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September 19, 2010 / Michelle Ferris

Dangerous Exposures: The Facts about Unforeseen Liability

Dangerous Exposures: The Facts About Unforeseen Liability

One bad accident can shut your business down. Just imagine – really visualize the amount of time, money and effort you’ve devoted to building your business. You have so much invested in your business that it is a part of you. You’ve gotten it off the ground and have made it happen, made your business a success. And suddenly, unexpectedly, it’s gone… And it could have been prevented.

In the blink of an eye, an unforeseeable liability can close a business.


Make sure you know what you’re signing. When you sign your lease, clarify all the lease provisions. As a tenant of a building, sometimes there are lease provisions which exclude liability for the building owner for things such as awnings or signage that one might normally think are covered.


The #1 Rule: They Are The Experts. Only use reputable vendors that have the proper certifications, licenses and insurance or you may not have any recourse if something goes wrong. And always make sure you have a contract drawn up – a gentleman’s agreement worked in the past, but creates a huge liability. In today’s world, this liability cannot be afforded; leave the handshake for after the contract is signed. To make sure they have done their job properly, put procedures in place that check that the work has been done. However, do NOT give them specific instructions on how they do their job – to do so is to assume liability! Remember, THEY are the experts. That is why you pay them to do what they do.


If not properly maintained, the hood and vent system can pose a great risk to a restaurant. Ensure that you are using a qualified vendor for its upkeep, and make sure that quality control systems are in place that check their work. There must be adequate protective measures preventing fires, such as extinguishing systems and automatic suppression systems with heat sensors that shut off fuel when abnormal temperatures are detected. Most insurance companies require a central station alarm system for fire and burglary as well. It is prudent to note that although most insurance packages cover some amount of theft (whether external or internal), it has the potential to raise premiums exponentially if a claim is filed.


All emergency exits should be well-lit and equipped with panic hardware that sounds an alarm when the door is opened. An establishment risks liability if diagrams showing location of fire extinguishers, fire-fighting equipment, and emergency exit routes are not posted clearly for customers and employees to see. As an additional safety measure, employees should be required to log time participating in evacuation drills in which they shut down power / fuel sources and lead customers to safety.


It is crucial to control these exposures, especially in fast-paced restaurants and those with heavy foot traffic. Check that all entry ways and hallways are clear at all times, including emergency exits. If there is carpeting, it should be well maintained and tacked to the floor so as not to pull up and trip customers or employees. Though “atmosphere” is appealing, ensure that your establishment still has enough light to be easily navigable. All ramps, steps and stairs should be well-lit, marked, and have a railing to hold on to. Outdoor seating must protect patrons with a railing around the area. Slippery surfaces should be remedied with grippy material and marked with caution signs.

Parking lots and sidewalks can become a liability as well. Check your lease agreement to see who maintains these areas – assume nothing. Potholes can become bone-breaking traps for the elderly, or cause damage to patron vehicles. Dangers of theft or other accidents rise if the lot is not properly lit. Debris, snow and ice all become dangerous to patrons, and dangerous to your business, if not cleared away. Additionally, objects such as abandoned cars or campers can become an “attractive nuisance” which can become attractive to children or other people – if they become injured, you assume liability. Reduce your risk exposures by keeping these off your property.

ADA COMPLIANCE (Americans with Disabilities Act)

All entries and exits in your establishment should be ADA compliant. The entries to the restaurant, hallways, restrooms, emergency exits should be wide enough and have a ramp for wheelchair access. Bathrooms should also be equipped for wheelchairs, and the parking lot should have disabled parking as well.


Reduction of loss through credit card and check fraud and fewer underage drinking claims can be achieved with a simple device – use an identification checking system that verifies the authenticity of driver’s licenses for all 50 states. Train employees to use this tool. Employees should be taught to pay attention to their safety on any equipment they use, and in using protective equipment if necessary. Regularly maintain equipment to help reduce accidents.


Training should extend to safe food handling as well, including Hazard Analysis Critical Control Point (HACCP) documentation, topics such as pest control, employee hygiene and garbage disposal. Local health departments provide testing for the Washington State required Food Handlers’ permits. If your establishment serves food, purchase Food-borne Illness Business Income Coverage. Crisis management is provided if food contamination occurs, protecting you from precarious situations with media, the health department and public law. Liquor is always a little risky – but with proper monitoring of consumption, claims can be prevented. Ensure your bartenders and wait staff know not to serve patrons if they appear drunk. Whether the customer became intoxicated in your establishment or showed up in that condition, if you serve them a drink, you become liable for any mishaps that may occur. Happy hour can be particularly precarious. Customers may show up to have several drinks in a short amount of time – monitor them closely, and as an added safety measure, it is advisable to require patrons to order one food item with every drink. For hotels, mini-bars become dangerous. Even if a customer has been drinking all night, goes back to their room and has one mini-bottle, the hotel assumes the risk. To help monitor their intoxication, do not stock the mini-bar; rather, require they order through room service to drink in their room.


Operators of fifteen-passenger vans, beware! When occupied by five or more passengers, these vans are known to fishtail and rollover, resulting in horrible crashes. When fully loaded, these vans have six times the risk of rolling over. It is advised that hotel owners begin looking into other modes of transportation for their guests. In the meantime, make sure their staff meet at least the minimum requirements for driving vans. Set up clear training and guidelines for load distribution, safety belts, and handling of these particular vans. It is suggested that drivers attend the American Automobile Association (AAA) driver improvement school. To further control risk, make sure to order a Motor Vehicle Record (MVR) for all people driving company vehicles – this will give you a history of the driver’s traffic violations as well as ensuring their license is valid. It is best if drivers for passengers transportation vehicles are over the age of 21, and all drivers, if possible, should have a Drug and Alcohol Screening. To control drivers while on the road, vans should be marked with contact information, and drivers should be forbidden to use cell phones or engage in other distracting behaviors. Finally, the vans should have pre-drive daily inspections which are documented to ensure accountability.

There are many different facets of insurance for the hospitality industry – the building itself, the customers, the service, the vendors… the list could go on and on. It is difficult, without a qualified and professional agent, to make sure your business is completely protected. However, by examining your business, exposures, and management practices closely you may be able to avert some of the claims and protect your business. It is, however, advised you seek the professional, personal, and attentive service of an agent that is knowledgeable about the hospitality industry.


Michelle Ferris

Director of Marketing

Balcos Insurance, inc.


Published in the Front Burner

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