A hospitality establishment ’ s insurance policies will reflect the unique characteristics of the type of business being operated and the location in which it does business. For example, a restaurant on the United States Gulf Coast may well feel that hurricane insurance makes sense, while the same type of operation in South Dakota would not. Similarly, the resort that offers overnight camping excursions for families may desire insurance against animal attacks, while the yogurt store in a shopping mall would be hard – pressed to justify purchasing such a policy.
Insurance companies offer a wide variety of products designed to meet the needs of their customers. Because this is true, hospitality managers must be very careful to make sure that they select the proper insurance coverage for their specific situation. With too much coverage, or with coverage that is not necessary, operational profits are reduced because premium payments are unnecessarily high. With no insurance, or too little insurance of the right type, however, the economic survival of the hospitality operation and its members may be at risk.
Many states have laws requiring businesses to carry certain types of insurance, at specified minimum amounts, in order to conduct business within the state. In addition, when hospitality firms lease space in buildings, the lease agreement may also require them to carry minimum amounts of insurance.
While the specific types and amounts of insurance needed for any given hospitality operation will vary, the following types of insurance coverage are common.
1.Property – Casualty
Just as its name indicates, property – casualty insurance is purchased to protect against the loss of property. These losses include damages incurred due to a fire, flood, or storm. Some insurance companies will classify threats to property in different ways, but in all cases, property – casualty insurance protects property and its contents. The determination of which risks to insure against must be made on the basis of each hospitality operation ’ s special circumstances.
Property – casualty insurance, in its many forms, is the most common type of business insurance purchased. It may be purchased in policies covering losses as small as a few hundred dollars or as large as many millions of dollars.
2.Liability
General liability insurance is selected when you wish to protect against injuries to other people resulting from the operation of your own hospitality facility. There are a variety of liability insurance types on the market today. The following are some of the most popular.
Property damage liability coverage is selected when you wish to protect against claims resulting from damage to the property of others. Personal injury liability coverage provides you with protection for such offenses as false arrest, libel, slander, invasion of privacy, and food poisoning.
Advertising injury liability coverage helps cover your legal liability for offenses arising out of the advertising of your business ’ s goods and services. Insurance companies have the right and obligation to defend any lawsuit against their insured customers that seeks damages for bodily injury or property damage, even if the allegations in the suit are groundless, false, or fraudulent.
The insurance company can also enter into any settlement agreement it deems expedient. It is important to remember, however, that the company is not obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company ’ s liability has been reached or that falls outside the coverage of the policy.
3.Employee Liability
An employee liability policy is selected when, as an owner or manager, you wish to supplement your general liability coverage with additional coverage for any harmful acts your employees may commit in the course of their employment. Some areas of coverage to be considered include those related to:
- Wrongful termination
- Workplace harassment
- Sexual harassment
- Breach of employment contract
- Discrimination
- Failure to employ or promote
- Deprivation of a career opportunity
- Negligent evaluation
- Employment – related misrepresentation
- Defamation
- Theft
4.Dram Shop
Liquor liability, or dram shop, insurance provides establishments that sell alcohol coverage for bodily injury or property damage that may result from any or all of the following acts:
- Causing or contributing to the intoxication of a person.
- Serving alcoholic beverages to a person under the legal drinking age.
- Serving alcohol to an intoxicated person.
- Violating any statute, ordinance, or regulation relating to the sale, gift, distribution, or use of alcoholic beverages.
Serving alcoholic beverages in today ’ s society makes a hospitality manager subject to great risk. Dram shop insurance is truly a necessity in today ’ s legal environment, and states may require it as a condition for granting a liquor license.
5.Health/Dental/Vision
One of a hospitality manager ’ s greatest costs, and one that continues to rise dramatically, is that of employee medical insurance. While medical coverage such as health, dental, and vision insurance is not a requirement, the degree to which it is offered can have a significant effect on a manager ’ s ability to retain and maintain a quality workforce.
Like all types of insurance, the variety of coverage available in medical insurance is tremendous. In addition, this is one area of insurance where the cost is generally split, in some manner, between the employer and the employee. Employers can choose from contributing 100 percent of medical insurance premiums for their employees to simply making such coverage available to employees on a voluntary basis. Employees often depend on such coverage for their families and can maintain that insurance even if they lose their jobs.
6.Workers ’ Compensation
The Workmen ’ s Compensation Act of 1908 was the first effort to provide injury – related insurance to those workers who were hurt while on the job. This law, passed by Congress, and covering federal employees, spurred the states to enact similar legislation covering workers in their states. Today, all states require public and private sector employers to provide some form of mandatory workers ’ compensation insurance. Workers ’ compensation policies provide payments to workers or their families in the event of an employee ’ s injury or death.
Coverage normally includes medical expenses and a significant portion of the wages lost by the employee being unable to work due to the injury. In more serious cases, lump – sum payments can be made to those workers who have been partially or permanently disabled. In addition, if a worker is killed while on the job, payments may be made to the worker ’ s family.
The injury must have happened in the “ course and scope ” of employment. The courts have broadly defined course and scope to sometimes include commuting to and from the place of employment, during mealtimes, or on or off the work site. Injured employees are generally prohibited from suing their employer for damages beyond those awarded by workers ’ compensation. Only in the case of gross negligence or an intentional act will an employer potentially be subject to paying greater damages than those normally imposed by workers ’ compensation.
It is important to know that some states will designate specific doctors who will examine those employees who appear to have been injured. This is an effort on the part of the state to hold down premium costs and reduce incidents of fraud. It is also important to remember that employers cannot claim the negligence of the worker as a defense for a work – related injury. Usually, only in cases where the worker has been proven to be under the influence of drugs or alcohol at the time of the injury, or if the injury was fraudulent, will an employer be able to mount a legally valid defense against a workers ’ compensation claim.
In cases where another employee or third party has caused a worker injury, or when the employer challenges the legality of a worker ’ s claim for compensation, a hearing is held before the state workers ’ compensation board. A judge will determine whether or not the claim has merit, and how much compensation the worker is entitled to receive, if any. Both parties have the right to appeal the judge ’ s decision, if they choose.
Because some form of workers ’ compensation is mandatory in every state, the failure on the part of management to provide it is punishable by fines and/or imprisonment. Employers are also required by law to accurately report on – the – job accidents to the state agency overseeing the workers ’ compensation program. This information is significant, as the cost of providing workers ’ compensation insurance varies based on the safety history of the employer and the potential risk of injury to employees working for a specific employer.
Many state workers ’ compensation boards use experience ratings, which categorize businesses by the number of injury claims that are paid out, to determine the amount of insurance premiums that will be assessed. Depending on the state in which they are operating, an employer may provide workers ’ compensation insurance through a private insurance company, a state agency, or itself. If the state allows a self – insurance option, the security deposit required can be substantial since, under the self – insurance option, an employer might be solely responsible for the payment of large awards in the case of a serious accident.