One word: Litigious
The hospitality industry is inherently a target for lawsuits – many of them frivolous, some valid and serious. Often, the restaurant or bar ends up on the “paying end” of the suit resulting in 5, 6, or even 7-figure payouts for the plaintiff.
Perhaps one of the most notorious lawsuits is the “Hot Coffee Suit” brought against McDonald’s Corporation in the 90s. A jury awarded Stella Liebeck, $2.86 million after she suffered 3rd-degree burns from a McDonald’s coffee that she spilled in her lap. It was found McDonald’s corporation’s coffee was significantly hotter than home-brewed coffee – a requirement made by the franchise and around 700 other people including children had been burned. Stella offered to settle for 20K but was only offered $800. It went to trial – and the jury sided with Stella.
Stella’s story with a few twists isn’t all that uncommon – high jury verdicts do happen, and a 7- figure judgment against a restaurant can be crippling forcing the establishment out of business.
One of those common scenarios is a bar or restaurant patron suing the establishment after a drunk driving accident resulting in traumatic injuries or death. Suits will usually allege the bartender/staff of the establishment unlawfully continued to serve an individual KNOWING they were intoxicated or over the legal limit to drive or under the legal drinking age.
Then of course there are claims of food poisoning, slip and fall scenarios, sexual harassment – the list goes on.
The solution always starts with prevention and looking at EVERY “What If” scenario and ensuring you are properly mitigating against all the risks that would pose a threat to your patrons and staff.
Next is knowing that no matter what you do, the chances are at some point you will be on the wrong side of a lawsuit, so you should make sure you have the proper insurance coverage in place to protect you and your business.
An Umbrella or Excess Liability policy with HIGH LIMITS* should be the standard for all restaurant and bar establishments as it will strengthen the underlying policies including General Liability, Liquor Liability, Employment Practices Liability, and if applicable Auto Liability.
How much is enough?
Most General Liability policies offer $1-2 Million in coverage, and often this will NOT be enough to cover a jury judgment like the ones in the examples above. Adding an excess liability policy to ensure the value of your business is protected from such claims is good business sense. Depending on the nature of your business including the number of locations and revenue, we recommend limits between a range of $3,000,000 to $10,000,000.
Every business is different and every business owner’s risk factor varies – so the amount needed is dependent on many factors. Our Hospitality Group at Power Risk Management, led by Risk Manager and Insurance Contract Lawyer Steven Mikuzis will take the time to review your operation’s balance sheet, your safety protocols, and your risk tolerance to decide what’s best for you and your business. Limits offered and the costs for policies vary by carrier and state.
At Power Risk Management we offer free consultations to review your current liability and other insurance coverages. Give us a call at one of our convenient locations:
Chicago Office: 5343 W. Devon Avenue, Chicago, Illinois 60646 | 773-273-8777
Bourbonnais Office: 1410 Argyle Ln N, Bourbonnais, IL 60914 | 815-922-4754
Denver Office: 1400 16th Street, Suite 400, Denver, Colorado 80202 | 720-779-1190
*The content in this article is for information purposes only and should not be construed as legal advice.