Opening a restaurant is an exciting time in a person's life. You dream of serving people, creating a home away from home for them with an atmosphere that welcomes them and makes them want to return. You picture good food and strong drinks that help people relax and offer a respite from the day-to-day grind.
Your dream can quickly turn into a nightmare, though, when a patron sustains an injury on your property and you find yourself fighting a lawsuit.
Restaurant insurance protects your dreams from turning into nightmares. If you have proper restaurant insurance, you can save your place in the foodservice industry for decades to come.
Keep reading to learn everything you need to know about restaurant insurance in Canada.
Restaurant Insurance Coverage
Restaurant insurance is a type of small business insurance that covers your business in the foodservice industry. It protects the restaurant owner from having to pay for any damages that their business may have caused.
Restaurant insurance plays such a critical part in the financial success of restaurants in Canada that some parts of Canada require it.
Do You Need Restaurant Insurance in Canada?
A restaurant insurance policy plays a critical role in the success of a restaurant, especially in the high-end food markets like what Canada offers. People travel internationally to taste the cuisine in the finest restaurants in Ontario.
You will save yourself sleepless nights of worry and thousands of dollars if you have the right coverage. You'll also save yourself legal headaches since some parts of Canada might even require restaurant insurance.
Before you open up your dream restaurant, check with local laws to see what insurance you're required to have.
What Does Restaurant Insurance Cover?
Whenever an individual injures themselves on your property or when your business causes damage or illness, your restaurant is liable for the medical bills and loss of work. Patrons can still hold you liable even when their own choices may have caused the injury.
For example, if a patron consumes alcohol at your restaurant and then has an at-fault collision where authorities determine alcohol is a contributing factor, you need insurance in case you're held liable. Here are a few other instances where you need insurance:
- Puncture wounds
- Broken teeth
- Food poisoning
Restaurants carry these inherent risks. Restaurant insurance helps you sleep at night instead of waking up with nightmares of people suing you for hot coffee. So as you plan your restaurant, insurance should top your to-do list from the first day of planning.
What Coverages Does Your Restaurant Need
Restaurants have a great choice of types of restaurant insurance to purchase. Here are a few of your options.
All businesses need general liability insurance, especially in this season of sue-happy patrons. You can lose literally millions of dollars when a patrol attempts to sue you for liability.
General liability insurance covers both property damage claims as well as bodily injury claims that result from accidents. When someone slips and falls on your property, general liability has you covered.
General liability also covers product liability. Thus any food-borne illnesses that your restaurant may cause would fall under this type of coverage.
In your general liability policy, make sure that you include an endorsement called Product/Completed Operations Hazard Redefined. This endorsement will cover any claims that your food caused illness whether your customers consumed it on or off your property.
The very nature of restaurants makes the restaurant property more prone to fire. General liability will cover you from damages caused by accidental fires, whether you own or lease your building.
Make sure your liability policy includes a section on Damage to Premises Rented To You if you do not own your restaurant property.
Liability will also cover the damage done to a customer's vehicle if there's an accident during valet parking. You can add Garage Keepers Liability coverage to cover this damage.
You can also add employee benefits liability insurance to your general liability policy. This protects you from any clerical errors you or your staff may make when managing employee benefits.
You can add in a liquor liability policy with the rest of your insurance. This insurance protects you from any damages caused by an individual who consumes alcohol that you sell. You must have this liability policy if you plan on selling alcohol.
Employment Practices Liability
Every business has experienced some share of disgruntled employees. When frustrations turn into something more serious, employees can and will sue their employer. They may feel like you've discriminated against them, harassed them, or just treated them unfairly.
General liability insurance does not cover these grievances. Employee practices liability insurance does cover these torts, so make sure you have it.
Commercial Property Insurance
If you own your property, you need commercial property insurance. This insurance will cover a variety of damages to your property including the following issues:
- Loss of income: If your business has to shut down because of events out of your control, you can recoup your losses through commercial property insurance.
- Backed-up sewer: If your sewer system malfunctions and backs up into your restaurant, commercial property insurance covers the damages.
- Utility malfunction: If the power goes out in your restaurant, you could lose thousands of dollars in inventory. A utility interruption could shut you down for a period of time as well. Commercial property insurance will cover the damages caused by a utility interruption.
- Equipment malfunction: If your freezer breaks down and quits or your food warmer stops warming the food, you will need insurance to cover any losses.
- Electronic data: If your restaurant uses electronic documents for purchasing and invoices along with other elements, then you'll want to make sure you have electronic data coverage through your commercial property insurance.
- Employee dishonesty: Make sure your commercial property insurance also covers you if an employee steals from you. You put a lot of trust in your employees, so make sure you have yourself covered from any dishonest workers that may make their way into your business.
- Busy season: You can add peak season coverage to your property insurance if you have a particular time of year where you do the majority of your business. So if you're running a restaurant in an area where tourists visit just at certain times of the year, you have more coverage during those times.
Commercial property insurance covers more than just your building. It can cover all of your property if you have the right policy.
Commercial Auto Insurance
If you use vehicles for your business, you need commercial auto insurance.
Think about your restaurant model. Will you be picking up supplies or delivering products? You need coverage on your business-owned vehicles as well as the non-owned and hired vehicles that you or your employees will be driving.
What Are The Most Common Restaurant Insurance Claims?
To best understand the importance of restaurant insurance, you should know the most common insurance claims in the business. Here are the top five claims typically made.
The Canadian Institute for Health Information reported in a 2019 report that over 600,000 ED visits in Canada were due to unintentional falls. On average, that means over 1,600 people visit the ED due to unintentional falls.
No matter how clean and well-marked you keep areas in your restaurant, someone will slip and fall.
You can only control so much in your world. You cannot control floods and fires and natural disasters. So it should come as no surprise that property damage is one of the top five claims made.
Commercial property insurance will cover property damage that would normally cost you thousands of dollars out of pocket.
When your main product is food, you have a high likelihood of dealing with a food poisoning claim. You may not even be at fault. Your food supplier could sell you produce linked to an E.coli outbreak or you had a breach in your plan to have a nut-free, dairy-free, and gluten-free facility.
If even a single customer can trace their illness back to your food, they will most likely sue you. Product liability insurance will cover the medical and legal costs if this happens.
When your equipment breaks down, you lose power, or a pandemic forces you to close your doors for a period of time, you can file a business interruption claim if you have the right insurance.
You will need Equipment Breakdown Coverage and Business Interruption Insurance to cover your overhead costs and lost income while your business is closed and you recover.
Any restaurant that serves alcohol must have liquor liability insurance. If your intoxicated customer leaves your restaurant and causes an accident that harms a person or property, your restaurant is on the line for liability. Liquor liability insurance will protect your business as well as your employees that individuals may sue for overserving.