The safety net

fireInsurance can take a bit of pain out of accidents for restaurant owners but do you have the right coverage?

It can happen in the blink of an eye. A diner at a waterfront restaurant, a little unsteady after a couple of glasses of wine and perhaps disoriented by the blinding glare of the summer sun, walks smack-bang into a glass door on his way out to look at the stunning views.

The patron has his nose broken in the collision and promptly sues the restaurant owner for compensation for his physical pain and trauma, which may involve medical costs and lost wages.

This can and does happen, and surprisingly often. In the more litigious United States, lawsuits following such incidents can lead to payouts of hundreds of thousands of dollars. And such events bring home to restaurant owners and managers the peace of mind they enjoy in being fully covered for such unforeseen circumstances.

“Fire is not necessarily the biggest concern for restaurant owners,” says Lisa Hobbs, chief operating officer of Dedes Waterfront Group, which runs six waterfront venues around Sydney, including Flying Fish at Pyrmont and Deckhouse at Woolwich Dock. “The kitchen is no more dangerous than a patron walking into a glass wall and breaking their nose. “Apart from that, we sometimes get people falling or tripping over, mostly girls wearing heels, tripping over something or on the stairs. So we’re always thankful that we’re fully covered insurance-wise for such incidents. But [in the end] it’s the staff that hurt themselves more than the guests do. In the kitchen, it’s mainly knife wounds or hurting their hands on opening or closing doors. It’s rarely burns, mostly cuts.”

According to Paul Stavrou, from OAMPS, one of Australia’s leading hospitality insurance brokers, it’s the kitchen that poses the biggest risks for restaurant owners.

“It’s the cooking area with all the fats that has the potential to really take off and then you’re looking at a major loss,” he says. “That’s why, as insurance brokers, we always recommend that owners take extreme care in the cleaning of flues and filters and make sure all the equipment is operational and where it should be. At the same time, [you need to] have fire extinguishers and other firefighting equipment regularly inspected, because there’s no point in grabbing a fire extinguisher to find that it’s clogged and it’s not going to work.

He insists that client do a proper clean- up on a six-monthly basis. “So clean the flues, and get rid of all the fats in the flues and filters, because once the heat builds up they don’t know there’s a flame there until it’s too late.”

Stavrou recalls an incident where staff decided to cook themselves something to eat before opening the restaurant.

“They got side-tracked and forgot about the cookers being on. The flame had been going for about an hour and a half, the pot melted all over the cooking area and bang, the kitchen went up, causing just under $300,000 worth of damage. Those sorts of things are occurring, and it’s probably more human error involved.”

He also says having fire blankets and extinguishers are “a must” in order to get cover. “The other area I consider as probably the most critical is public liability because that takes into account not just slips and falls but also food poisoning, including the salmonella issues of recent times,” says Stavrou.

“The next most important area is business interruption. If it’s a major loss, a lot of them don’t recover, whereas when they’re covered properly, the insurance company will keep paying them as if they’re still operating until the doors reopen.”

Restaurateurs who don’t fully insure their business are at risk of massive financial losses in the event of an insurance claim.

Says Stavrou: “I find a lot of restaurant businesses, especially the smaller ones, are fairly blasé about insurance and will say ‘look, just cover me for $100,000 in contents insurance’ when in reality they should be covered for $400,000. So you point out the under-insurance clause and they say ‘no, no, she’ll be right, she’ll be right’, then they have a small mishap and they ring up and say ‘look, you’d better increase it to $250,000 or $300,000’—but by then it’s usually too late to claim the full amount.”

Javed Khan, owner of Delhi ‘O’ Delhi in Newtown in Sydney’s inner west, acknowledges the importance of being fully insured to cope with unforeseen events. “Definitely one of the most important and basic things you’ve got to have is insurance to protect everything involved with the business, including the staff,” says Khan, who has worked in the restaurant industry for 20 years, here and in India. “It’s very reassuring, of course, to have insurance but the dangers involved are really not a big issue for me. These things are unforeseen and you can’t rule them out.”

Brokers now also offer restaurant businesses insurance cover called management liability, which protects owners against being sued for wrongful dismissal or sexual harassment. Stavrou cites the case of a restaurant whose owner was fined more than $400,000, forcing the business to close, after one of his chefs harassed a waitress who later committed suicide—even though the owner wasn’t aware of the harassment and wasn’t a party involved in the case.

“Management liability cover would have protected him,” Stavrou says.

Lisa Hobbs of Dedes Waterfront Group says the group’s relationship with their brokers offers the necessary coverage but also, importantly, peace of mind for the restaurant group’s managers.

“We don’t follow things up concerning insurance, our broker follows it up for us,” says Hobbs. “Especially with any new venues opening, OAMPS is very quick to act. Hospitality is an ‘instant’ industry, nobody wants to wait for anything, so it’s important to have an insurance company on board that can provide full coverage promptly and efficiently.”

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