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From the Front Lines: Hotel Liability

"Don't just provide hotel owners a quote on insurance. They aren't risk experts," says independent agent Mike Barnum. "Help them identify their largest exposures and what can be done to minimize them outside of insurance." 
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From the Front Lines: Hotel LiabilityMike Barnum


Bankers Insurance

Portsmouth, Virginia

How did you get started at your agency? 

I owned an agency prior to joining the Bankers Insurance team. Although ownership had perks, juggling responsibilities took time away from what I love: helping business owners overcome risk and providing them solutions. I contacted Bankers Insurance and immediately felt at home with how they welcomed my ideas, my vision and the support they provided. I saw I'd be able to focus on solutions for business owners without distraction, so I joined.

Why hotel liability? 

I started in this industry 16 years ago and was advised to establish my own vertical where I had experience and where businesses needed help. Throughout college and high school I had worked in hospitality, so that's where I began calling. I immediately gained traction with hotels where they appreciated my thoroughness and work ethic. Many hotel owners referred me to their peers and it took off from there.

Biggest industry changes?

We are in a hardening market for hotel insurance and insurers are removing coverage. If the policy doesn't contain a communicable disease exclusion under liability, most are adding it at renewal. Many of these actions are being required by reinsurance.

Rates are increasing more than 22% for property. Several hotel umbrella programs shut down and others are reducing their appetite for specific types of hotels. Liability insurers are changing predictive modeling by focusing on the insured's crime score and their online reviews. Several underwriters have told me this past year they received over 10 times the submissions, forcing them to strictly prioritize which ones they will consider. These factors and more culminate into a hard market that will not be going away soon.

Biggest challenges?

Operators are reporting revenues down 30%, while those reliant on weddings and conventions are reporting revenues down as much as 70%. The decreased revenues coupled with the additional regulatory requirements at the local, state and federal level have subsequently resulted in higher operating expenses. Operators are struggling with balancing these additional expenses, new franchise requirements and a hardening insurance market.

Future trends in the hotel liability market? 

I believe the hotel liability market will continue to harden. Pricing will continue to increase and obtaining desired umbrella limits will become more difficult. Liability exclusions such as communicable disease will be common, or even expected, due to reinsurance treaties.

I foresee an effort to add assault and battery liability limitations or exclusions on lower tier properties, especially in high crime score areas with lower average occupancy rates.

With some hotel owners being financially distressed, I am already seeing many acquisitions, some being attractive value buys. The supply of selling properties will increase with the excess potentially leading to vacant or poorly run properties.

An increasing number of underwriters are looking at occupancy rates for eligibility for their insurance program as well as limitations within it. With the expected trend in distressed properties, this will be a growing problem that will be spurred on by an increase in claims.

Advice for a fellow agent?

Don't just provide hotel owners a quote on insurance. They aren't risk experts. Guide them on proper risk strategies. Help them identify their largest exposures and what can be done to minimize them outside of insurance. Claims for slip-and-falls and bed bugs are frequent liability losses. What is the hotel owner doing to prevent those claims and how are they documenting it?

Documentation is critical. It allows clear, empathetic communication with the claimant, so the insurer doesn't need to overpay an angry customer or aggressive attorney. You can help them grasp the importance of documentation by providing samples, then following up for an executed copy. If your agency does not have these resources, ask your insurer. If we all do our job to mitigate risk with our hotel clients, the entire market will benefit.

Favorite success story?

There's no greater compliment than when a client recommends me to someone they care about. Their trust and confidence are the greatest rewards I receive. We can all make a positive difference if we invest our heart and time in helping our clients instead of just giving them a quote.

Olivia Overman is IA content editor.

Monday, March 8, 2021