Hospitality 101

by Insurr 20 Dec 2016
The hospitality industry is full of potential risks that can affect workers, customers, event organisation, property and equipment. It is therefore important to consider the correct type of coverage required in order to protect the appropriate risk. Hospitality can cover anything from hotels, to catering, special events, festivals or nightclubs. Each type of client will have their own specific needs and common potential risks that are relevant to their service. Cooking, slipping and falls may be the most common type of incident to occur within the hospitality industry but a whole range of other risks also need to be considered.

Providing short or long-stay accommodation presents a wide range of potential risks. Businesses such as hotels, motels, holiday resorts, inns, lodges, hostels, and bed and breakfasts provide a service to customers where personal safety is crucial. If an accident occurred in these premises then the business owner could be liable for a large pay-out. It is therefore important to ensure that all buildings and facilities have sufficient public liability or personal injury coverage in the case of an accident. This would also apply to a customer’s personal property if it lost or damaged as a result caused by the business. Employees, contractors, casual workers and temporary staff also need to be covered by employer’s liability insurance. This is required by law to cover claims from employees in case they become injured or seriously ill as a direct result from working for the business in question. Taking out an employers’ liability is required by law if you have employees and is punishable by a fine if an employer fails to do so.
Business premises also need to be covered in case of damage, vandalism or accidents. Whether it is building contents, building façade, fixtures and fittings, or stock, all need to be covered for all eventualities. However when insuring property it is important to bear in mind to insure the cost of a rebuild and not the market value. Business contents also only covers items for which the owner is responsible located on the business premises only. Common risks include guest behaviour which ranges from destruction of property to the safety of travellers. Branding and reputation is another key risk if trademarks are infringed upon or a business is the victim of defamation. Financial losses and litigation need to be covered in case of these unexpected eventualities. Various types of business interruption can also affect the running of operations. Whether there is a natural disaster, like a flood or an earthquake, or a political event such as a terrorist attack or kidnapping, other unusual risks such as these also need to be considered when taking out a policy.

New emerging risks such as internet rentals and airbnb rooms/apartments demonstrate how much the market is changing all of the time. Brokers need to keep up with emerging risks to prevent costly payouts later. Clients renting out their own room or properties need to make sure that they are sufficiently covered to protect both their property as well as the safety and wellbeing of those who use them.

Other similar businesses in the hospitality industry include catering. Operations such as restaurants, cafés and coffee shops all require similar types of coverage as mentioned above. However stock and contents play an important part in policy writing. Handling food and drink can be complicated in terms of food expiration, preparation and presentation. Different types of food and drink need to be transported and stored under strict conditions in order to be preserved and delivered successfully. Out of date or spoiled food can ruin a business if a customer becomes ill after consuming a poisoned meal. Public and product liability policies cover risks such as food poisoning and spoilt food which can be costly if multiple customers make claims if they begin to suffer from illness and suffering caused by the business. This will also cover medical fees and expenses if the injured parties have to take a leave of absence from work. Product liabilities can also cover food recall expenses if a manufacturer or provider has to recall a delivery of spoilt or contaminated goods.
Caterers also need to take out protection for the possible breakdown of equipment that is used to store and prepare food. Cooking and refrigeration units can also spoil food when they break down, so need to be fully covered as this can also cover the expenses for replacing spoiled goods. Fire cover also needs to be considered as this is a high potential risk in a kitchen which will not only cause localised damage to equipment and stock, but also large scale damage to the whole or parts of the property. 

Festivals, events and nightclubs can be slightly more problematic to insure as very specific types of coverage need to be considered as they are full of potential risks. As well as building and accident coverage, things such as event security, alcohol and personal appearances need to be specifically covered. Special events such as live music performances, public speakers, carnivals, film screenings, festivals, conferences and exhibitions need to make sure that public safety is adhered to for both customers and staff. Event security needs to be covered for both personal injury as well as potential terrorist threats. Event cancellation can cause a huge financial loss if not covered properly. However sometimes events are cancelled due to a non-appearance of a key guest, extreme weather conditions such as flooding, earthquakes or snow, or civil unrest such as a demonstration, protest, bomb scare or a hijack. Expenses such as reimbursements may need to be paid out as well as a loss of earnings for the venue.
Alcohol may be required at many of these events and a liquor liability insurance policy will need to be taken out in order to protect the business from the potential issues that serving alcohol can cause. Selling too much alcohol to a patron, causing them to become drunk and ill, can cause endless repercussions if criminal damages occur caused by the drunken person. Accidentally selling alcohol to a minor also has drastic consequences which can result in heavy fines or an expensive lawsuit. Most liquor liability policies are sold separately and must not be overlooked when running an event or business that supplies or sells alcohol.
Other unusual risks such as fireworks and other pyrotechnics need to be considered as well as not all policies cover these, with many excluding them from general hospitality or event programs.

Other general things to consider when insuring hospitality include pollution, automobiles, professional liability and general umbrella/excess coverage. These things will cover waste and recycling caused by the running of businesses, transportation and delivery of goods, general errors and omissions, and any other potential risks that lie elsewhere.