Why Excess Liability Coverage is Essential for Hospitality Businesses

Restaurants and hotels alike are presented with new and difficult risks on a daily basis. Full of flames, food, sharps, and a revolving door of patrons, risk is in the nature of the restaurant businesses. The same is true for hoteliers, hosting large numbers of guests at a time and providing them with top-tier, sometimes hazardous, amenities. While hospitality businesses might already have a basic insurance policy in place, it is not enough. 

Common Hospitality Risks Can be Catastrophic

We see massive million dollar verdicts make headlines all the time, from the Mandalay Bay mass shooting settlement in 2017 to the ongoing McDonald’s workplace safety class action lawsuit. Catastrophic events like these can mean the end of a business, but the fact is, large losses can happen at any time. Everyday exposures, like slip and falls and elevator accidents, are behind most large claims. This is in part due to the fact that the everyday exposures for restaurants and hotels are inherently more risky than those of other businesses, but also today’s litigious environment. 

Claims that would have previously resulted in a $1 to $2 million settlement now reach anywhere from $5 to $100 million. Unexpected, seemingly innocuous situations are resulting in large losses. Many factors are responsible for the skyrocketing settlements, including juror anti-corporate sentiment and plaintiff sympathy, the jurisdiction’s location, an aggressive plaintiff bar, among others.

Umbrella Policy Strengthens Other Coverages

Aptly named, umbrella insurance blankets over existing insurance policies. Excess policies can cover a range of different liabilities, including bodily injury, commercial auto coverage, liquor liability, property damage, health and sanitation issues. In short, umbrella policies bolster all existing policies purchased by a business. 

Excess liability policies serve as safety nets. They build on basic policies and expand coverage to provide extra protection in the event that existing limits are exceeded. For instance, let’s say a rowdy, intoxicated customer leaves a restaurant and goes on to burn down a building and the person whose property was damaged decides to sue the restaurant that served the man alcohol. They win and court costs, attorney fees, settlements, and any other incident-related cost, totals $2 million, well over the restaurant’s liquor liability policy’s $600,000 coverage limit. Without excess coverage, the restaurant would be left to fend for themself. With an umbrella policy, however, the gap would be covered and financial collapse would be averted.

While restaurateurs and hoteliers should make risk mitigation their top priority, it is impossible to foresee all accidents. In the hospitality world, the inherent risks and liabilities make purchasing excess liability insurance essential.