Insured & Secured

How

Choosing the right policies can make the difference between success and failure should anything happen to your business

Nightclubs and bars are places of fun and relaxation, but they’re not just that if you’re the owner – they’re a livelihood. An often forgotten, or neglected, task is that of properly insuring your business, but it’s an extremely important part of being an owner.

“Often [bar and nightclub owners] buy a general liability insurance policy simply to satisfy their landlord's lease requirements without fully understanding that the standard general liability policy does not cover claims that arise out of the service of alcohol,” says Ken King, primary casualty at Golden Bear Insurance, Stockton Calif.

Don’t put off what you can and should do today; you may not realize the importance of insurance until you’ve had a claim, but don’t let it get to that point.

Nightclub & Bar highlights the most essential policies for your business:

Liquor Liability

Liquor liability insurance is the most important insurance for bars and nightclubs, says Kevin P. Foley, president, PFT&K Insurance Brokers in Milltown, N.J. This protects your business if someone who’s been drinking with you accidentally kills or injures someone driving on the way home from your bar, for example. “They don’t even have to drink at your bar but if they were just there, you need this,” he says. Almost all liquor liability claims are auto-related. In fact, points out King, in 2013 there were 10,076 fatalities from automobile accidents involving a driver with a blood alcohol content of 0.08 or higher. These accounted for 31% of all traffic fatalities in the year.

This insurance also provides protection in case your bar staff mistakenly serves alcohol to a minor who then causes death or injury to a third party. Be sure to include your employees as patrons under this insurance in case they have a drink before leaving for the night. Your deductible for this coverage should be at least $1 million.

Assault & Battery

Assault and battery is a vital insurance, says King. “If there is a fight or a security person roughs up someone, or there’s even an allegation of that and the injured person retains an attorney, the bar owner will have to respond to whatever suit that person files,” he says. However, assault and battery insurance includes any defense costs a bar or club runs up. There’s an added bonus of this insurance, King says: “Insurance companies know good attorneys and will help secure that person and assume that defense.”

This insurance is especially important if you have a bouncer, says Michelle Pray, niche president, consumer services with ProSight, Morristown, N.J. This insurance is sometimes covered under commercial general liability policies.

General Liability

Just as it sounds, this umbrella-style policy covers many things, from a customer falling in the bathroom, to someone contracting a foodborne illness, “though it doesn’t cover the liability of others to whom you’ve served alcohol,” King says. It can, however, offer coverage beyond the liquor liability policy. This is basically to prevent harm from coming to the public, Foley points out. Do some homework and find out exactly what is not covered in your policy.

Workers’ Compensation

Every single state requires you to have workers’ compensation insurance. “This covers anything that happens to your workers when they are on the clock,” King says, even something seemingly minor such as a slip and fall.

Commercial Crime Insurance

According to the National Restaurant Association, internal employee theft is responsible for 75% of inventory shortages and is an $11 billion problem in the U.S. Commercial crime insurance can protect you against this, as well as robberies from patrons or an outside party. This is particularly important if you have a messenger who takes a lot of cash to the bank every day, if you keep large deposits in your building overnight, or if you have a lot of stock (alcohol and cigarettes are target items), says King. It’s a good idea to set a high limit on this, since you can recoup only as high as you’re insured. So, if you have a $1 million limit and $1.5 million is stolen over the course of several months, you’ll only recoup $1 million.

Business Income (or Business Interruption) Insurance

Most bars and nightclubs are small businesses, and if something happens to that business it spells big trouble for the owner(s). If your building burns down or a natural disaster (except for an earthquake, which is not covered) occurs, this protects you. It covers both a) any income you lose during the time you’re closed; and b) expenses, such as utility bills and some paychecks (such as those of managers and highly skilled kitchen staff, but typically not hourly workers) that still need to be paid.

“This is something most people overlook, but if your building burns down not only do you need a new building, you don’t have customers or income coming in. So, this allows you to keep operating while you’re being rebuilt,” King explains.

Property Insurance

Property insurance covers all the inventory you have on stock as well as the building you’re in, and all your equipment, from your refrigerator to your sound system.

Employment Practices Liability (EPLI)

EPLI protects you against lawsuits from employees, such as discrimination claims, says ProSight’s Pray. It covers everything from harassment to wrongful termination.

Insurance: Important Points to Remember

  • If you don’t have insurance you’ll have to get a lawyer, which will cost you a lot more.
  • Get the highest limits you can.
  • Find insurance partners that specialize in your industry and can provide a comprehensive insurance that not only covers you but also enhances their operating performance, says Michelle Pray, niche president, consumer services with ProSight, Morristown, N.J.
  • Alternatively, hire an independent risk management and insurance consultant who does not sell insurance.
  • Don’t be shy about negotiating with insurance agents, and tell them why you think their rates might be a little high.
  • Don’t pick the cheapest insurance policy because of what’s likely missing from it. Instead, opt for a mid-priced policy because you can always add to it.
  • The more food you serve, the lower your insurance premiums. Look at it this way: Food is the sponge that protects your customers from their own indulgences.
  • Basic safety training for your bartenders and your cocktail staff can reduce your premiums in your liquor liability coverage by 15% to 20 percent. This training should include recognizing when a customer is intoxicated or mixing alcohol.
  • Things that can cause your premiums to rise: Bottle service at tables; happy hours that go longer than a couple of hours or go past 7:00 PM; $1 shots; and unusually low drink prices.
  • Consider everything that could cause harm to patrons, from falls from a mechanical bull to facial burns from a flaming drink.