plan to review their work in this area on an ongoing basis so that you have control over the risks that their actions create for your restaurant.

Put It In Writing:  Draft a social media policy statement with a set of guidelines.  This should spell out what is and what is not acceptable social media behavior for anyone who may be representing your restaurant on a social media platform.  You should also consider a separate social media rules statement that creates guidelines for employees using social media while not at work.  Then have an independent attorney review all of these written statements to make sure that they comply with employment practices rules and regulations.

Discuss With Employees:  Formally address the risks of social media to your restaurant that are created by your employees.  They are generally the largest social media risk to your company, usually without meaning to be so.  You should plan to provide regularly updated training to your employees regarding the dangers of damaging your organization through the use of social media, either on or off the job.

Create A Social Media Agreement:  This agreement, which should be reviewed and signed annually by each employee as a condition of continued employment, should carefully spell out the expectations that you have for each employee in the area of social media and the risks to your organization.  This agreement should be updated at least once a year as the social media world is evolving and changing quite quickly.

Social media offers many excellent opportunities for restaurants to add new clients, increase sales and enhance their reputations in their respective communities.  It is important though for each restaurant owner to understand and begin to manage the substantial risks that are created by this new age of social media.  If you would like more help understanding your social media risks or the ways that insurance may be able to help protect your restaurant, please feel free to call us, toll free, at 877-687-7557.  We look forward to helping you.


Restaurants and Social Media – Understanding The Three Broad Risks Types

Like a prairie fire, social media has spread across our country and into our culture at an alarming pace over the past ten years.  With smartphones in so many hands now, this trend has continued to accelerate.  And social media can provide a restaurant owner with a great opportunity to build brand awareness and loyalty across a broad spectrum of potential customers.  With more and more different types of social media platforms gaining traction each month, the opportunities seem limitless.  But social media is and probably always will be a double edged sword.  As easily as you can have good words about your company shared with others, so too can you find yourself with negative attention about your restaurant being spread throughout the social media world.  In order to better understand the risks to restaurant owners posed by social media, this blog will break up those risks into 3 distinct risk groups.  Our next blog will provide you with a 5 point checklist to get your social media risks under control.

Social media platforms open the door to risks for your restaurant in many different and diverse areas, including privacy, security, intellectual property, employment practices and other legal risks.  It is important to understand the considerable downside of social media for your restaurant that is coupled with the upside of using these programs.  The downside risks can be categorized into one of three different risk groups, reputational risks, legal risks, and operational risks.  Let’s take a closer look at each one of these risk types.

Because of the vast reach of social media platforms, reputational risks can easily equal or exceed the reputational benefits.  Bad behavior by employees or the posting of embarrassing information by either an employee or even a customer can reflect poorly on your restaurant and even cost you sales.  Your employees can put your restaurant’s reputation at risk, either intentionally or not, by disparaging coworkers, management, clients, vendors or even the restaurant itself.  Should they do this on a branded social media page like your restaurant’s facebook or twitter page, then the negative ramifications for your restaurant can be even more immediate and direct.

Social media also bring a level of legal risk to your restaurant business.  And these legal risks should be carefully considered before engaging in a social media strategy.  The main legal risks include employment liability risks, privacy risks, security risks and intellectual property risks.  Some of these risks can be managed to some degree by insurance; Employment Practices Liability Insurance and Cyber Liability Insurance should be included in every restaurant owner’s restaurant insurance program.  Examples of employment liability risks could have to do with choosing to hire or fire an employee based on his or her facebook profile or even his or her facebook interactions with other employees.   And of course using social media puts your restaurant’s computer security at risk for thieves trying to steal your business information or the personal identification information of your customers.  These risks can pose
tremendous costs on a poorly protected restaurant but can also be very well controlled with proper advance planning and appropriate insurance policies in place.

The operational risks that arise from social media have to do with your security being breached.  There are quite a number of scams, computer viruses and phishing programs out there designed to use social media as a back door into your security system.  Once inside, thieves can create nightmare scenarios that may even bring your restaurant’s ability to function and take payments from customers.  This could effectively shut your restaurant down for some amount of time while you clean it up.  And if your patrons find that their information is at risk if they eat in your restaurant, how many of them will return for another meal?

It is clear that while most restaurants have dabbled in or even set up full time social media programs to enhance their reputation and sales, very few restaurant owners have carefully evaluated and taken steps to manage the huge risks associated with social media.  In our next blog, we will give you 5 steps you can take to make sure that you manage the risks better in your social media program.

Here at Clinard Insurance Group we insure hundreds of restaurants all across NC, SC, GA, and TN.  If you would like help or advice with your restaurant insurance needs, please call us, toll free, at 877-687-7557.  We look forward to helping you.