Restaurants are busy establishments that face many types of business risk. There are multiple reasons for this including the inherent dangers in preparing and serving food, frequent staff turnover resulting in new team members who are unfamiliar with your operations, and a continuous stream of customers who can be injured or become ill during or after their visit, to name just a few.
With all the focus on activities and risks inside a restaurant, it’s understandable that some owners don’t spend a great deal of time thinking about the risks outside their restaurant. But incidents involving employees who are delivering food or running business-related errands are a significant source of liability risk. Consequently, as an owner, it’s crucial that you know what type of auto insurance you need to protect your business from a potentially crushing financial burden if you are sued.
The Pandemic-Driven Rise in Food Delivery
With the COVID-19 pandemic likely to limit dine-in service for the foreseeable future, restaurants today are scrambling to adjust their business model in order to make up for declining revenue. For many, delivery service is a new offering that can help fill the void.
Often, these restaurants choose to make deliveries themselves rather than using a third-party service in order to save money. However, for those restaurants that haven’t offered delivery in the past, a lack of familiarity with the risks and the insurance coverages to address those risks can be a problem. You may think a driver’s personal auto insurance would cover them, but most personal auto policies exclude accidents during food delivery.
The Critical Question: Who Owns the Vehicles You’re Using for Deliveries?
If you’re ramping up delivery operations at your restaurant, the most important question from a liability perspective is, “Who owns the vehicles you’re using for deliveries?” For many businesses, the answer—at least initially—will be that employees are using their own vehicles. If your restaurant is switching gears to a delivery-focused model, it’s likely that you don’t own many (if any) vehicles that can be used for this purpose.
The solution, in many instances, is to ask employees to use their own vehicles for deliveries. If that’s the case, you’ll need what’s called hired and non-owned auto liability coverage, because the driver’s personal auto policy probably won’t cover liability when the vehicle is being used for food delivery purposes. This coverage can be purchased as an add-on or “endorsement” to a general liability or business owners policy (BOP)—policies you should have to cover other business risks.
Keep in mind that it doesn’t matter who is doing the driving. Even if you, as the business owner, are using your own vehicle for business purposes, your personal auto policy probably won’t provide coverage.
A different type of insurance is required if your drivers make deliveries using vehicles that your business owns. In that scenario, you need a commercial auto policy. This type of insurance can cover virtually any type of vehicle that you might have and use for deliveries, including cars, pickup trucks, delivery/cargo vans, food trucks, and refrigerated trailers—just be sure to contact your insurer to let them know if you purchase new vehicles after the policy is in place to ensure they’re covered.
A commercial auto policy protects you from a wide range of risks. This includes bodily injury, death, or property damage resulting from an accident where you or your employee is at fault. The policy can also provide payment for limited medical expenses for employees or passengers traveling in your vehicle, regardless of who is at fault in an accident, if personal injury protection or medical payments add-on coverages are purchased.
Plus, a commercial auto policy can pay when an accident is caused by an uninsured, underinsured, or hit-and-run driver. And there is coverage for vehicles on the policy for things like theft, vandalism, flood or fire damage, and damage from collisions with other vehicles or single-car accidents.
Auto Liability Beyond Deliveries
Food deliveries may not be the only time your employees drive for work purposes, of course. If a team member makes a trip to a supply warehouse, the grocery store, or the bank, those are business activities and you need the appropriate coverage to protect your restaurant.
Here again, there are multiple reasons why the pandemic may have your employees driving more often. For instance, it may be more cost effective to send someone out to get needed supplies than to schedule a delivery. And, with many restaurants cutting back on their hours of operation, you may not have anyone available to accept deliveries at your regularly scheduled times. Plus, your suppliers may be reducing the range or frequency of deliveries, meaning you have to go out for supplies more often.
The question of ownership applies to errands the same way that it does to food deliveries. If employees are using their own vehicles, you’ll need hired and non-owned auto liability coverage. If you hand them the keys to a company vehicle, it should be covered by a commercial auto insurance policy.
It Only Takes One Incident …
The truth is that it only takes one mistake by an employee who is driving for work purposes to make your restaurant the target of a lawsuit. If you’re found liable and don’t have the right insurance coverage to protect you, the financial impact of that verdict could be more than your business can bear.
The bottom line: If you or any of your employees ever drive for work purposes, you need to make sure your business is properly insured. Knowing what coverage you currently have and what you need to add to fully protect yourself is key.