SullivanCurtisMonroe Insurance Services LLC, a California-based insurance agency, has provided five risk management tips for the foodservice industry.
- Coverage for supply chain risk. Supply delivery can be interrupted by many factors, including adverse weather, infrastructure issues, price increases or damage to a supplier location. Loss of even one dependable supplier can lead to a loss of income, and can affect the quality, consistency and service of a foodservice provider. Business interruption insurance can cover the loss of business income and extra expenses that result when a supplier located within a policy territory fails to deliver because of damages resulting from a covered cause of loss. According to SullivanCurtisMonroe, dependent properties should be insured with a limit of at least $50,000. If your business depends on foreign locations, your carrier should provide coverage for them, as they are likely more prone to supply disruption than domestic suppliers.
- Equipment risk management. Equipment breakdown insurance covers the cost of mechanical breakdowns, damage caused by power surges, operator error and more. Business interruption insurance covers any income lost because of equipment failure. Some carriers will help prevent breakdowns by offering infrared testing, inspections and assistance in sourcing replacements for damaged equipment.
- Spoilage and contamination coverage. Power outages and other issues beyond your control can result in spoilage or contamination of food. Spoilage coverage with limits of at least $250,000 is recommended, with the ability to increase limits. Food is worth more at certain times of year than others, so your carrier should be willing to increase your limit during peak season by about 25 percent.
- Food safety and recall risk. An estimated 48 million illnesses are borne by food in the U.S. each year, resulting in 128,000 hospitalizations and 3,000 deaths, according to the Centers for Disease Control. Food poisoning from contaminated food can cause widespread illness and even death, so coverage of up to $25 million is recommended. Your business will need coverage not only for protection against lawsuits, but to compensate for lost market share and reduced goodwill. In addition, a limit of at least $100,000, with the flexibility to increase limits, is recommended to cover the cost of withdrawing a product from the market. Many food manufacturers make products for others, which are sold under the customer's label, so coverage should include reimbursement for recall costs incurred by others.
- Computer and Internet disruption protection. Forty-six percent of companies experience a data breach, yet only one in 10 businesses has cyber-liability coverage. Restaurants are at particular risk because of the large amount of personal and financial data, including credit card and bank account numbers, they keep on file. Business interruption insurance with a limit of at least $10,000 is recommended to cover lost income caused by interruptions in computer operations. Cyber-liability insurance covers data breach services and expenses, including identity restoration, forensic analysis, costs of notification and more. It also covers other expenses, such as legal services and public relations services.
"It takes attention to many details to create a profitable food business, including the freshness of ingredients, the right equipment and a dedicated, service-oriented workforce," said Craig M. Kwitoski, vice president, Food Industries Division Manager, SullivanCurtisMonroe. "Even with these ingredients in place, though, an accident, a lawsuit, an act of nature or a deliberate act by a disgruntled ex-employee can destroy a business. Businesses that are protected against such risks are more likely to succeed long-term."
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