From typical property and liability risks like slip-and-fall and equipment breakdown to less common ones like food-borne illnesses, restaurants face a variety of unique exposures.

And that requires securing additional layers of coverage beyond what you’d normally put together for an average small to midsize business.

“Given the range of exposures a restaurant has and the potential complexity of those, this is an industry where consulting with an independent agent can be very important to a small business owner to make sure they have proper, customized insurance solutions,” says Lynn LaGram, assistant vice president of small commercial product at The Hartford.

Current Gaps

For example, LaGram urges agents to discuss how an interruption in operations could result in a business income loss, which “could be very costly to a restaurant.”

“I would also think about a potential business income loss as a result of a dependent property,” LaGram adds. “Many restaurant owners might be dependent on a linen service, a supplier or a wholesaler to provide things they need in order to run their business.”

Kurt Muntzinger, staff specialty underwriter at Central Insurance, also notes that most restaurants may not realize they have a pollution liability exposure.

“If you spill the old grease you took out of the deep fryers and that starts seeping into the sewer system, the EPA is not going to be too happy about that, and neither are the local governments,” Muntzinger explains. “Nobody ever wants to buy pollution insurance, but when restaurants start getting sued, they’ll start wanting that more.”

The same goes for cyber, Muntzinger adds: “Cyber is a huge exposure with all the credit card information restaurants receive. In this world today, everyone needs cyber liability.”

Finally, pay close attention to your client’s approach to liquor sales. Recently, even BYOB restaurants have been found liable for overserving patrons who were later involved in a drunk driving incident.

“The thought process in the decisions that have been coming down from the courts is that if you can charge a cork fee to the customer to take the cork out, then you have the ability to put the cork back in,” explains Matt Marcella, director of product, commercial accounts at Travelers. “What that means is that BYOB restaurant owners need to start considering liquor legal policies and insurance coverages.”

Emerging Exposures

LaGram notes that farm-to-table restaurants are shortening the supply chain for many restaurant insureds. “That might mean the food at the restaurant is fresher, but it might also mean there’s more of an onus on the small business owner to take on some of those quality control measures themselves,” she explains.

Food trucks are another emerging trend to watch as more restaurants seek “to expand their brand and their reach,” LaGram says. “A food truck is part auto, it’s part property, it’s part liability, you have employees as well—there’s a whole host of new exposures there.”

Marcella adds that while ridesharing services like Uber have been around for a long time, related delivery services like Uber Eats and its local variations are newer developments that are giving restaurant owners more options to consider. “It doesn’t matter if you’re a big restaurant or you’ve just opened up—using a sharing economy-type delivery service allows a restaurant to broaden their scope of influence and touch more customers,” he explains.

But that convenience has consequences: When a restaurant elects to use a delivery service, “it loses some of the element of control in that interaction with the customer,” Marcella points out. “Should that customer have a bad experience with a delivery person, even though it’s a third party, the customer won’t necessarily associate that bad experience with the delivery service—they may develop a negative connation with the restaurant.”

As a result, certain segments of the industry are “starting to try to think of additional ways to navigate that issue,” says Marcella, who notes that larger restaurants are moving away from sharing economy delivery services and toward solutions like online ordering or curbside pickup. “Some of the smaller restaurants are still going to use it because they get a lot of bang for their buck, but the restaurants that have the capabilities to navigate around that are starting to do so.”

Every restaurant has one more major risk management consideration to take into account: its people. Keep an eye on IAmagazine.com and upcoming editions of the Markets Pulse e-newsletter to learn why employee management is crucial to a restaurant’s success.

Jacquelyn Connelly is IA senior editor.