Outlined below are several types of insurance that restaurants, bars, and nightclubs often need:
General Liability Insurance
Also called commercial general liability (CGL) insurance, this coverage protects business owners against “third-party” claims, meaning claims that are brought against the business by customers, clients, vendors, contractors, and others. It provides protection against property damage, bodily injury, negligence, and libel claims.
Who Is Covered: Business owners, employees, members, and their spouses are protected if a suit is brought against them for something they do acting in an official capacity for the business. It will also pay for legal expenses, including the cost to defend or investigate a suit or claim against you, court costs, fees, and other reasonable expenses.
It’s important to note that CGL policies do not cover everything. For example, if your establishment manufactures, sells, distributes, or serves alcoholic beverages, a CGL policy will generally not cover you for liquor-related accidents—you’ll need liquor liability coverage for that. Additionally, employee injuries incurred on the job are generally not covered under a CGL policy; for this you’ll need workers’ compensation insurance.
There are two commercial general liability coverage forms available, the occurrence form and the claims-made form. Both forms are somewhat identical in the coverages offered. The main difference is in the way claims are handled under the two forms.
- The occurrence form covers bodily injury or property damage claims that occur during the policy term, regardless of when the claim is reported.
- The claims-made policy form only covers claims made against the insured during the policy term; a claim made after the policy expires is not covered by a claims-made policy unless the claim is covered by an extended reporting period. The claims-made policy will only have the extended reporting period.
For additional information, please check out the General Liability Insurance Overview.
Consult with the experts at Tabak Insurance Agency to understand what a CGL does and does not cover.
Commercial Property Insurance
Commercial property insurance protects your real property (land, buildings/structures), personal property (all property that is not real property), assets, and inventory against losses by accident, theft, and other means. It generally covers costs to repair or replace damaged or stolen property, which can include office equipment, inventory, supplies, furniture, building fixtures that you installed, and other items. It covers these items whether on-site or off-site.
Most commercial properties are covered under the Building and Personal Property form, which covers direct physical loss or damage to covered property at the premises described in the policy against covered losses; usually this includes the building and other structures, completed additions, outdoor fixtures, permanently installed fixtures, machinery, and equipment.
The Building and Personal Property form typically also provides protection for the personal property of others while in the insured person’s care, custody, or control. Some policies also have coverage extensions and additional coverages.
For additional information, please review the Commercial Property Insurance Overview.
The experts at Tabak Insurance Agency will ask you a series of questions to determine precisely what coverage you’ll need, as well as which extensions/additions are appropriate for your business.
Liquor Liability Insurance
Liquor liability policies (sold as standalone policies or as part of a CGL policy) protect businesses that manufacture, distribute, sell, serve, or aid in the use or purchase of liquor (e.g. dram shop) against liability claims. For example, a claim made by the family of a person who was killed by a drunk driver who had been drinking at your establishment, or the parents of a minor who sue your liquor store for injuries their son incurred after drinking liquor that your store clerk sold him.
Not all liquor liability policies cover everything—in fact, assault and battery is commonly excluded, so be sure to read your policy carefully to ensure it covers against this and other perils. Better yet, contact the experts at Tabak Insurance Agency to be sure.
Errors and Omissions Insurance
Also called professional liability insurance (PLI), errors and omissions (E&O) insurance protects business owners against claims made by clients for financial losses. For example, suppose a business owner’s marketing consultant accidentally creates a slogan that is similar to the slogan of another company, and that company sues for copyright infringement. Most errors and omissions policies would cover this, subject to the coverage limits outlined in the policy.
It’s important to note that most errors and omissions policies are sold on a “claims-made” basis, which means the policy only covers claims made against work performed while the policy is in effect; claims made after coverage ends would not be covered.
For additional information, please read the Errors and Omissions Insurance Overview.
Directors and Officers Liability Insurance
Often simply referred to as “D&O,” directors and officers liability insurance protects the directors or officers of a company, or the organization itself, against losses resulting from legal actions made against the officers/directors/organization for wrongful acts committed in an official business capacity. E&O usually covers costs for legal defense and investigations associated with the alleged regulatory violations or criminal actions. D&O insurance typically does not cover intentional illegal acts.
The coverages explained below are often included as part of a commercial general liability (CGL) and/or commercial property insurance policy:
- Premises/Operations Coverage: Premises/operations coverage is included as part of many CGL policies and provides coverage for damages that arise out of ownership or occupancy of the insured premises when not maintained in a reasonable manner. Premises/operations coverage also pays for damages arising out of operations performed by the insured business.
