There are all sorts of risks that you can face when opening a new restaurant, nightclub, or bar. It is important to be aware of these risks and how the right general liability insurance for restaurants, nightclubs, and bars can help mitigate risks, along with other types of insurance. Before we get into what insurance is needed for restaurants, nightclubs, and bars, let’s first take a look at potential risks and how they could impact your operations.
Potential Risks to Avoid
Fires can destroy your business quickly and often take a long time to fully recover from. One of the more common fires in restaurants and bars is the grease fire. In nightclubs, electrical fires are more common, due to the various types of lighting used for dance floors. Fires can also be set deliberately and on purpose by vandals, unhappy patrons, or disgruntled workers.
Accidents can and do occur while your employees are working. They could slip, trip, and fall down and hurt themselves. They could experience burns if they work in the kitchen. They could even get injured while working with various equipment.
Business Vehicle Damage
If you have vehicles you use specifically for your restaurant, nightclub, or bar, or have employees drive their own vehicles while on the clock, there is always the risk of car accidents. You could be held accountable for property damage and personal injuries if you or your employees were responsible for causing the accident.
The contents, equipment, POS system, TVs, sound systems, and other items inside your business could get damaged due to a variety of reasons. You also need to consider damages to the building, if you own the building, like roof damage, exterior damage, and so on.
This risk refers to the potential personal injuries your customers could experience from various events. For instance, they trip over the edge of a curb and fall down and break their arm. Or one of your bouncers at your nightclub gets a little too rough while ejecting patrons from the club, and they are injured.
Flood and Water Damage
Floods can occur in many different areas without any warning. Even if your business is located in an area that normally does not flood, that does not mean it won’t flood in the future. Weather patterns are unpredictable, and all it takes is a deluge of rain and a stopped of drainage system near your building, and you could find your business under water.
Water damage can occur from backed up sinks or toilets, broken or frozen plumbing pipes, leaky roofs, and other such problems. Water damage cleanup can be costly without the right insurance.
Windstorms, thunderstorms, tropical storms, hurricanes, snow storms, and other such inclement weather conditions could damage your building. In some cases, like we saw this past year with Hurricanes Harvey and Irma, some businesses lost their entire buildings and everything inside!
If you have a liquor license and intend on serving alcohol to boost your revenues, it is important to understand you and your employees could be held liable if someone is injured, causes injuries to others, or gets into an accident while intoxicated. Without the right insurance coverage, if you are sued, you could find yourself going out of business, even though you just opened the doors.
The food you have in your walk-in and freezer is considered a business asset. If something happens and it spoils, like from a power outage or equipment failure, you could lose money unless you have specific insurance protection to cover your food.
Another type of concern you need to be aware of is the potential for food contamination. If your employees or customers consume contaminated food and become ill, you could be held accountable.
Equipment can fail at any time for any reason, such as from electrical power surges, fire, or water damage. The costs to repair or replace broken equipment can cut into your revenues unless you plan accordingly.
Just because your restaurant, nightclub, or bar is located in what you would consider a “safe neighborhood,” it does not mean that it could not be the target of vandals. They could spray paint and tag the side of your building. They might throw rocks or other large objects through windows. They may even decide to set your business on fire.
No matter how well you screen employees, there is always the risk of employee theft. It could come in the form of stealing food, liquor, dishes, glasses, or other such items from your business. It may also include stealing cash or giving away “free” meals or drinks to their friends.
A few short years ago, data breaches were only something large corporations had to worry about. However, today this is no longer the case. Small businesses are becoming rather popular targets for hackers and could infect your POS system, computers, wireless network, or other types of wireless, smart, or internet-based technologies. One popular hack is to put “ransomware” on the device and require you to pay a “ransom” to have it removed.
You cannot ignore the risk of theft at your business. No matter what types of precautions you take, like using an alarm system and a safe to keep cash in, someone could still break into your business and steal equipment, furniture, TVs, and other such items.
If you need to close your business due to fire, vandalism, theft, or property damage, you will not earn any money, nor will your employees earn a paycheck. It is important to keep this in mind, as there is specific insurance coverage you may want to add to cover this type of event.
Valet Parking Damages
If you offer valet parking as an amenity for your customers, you need to be aware of potential vehicle damages that might occur. You and your valet drivers could be held accountable for vehicle damage, theft of personal items from the vehicle, or joyriding. In addition, if your valet driver accidentally hits another person, there are also personal injuries to consider.
What Types of Insurance Coverage Do I Need?
Now that you are aware of the many risks restaurants, nightclubs, and bars face, let’s look at what insurance is needed for restaurants, nightclubs, and bars.
General Liability Insurance
This type of insurance protects your business against third-party lawsuits, personal injuries, property damage, and reputational harm. This is the most basic type of insurance you should have for your restaurant, bar, or nightclub, as it provides coverage for:
- Property Damage
- Bodily (Personal) Injury
- LIMITED Liquor Liability*
- Medical Payments
- Rental Property Damage
- Advertising Liability
- Reputational Risk
*Some basic general liability policies will include a “limited” or “basic” liquor liability provision. However, this provision IS NOT for businesses that serve alcohol on a daily basis, but only for those that may serve it occasionally.
Liquor Liability Insurance
This type of coverage is required for businesses that serve alcohol on a daily or frequent basis. It provides liability protection should a patron get intoxicated and cause injuries to others or damage their property. It can also cover legal fees, medical bills, and settlement payouts. It does not cover damages to your property.
Commercial Property Insurance
This type of insurance coverage is necessary if you want to protect your business against business interruptions and property damage. It will provide protection against:
- Equipment Breakdown
- Natural Disasters
- Criminal Activity
- Food Spoilage
- Business Interruptions
- Inventory Protection
- Business Property and Contents
- Building and Structures
*Accident coverage is for accidents that are not attributed to employee errors.
Errors and Omissions Insurance
Errors and omissions insurance is a special type of coverage that protects businesses from cases where a customer claims a loss or negligence due to an error or omission on the part of the business owner or their agents (i.e., employees). For restaurants, nightclubs, and bars, this insurance protection can help in situations like:
- A data breach occurs, and your customers’ credit/debit card numbers are stolen from your POS system data.
- A fight occurs between two patrons in your establishment that results in personal injuries.
- You rent out all or part of your business for a special event, and it is discovered there is insufficient space, different from as advertised.
- You close your restaurant to host a wedding and promise the meal will be served at 6 p.m., but there are delays that cause the meal to not be served until 8 pm.
Receive Additional Advice
Keep in mind, the information presented here is just a general overview of the various types of restaurant, bar, and nightclub insurance coverage you may require. It is always best to speak with a qualified insurance agent to determine the most appropriate insurance protection for your bar, nightclub, or restaurant.
To make sure you are prepared against potential risks or to learn more about different types of restaurant, bar, and nightclub insurance, please feel free to contact Tabak Insurance Agency at (281) 769-5274 today!