The restaurant industry is in the midst of a challenging economic and social environment. And while restaurant owners are trying to keep their expenses down, it is imperative for them to maintain adequate insurance coverage. Independent agents who are well versed in the intricacies of the industry can stay ahead of the game by keeping restaurateurs up to date in a fluctuating industry.

The most proactive agents that provide the best coverage for their clients will “not just support the least expensive option but will place their clients with underwriters that have a positive track record, are committed to a long-term relationship and understand the unique exposures of restaurants," says Peter R. Taffae, managing director, Executive Perils Inc. “These are challenging times—partnering with an established company will serve their clients long after the pandemic is over. The key is 'value' not 'cheapest.'"

“An agent should be well informed and be prepared to discuss in detail the risk exposures and risk mitigation strategies each business must address," agrees Grady Campbell, executive vice president, commercial lines and life, Encova Insurance. “Being part of the risk management process will be invaluable."

“The longer a restaurant is not open, the quicker it will be out of business," Campbell adds. Independent agents could be the key to helping them back on their feet.

“While there are some restaurant-specific coverage options, the most important thing is communication between restaurant owners, agents and the carrier," says William Hughes, vice president of commercial lines, Arbella Insurance Group. “This has to be a collaborative effort between the three parties to address a very fluid environment and the business needs of the restaurant."

According to Hughes, working collaboratively with restaurants to help them bounce back from the pandemic will require agents to:

1) Maintain frequent contact with the business. Check-in on the status of the operation on a weekly or monthly basis. With daily decisions by health and government officials impacting what a restaurant can and cannot do, continue to ensure that coverage corresponds to the restaurant's current operation model as your client responds to changing guidelines and restrictions. 

2) Facilitate clarity around changes in exposure. Work with each client and communicate any changes to the insurance carrier to ensure that the restaurant is only making premium payments based on the true—and possibly reduced—sales and payroll figures.

3) Educate on risk mitigation. Provide advice on how an insured can best protect their restaurant in potential instances. How can they protect their facility in the event they need to temporarily close? How can they protect themselves from a vehicle accident while deliveries are being made?

“Many of these business owners don't think about checking with their insurance consultants," Hughes says, warning that, as a result, coverage gaps continue to prevail.

Common coverage gaps include:

• Building limits and business income coverage. While patronage may be down, certain perils do not go away, such as weather-related wind or freezing temperatures leading to frozen pipes and fire. Maintaining full coverage limits is essential.
• Cyber. Cyberattacks got even worse during the pandemic, which means it is critical to maintain a strong cyber policy. The reality is that cyberattacks don't just affect big businesses or tech companies. Businesses of all sizes, including restaurants, have been hard-hit by cyberattacks over the past number of years.
• Employment practices liability insurance. Difficult staffing decisions may have occurred or are still being contemplated as businesses continue to deal with restrictions. This may pose a serious exposure risk.
• Workers compensation. Statutory regulations require this to be maintained to avoid potential fines and agents have a duty to their clients to ensure this coverage is maintained. 
• Commercial auto. If the business started or increased its delivery services over the past year, coverage may need to be reviewed.

The pandemic's impact on restaurant insurance “has seen extremes over the last year," Taffae says. “A year ago, at the beginning of the pandemic, the reaction from buyers was 'no way' to the increasing costs for EPLI, directors & officers and errors & omission quotes."

“Many decided they would not renew due to costs and the perceived lack of coverage," Taffae continues. “Looking back, that was a mistake. Claims frequency is way up and expected to grow with expected vaccine liability."

Olivia Overman is IA content editor.