- Products/Completed Operations Coverage: The products portion of a commercial insurance policy provides coverage for damages arising out of products manufactured, sold, handled, or distributed by the insured. Completed operations coverage pays for damages occurring after operations have been completed or abandoned, or after an item is installed or built and released for its intended purpose.
- Medical Payments Coverage: The medical payments section of a commercial insurance policy pays medical expenses (subject to the limits outlined in the policy) resulting from bodily injury caused by an accident on premises owned or rented by the insured, or locations next to such property, or when caused by the insured’s operations. These payments are made without regard to the liability of the insured.
- Fire Legal Liability Coverage: Fire legal liability coverage is included in most CGL policies. It protects business owners who are renting a space/building against fire damage caused by their business’s negligence. For example, suppose a restaurant employee leaves a fryer on overnight, and the fryer starts a fire, which causes $100,000 in damages to the building. The landlord could demand that the restaurant owner pay for the damage, since the fire was caused by his/her employee’s negligence. Fire legal liability coverage would protect the restaurant owner in such a case. Note that fire legal liability only provides coverage for property rented to the named insured on the policy (in this case, the restaurant owner). If an adjacent building that is not rented to the insured was also damaged in the fire, those damages would not be covered under the fire legal liability coverage.
- Personal Injury Coverage: Personal injury coverage is included as part of many commercial insurance policies. “Personal injury” means injury other than (physical) bodily injury. It provides coverage for injuries resulting from offenses such as false arrest; malicious prosecution; detention or imprisonment; the wrongful entry into, wrongful eviction from, and other acts of invasion, or rights of private occupancy of a room. Coverage for libel and slander is also provided in the policy.
- Advertising Injury Coverage: Often combined with personal injury (PI) coverage on CGL policies, advertising injury coverage pays for damages in connection with the insured’s oral or written advertising, if that advertising disparages, libels, or slanders a person’s or organization’s goods, products, or services. Coverage applies only if the offense(s) occur during the course of advertising of the named insured’s own goods, products, or services.
Glossary of Insurance Terms
The following terms appear throughout commercial insurance policies and are important to know and understand.
“Each occurrence” refers to an accident, which could include continuous or repeated exposure to the same harmful conditions. An occurrence can also be a sudden event, or an incident resulting from a long-term series of events.
Limit of Insurance
The “limit of insurance” is the most the insurer will pay for loss or damage in any one occurrence, as stated in the policy declarations.
The deductible is the amount the insured person/entity will have to pay before the insurance company pays on a claim. Most commercial insurance policies have a standard deductible of $1,000. However, different coverages within the policy may have separate deductible amounts. The deductible applies once per claim/loss, not once per policy term.
Most building and business personal property polices have a coinsurance clause that requires the insured to carry insurance equal to at least a specified percentage of the actual cash value (ACV) of the property. For example, if the ACV of the property is $1 million and the coinsurance clause says the insured must carry insurance that covers 80% of the ACV of the building, the insured must have a policy that covers at least $800,000. If a loss occurs, and it is determined that the amount of insurance carried is less than the amount required, a penalty could be placed on the insured.
Causes of Loss
The term “peril” is used when discussing losses. A peril is a cause of loss. Basic form property insurance policies typically cover the perils of fire, lightning, explosion, windstorm, hail, smoke, aircraft or vehicle damage, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action.
Broad form property insurance policies often add coverages for water damage, weight of snow, ice or sleet, breakage of glass, and coverage for falling objects.
The broadest coverage is the special form, most often referred to as the all-risk form. All risk covers all causes of loss, except those specifically excluded from coverage. It is possible for a commercial property policy to have more than one cause of loss form.
Replacement Cost and Actual Cash Value
Property can be valued in several different ways. Insurance companies commonly use two approaches to determine value, which also determines how a loss will be paid: the replacement cost method and the actual cash value method.
Replacement cost of a property item is the cost to replace it with new property of like kind.
Actual cash value is replacement cost minus the accumulated depreciation for age and condition.
The agreed value option is used to remove the coinsurance requirement from a policy, in which case the insurer agrees to cover losses for the “agreed value.” For example, suppose a person has their property insured for $100,000, and the agreed value is also $100,000. In this case, losses up to $100,000 would be covered 100%. When this option is used the insured and the insurance company agree on the value of the property before the policy is issued. This option is usually assigned to one-of-a-kind property.
Buildings can (and hopefully do) increase in value over time. While a building might have been insured to its full value at the beginning of a policy term, by the end of the term the coverage may be insufficient. This is where “inflation guard” coverage comes in. Inflation guard gradually increases the policy limit during the policy term in order to achieve a desired percentage increase by the end of the policy term.
The general aggregate limit is the maximum amount the insurer will pay during the policy term for all coverages, including bodily injury, property damage, advertising injury, etc.