2022 Restaurant Insurance Update

The U.S. restaurant sector is gaining steam after coming out of a two-year pandemic that shuttered doors and curbed eatery revenues dramatically.

According to the National Restaurant Association, the dining industry should generate $899 billion in revenues in 2022. That’s up from $640 billion in 2020.

Even with robust growth, the restaurant industry faces steep challenges right now, with labor shortages, higher inflation, challenges with home food and drink deliveries, and ongoing food and supply chain shortages.

With change in restaurant management so dynamic, industry experts say that now is a good time to review and even revamp restaurant insurance policies.

“As the COVID-19 pandemic continues to affect businesses across the globe, restaurant managers have had to adapt their operations to stay afloat,” says Linda Chavez founder and chief executive officer at Los Angeles-based of Seniors Life Insurance Finder. “Along with making changes to their menu offerings and business models, many restaurateurs are also reassessing their insurance needs.”

According to Chavez, while some insurers have been quick to adjust their coverage options in response to the pandemic, others have been slower to keep pace. 

“Restaurant managers need to be aware of the changing insurance landscape so that they can make informed decisions when selecting a policy,” she said.

What are the big insurance issues impacting restaurants going forward? Industry observers say these key factors are at the top of the list.

Food Delivery Issues

Restaurants are looking to leverage stand-alone delivery companies such as Uber Eats and Grub Hub, as well as individual delivery drivers, with both carrying different insurance exposures. 

“As these alternative forms of third-party food services and delivery systems continue to increase post pandemic, restaurants have developed comprehensive contracts with these third-party providers requiring appropriate insurance limits of liability and specific terms/conditions that allow the best protection for all parties,” said Kimberly Patlis Walsh, president and managing director at Corporate Risk Solutions in New York City. “Some restaurants have developed internal safety plans for their own delivery drivers, including motor vehicle checks on new delivery drivers and requiring minimum limits of insurance on their personal vehicles.”

While these contingent workers can provide a much-needed boost to a restaurant's bottom line, they also pose new insurance risks. 

“Restaurant owners need to be aware of these risks and have the right coverage in place to protect themselves from potential losses,” Chavez added. “Some of the key issues facing gig/contingent/delivery workers include liability for accidents or injuries that may occur on the job, as well as loss-of-income coverage in the event that a gig worker is unable to fulfill their obligations.”

Covid Issues Still on Front Burner

 In 2020 the pandemic severely hit restaurants across the U.S. with many having to shut their doors. Consequently, restaurant insurance needs practically fell off the map. 

Midway through 2022, COVID-19 is still a problem, albeit nowhere near the size and scope of 2020 and 2021.

“While restaurants continue to adapt, insurance demands remain uncertain,” said Mariano Demarin, president of Homeport Insurance in Miami. “Owners are not quite reaching pre-pandemic revenue levels. They are exercising both caution and a common sense on their insurance needs.”

Job one is to protection from new Covid strains.

“The fact remains that there is the possibility of another variant, it’s just a matter of where and when,” Demarin said. “Post-Omicron did, however, offer a sign of relief to struggling restaurants. Across the country, mask mandates have eased, capacity restrictions have lifted, and most states have gone back to business as usual.”

“Owners will need still need to be vigilant with their insurance policies and exercise preventive measure to reduce risk not only for their customers, but their employees and vendors as well.”

Maintaining Workers Compensation Coverage

Health insurance needs are also a priority for restaurants.

“It’s vital for potential employees to know that a safe work environment is about more than just preventing injuries or the spread of disease, it is about making the employee’s welfare a priority,” said William Heinsen, Executive Vice President at Homeport Insurance. “Also, the potential for adding health insurance as a benefit will go a long way with employee retention and attraction, taking into account the consistent increase we are seeing in costs for that space.”

Addressing Business Interruption Needs

Even as Covid recedes, restaurants should continue to review their coverage for replacement cost and business interruption protection. 

“All too often premiums are lowered to “fit a budget” or meet the minimum of what a landlord requires,” says Mark Moeller, founder at Recipe for Success, a restaurant consultancy firm in Westport, Ct. “This leaves the owner under protected and often pushes the business to permanent closure in the event of an incident or disaster.”

Steering Toward Better Insurance Benefits for Staffers

In the Great Resignation era, medical, dental and life insurance are all attractive to candidates and retaining employees.

“However, this comes at a cost that the owner needs to factor into their budgets,” Moller notes. “Offering a retirement plan, even if the company does not contribute is also a plus.”

The Takeaway on Restaurant Insurance Trends in 2022

As restaurants ramp up operations and greet diners again after two years of dealing with a global pandemic, it’s vital for restaurant owners to maintain adequate coverage and be proactive in mitigating risk. 

“Proactive measures should include health and safety, security cameras, and schedule maintenance of equipment,” Demarin said. “Being mindful of what they post on social media, underwriters will take a look while deciding on whether or to offer coverages.”

“Also, it’s a good idea to run any “special event” type of idea by their insurance agent, to ensure it does not create any unwarranted risk that may not be covered for, or could lead to a cancellation,” Demarin added.