Premiums and Protection
Good Insurance Coverage Requires Thought

    The first thing that generally comes to mind when seeking an insurance policy is “Who can offer the cheapest rate?” says Sherri McCullers, president of Coast to Coast Commercial Insurance in Oldsmar, Fla., an insurer that specializes in comprehensive policies for nightclubs, bars and other hospitality-related businesses.
    Yet as operators inevitably discover, McCullers says, “Your business is one of your most valuable assets, and it is the responsibility of the insured to help his or her agent to protect that asset.”
    But where do owners begin?
    For Daniel G. Fink, a veteran insurance writer with Resort Insurance Brokers/Ideal Insurance of Arizona, it starts with viewing one’s insurance coverage as a critical component of the total operations strategy.
    “Insurance is just one step in the total management picture,” Fink says. “It is one way to protect the bar owner. A wise nightclub owner should not just buy insurance and throw the policy in the drawer. He should definitely be aware of protecting his assets, and that is an on-going process. Good insurance is a transfer of risks over to an insurance company.”

Key Issues
    No two clubs are alike when it comes to deciding the kind and the amount of insurance coverage to carry, says Fink, who writes comprehensive coverage that protects bars, clubs and restaurants from loss as a result of property damage, assault and battery and alcohol-related lawsuits, as well as the everyday slip-and-fall incidents that are common claims in all businesses that cater to the public at large.
    “You could have two nightclubs that look similar on the outside, and one may be paying $10,000 in premiums and the other $40,000,” Fink says. “You and I may both have a Ford Excursion, but our rates may be differ because of driving records and family members. So many things factor into the rate.”
    In assessing their individual policy rates for property and contents coverage, owners often are at the mercy of circumstances they cannot control, Fink says.
“Is the building frame or is it metal construction. Is it sprinkled? And how good is the fire department that responds.”
    With assault and battery coverage however, an operator ultimately controls his or her own destiny, Fink says.
    “The key coverage is assault and battery,” says Brad Sharon of Fairmont Insurance. “There are a lot of guys out there who will purchase general liability policies, and their brokers won’t have the facilities to provide assault and battery. But there are carriers that are giving those coverages. Without assault and battery coverage, one claimant can really knock you out of business. For venues that outsource security, a lot of times owners will request from the security company a certificate of insurance,” Sharon says. “A lot of these owners don’t realize that those security companies’ policies may not include assault and battery. These owners should request proof of insurance that specifically states that assault and battery is included and state what limit of coverage is included for that.”
    “When you have a nightclub and a younger crowd (where) fights break out, the insured should purchase an assault and battery sub-limit,” says Carol Kristiansen with KEL Insurance, which specializes in packaging coverages for hospitality venues — offering a package to include general liability, liquor liability and assault and battery, and property.
    “A lot of times what happens is that agents who are not familiar with the industry will not encourage the insured to purchase loss of income coverage, which comes under the property coverages,” Kristiansen says.
    “That will cover them if a fire burns them to the ground, and they’re out of business and looking to rebuild. It would pay them income for anywhere from three to six months.
    “Right now, because it’s a soft market, you’re seeing a lot of owners going without coverage, which is really not a good thing.”

Liquor Liability
    Although slip-and-fall types of claims are the most common across the country in general, Fink says liquor liability claims have proliferated in the litigious environment of the United States in the last few decades. And it is this area of insurance coverage that represents one of the biggest risk factors faced by the bar industry today.
    “If someone who has been at your bar goes out and hits someone, you don’t know if they are going to sue you for $50,000 or $50 million.” Fink says. “People are always looking for that golden egg, so if they get injured … they look for the deep pockets.”
    Of course, insurance coverage isn’t magic. Operators can help themselves and their insurers by practicing due diligence on-premise.
    “Controlling liquor consumption of patrons should be a top priority,” Sharon says. “One of the best ways to do it is by restrictions at the bar. One recommendation is limiting the number of drinks, such as limiting each person buying a drink to one drink per ID, for venues that check ID at the bar.”

Determining Value
    When advising her clients about insurance coverage issues, McCullers suggests that property values be reviewed by the insured or, better yet, by an outside party.
“I suggest that if you have not used a professional appraiser in the past you should do so,” she says. “Make sure that when you are insuring a building that you carry the correct limits. This is also true for your contents, signs and other coverage you may secure. (And) make sure that the agent is aware of any and all additional … loss payees who will need to be included on the policy.”
    Because liability rates are based on gross sales, McCullers says it is also important to give agents accurate sales numbers. “Many companies are now requiring that (those being) insured provide them with financials. More than once I have seen clients get hit with additional premiums after they secure a policy because they did not give correct sales figures.”   
    It is also beneficial to an operator to read the fine print in a policy before it is signed, McCullers says.
    “When the agent comes back to you with a quote, find out what company the coverage is being placed with. You can check out the company online with your state Web site or AM Best. Make certain you know what the company will require from you.”                             NCB