A RECIPE FOR SUCCESS
Risk Management for the Food Service Industry

Chapter 2: Understanding Food Business Insurance Policies
Part 4: What Business Insurance Can't Cover (and Riders that Fill the Gaps)

Business insurance can safeguard your restaurant or bar from a slew of risks and liabilities, but there's no single policy that will cover every event, circumstance, or incident. All insurance coverages are written with unique limits, inclusions, and exclusions, which is why you should always read the fine print!


You don't want to think your policy covers something only to be surprised when it explicitly doesn't. But the good news is that there are endorsements (or "riders") for nearly every gap your coverage may have.

Endorsements give you the freedom to customize your plan to suit your needs and account for risks specific to your industry.

Let's explore a couple endorsements you may consider adding to your plan.

Food Spoilage Coverage (Property Endorsement)

When you're in food services, proper refrigeration can make or break your success. One power outage and you could have weeks' worth of rotten food on your hands. If you're a caterer, you could miss deadlines and end up with a stockpile of rotten produce and premade products.

Plus, if your food is spoiled or contaminated and you accidentally serve it to a customer, you could be sued for causing their illness. Think of the damage that could do to your reputation! Fortunately, the Food Spoilage endorsement (which you can add to your Property policy) can cover the high cost of replacing damaged food and lost revenue due to contamination or spoilage.


Coat Check Coverage (Property Endorsement)

If you are a caterer or you own a fine dining establishment, consider adding Coat Check Coverage to your Property Insurance policy. This endorsement protects others' property against loss or theft while it is in your custody. If your customers' personal belongings are stolen, the policy can reimburse you for the cost of replacement.

Why Starting and Stopping Insurance Coverage Never Pays Off

For most small-business owners, finances are an ongoing challenge. Chances are you often mix your personal and commercial funds together just to pay the overhead, bills, and unexpected expenses that arise. So when you don't have much wiggle room, it can be tempting to view your business insurance as an expense rather than an investment.

But it's worth reiterating that the money you'll save by discontinuing insurance is not worth the risk. After all, if money's tight now, you definitely won't have the funds you need to hire an attorney and pay settlement expenses out of pocket if you're sued during a coverage hiatus.


Even if you've had a policy for years, the moment you cancel your policy, you leave your food service business exposed. That means if someone was hurt at your bar a month ago by an intoxicated patron, but you terminated your Liquor Liability Insurance policy just this week, you are on your own if they decide to sue for damages.

The moral of the story is that even when you think you're in the clear, you never know when an incident from the past may come back to haunt you. And because each state has its own statute of limitations, you really can't be too careful.

For a list of each state's statutes of limitations, check out Nolo.com's Statutes of Limitations in All 50 States chart.

Next: Chapter 3: Tips for Purchasing Food Services Business Insurance

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