Hotel franchisees spend countless hours considering the perfect location for their new business, but often neglect to take that same consideration when insurance enters the picture. But franchise agreements can be complicated, often requiring certain coverage enhancements beyond simple limit requirements. That’s where a limited-service hotel umbrella policy comes in handy.
This type of policy offers just the type of coverage enhancements required by the franchisor. Hilton, for example, requires worldwide coverage, which extends coverage of the insured to any geographic location (except in countries subject to trade or economic sanctions/embargoes by the U.S.).
Another common franchise requirement, per-location aggregate limits, allows a franchisee to have separate claims ceilings for each location. Consider the franchisee that has hotels in Manhattan and Yorktown. If lighting strikes two places at once and lights fires in both locations simultaneously, the compensation for any injuries can be dramatic—but because each location has its own limit, the franchisee has two separate insurance pots to draw from.
Other common limited-service hotel franchise requirements include:
- No cross-liability exclusion on primary or umbrella
- Waiver of subrogation in favor of the franchisor
- No assault & battery or abuse & molestation exclusion or sublimit
While coverage enhancements may not be top-of-mind for potential hotel owners, having correct coverage is vital to protecting one’s investment and future customers. Brokers can—and should—play a key role in keeping their clients informed and aware of the often-complicated web of requirements mandated by limited-service hotel franchises.
