Public liability insurance

public liability insurance

Public liability insurance is a must-have for catering businesses, particularly those that supply large events—and with very good reason. Chris Sheedy reports

Whether he’s catering for a corporate networking event, a training day for a government department or an autumn wedding, Anthony Holloway says he’d never consider doing so without public liability (PL) insurance.

“In this day and age, you are far better having PL insurance than not,” says the owner/operator of Topgun Catering in Canberra. “You have to understand the potential risk. It’s not as if you’re just driving your car and you might run into somebody else’s car. In our business we’re playing with knives and fire and food in multimillion-dollar buildings. If you damage someone else’s property, then it’s probably going to put you out of business and into debt. It could send you into bankruptcy for many years.”

There are also a few other very good reasons to take out PL insurance. One is that most event organisers, corporates and government departments now insist on seeing a certificate of currency for PL insurance from a catering company before they will even consider them for a job. So, without insurance, a catering business is missing out on major opportunities.

The other powerful argument for cover is that when something goes wrong at an event, it is common legal practice for a plaintiff’s legal team to sue everybody involved in the event whether they were directly connected to the mishap or not.

Zoe Evans, a senior account executive from Arthur J. Gallagher, the insurance agency that consults to Restaurant & Catering Australia and its members, says this last point is important for caterers to understand. Even if something happens at an event that clearly has nothing to do with the caterer, it is likely that the caterer will face some sort of legal demand.

“Imagine somebody goes to an event and they trip, fall and sustain an injury for which they then want to take legal action,” Evans says. “They will usually seek legal advice and bring a claim against several entities involved in that event to ensure the claim is brought against the correct responsible party.

“If you’re insured, your insurer would then fight the claim and prove it had nothing to do with the caterer, and the caterer goes on with their business, perhaps having only paid an excess. The insurance company defends the case and sends a denial letter on the caterer’s behalf.”

And what if the caterer is at fault? What if the insurance company’s legal team cannot prove the caterer had nothing to do with the incident? Evans has seen this happen more than once and the good news, for the caterer at least, is that PL insurance means the insurance company faces the legal action on behalf of the caterer. The only cost to the caterer, as mentioned, is the excess and time assisting the insurer with the defence.

“In our business we’re playing with knives and fire and food in multimillion dollar buildings. If you damage someone else’s property, then it’s probably going to put you out of business and into debt. It could send you into bankruptcy for many years.”—Anthony Holloway, owner/operator, Topgun Catering, ACT

“I’ve seen two large claims,” Evans says. “One was around food poisoning and another involved a third party who tripped over an extension cord to a mobile cool room and broke their ankle. In both instances, there were claims brought against the caterer.

“The food poisoning claim ended up costing about $2 million because they had 30 or so claimants, all of whom received a payout. There were legal costs connected to the claim as well as more legal costs to restructure the business to protect from claims against the director. Quite a few different things were in play, but it only cost the business an excess of $500.”

What does PL insurance cover? If a caterer’s mobile cool room is damaged at an event, it is not covered by PL insurance. Public liability is all about covering damage or injury to third parties, including property and people. For example, it covers damage done to the building that hosted the training event, the grounds that hosted the wedding, the parkland that hosted the music festival, and it covers potential costs resulting from legal action by people who attended such events. It also covers claims arising from your product—i.e. your food.

If a claim is made against a caterer and they have PL insurance—and as long as it is an insurable event—then the insurance company automatically takes responsibility for the claim. The insurer makes itself the target for the action rather than the catering business.

How can you reduce the cost of PL insurance? Of course, there is a cost involved in having PL insurance, but that cost can be managed downwards by having the right processes in place. Food businesses that do not have a good track record for food safety, for instance, or that do not provide constant, consistent and up-to-date training for their staff, are going to be hit with higher insurance premiums because they represent a greater level of risk.

An insurance broker such as Evans will work with the business to figure out how their processes and policies measure up, and what can be done to improve the caterer’s ratings. In fact, a meeting with a broker who is knowledgeable about the catering industry should result in an improved business, thanks to their advice around risk management.

“But just because you don’t have a risk management plan or other business plans in place, it doesn’t mean you’re not insurable,” Evans says. “An insurer will still offer you a policy. Our job is about helping you understand the risk. As brokers we relate the insurance policy to the work caterers do.

“Some business owners still say, ‘It will never happen to me—I don’t need insurance and I’m not paying for it,’” Evans adds. “But the cover is not just in case you do something wrong. It’s also about whether somebody alleges that you’ve done something wrong. We see it all the time and once a claim is lodged, the insurer will have their legal panel and their claims advisers act for and on your behalf. They do everything for you.”

Any advice provided in this document does not consider individual objectives, financial situation or needs. You should consider if the insurance is suitable for you and read the Product Disclosure Statement (PDS) and Financial Services Guide (FSG) before buying insurance. 

This great content is produced for members of the Restaurant & Catering Association. Find out about becoming a member here.

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