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Are you covered?

10 ways you’re exposed to liability and what to do about it.

The disaster: Something bad happens close by that affects your business in a big way: a flood, a major tourist magnet goes out of business, a storm damages the area. Say your place doesn’t have to shut down, or maybe only closes for a couple of weeks, but because of the devastation to the area you have no foot traffic. You might as well be closed. Once you open your doors, your loss-of-income insurance stops making payments, unless you pay higher premiums for longer term coverage.

­The contractor: They should have at least $1 million in general liability coverage, recommends Mike Modlin of Firemen’s Fund Insurance. Also, ask for a “hold harmless” agreement, which will ensure you’re not liable for a contractor’s negligence. If you don’t, you might not just get stuck with repair costs, but your premium could go up.

The vendor: A supplier sends you a batch of bad meat and your customers get sick. Who pays? If the supplier
doesn’t have adequate insurance, you do. Get a certificate of insurance from your vendor showing the types and levels of coverage. Keep in mind you could still be liable if you can’t prove the problem existed when you received the product.

The valued employee: You’ve got loss-of-income insurance if your restaurant shuts down for an extended period, but does it cover the lost earnings for employees you can’t afford to lose—a chef, a longtime waiter customers come to see, a maitre de? Are their tips covered?

The building: Even though you spent $6 million for the building and equipment, it will probably cost more to rebuild and replace everything. Readjust annually, taking into consideration increased equipment and building costs.

The alarm: If you have a policy that gives you a credit for having a 24-hour alarm system, make sure to keep the
system in working condition and keep your contract active with the security firm that monitors the system. If your place is robbed and the alarm doesn’t function properly, your claim could be denied.

The vino: If your wine collection is insured, you’ll only be covered for the price you paid for the wine, not the menu price, unless you stipulate otherwise—and pay a higher premium.

The parking lot: If you lease your parking lot, don’t assume the lot’s owner will be held liable for problems there. Secure a “hold harmless” agreement from the owner, relieving you of responsibility for his property.

The delivery guy: If you have a delivery business—even if it’s negligible—screen your driver. If he lacks proper insurance or has a bad driving record, you could be liable in an accident. Also, if a driver goes to a bad part of town and is assaulted, you might only be hit with a workers comp claim, but you could be sued for negligence if your state allows suits above and beyond workers comp.

The slip and fall: If a customer or employee falls document it—what was the condition of the floor, was it wet or dry, had something been spilled, what kind of shoes was the person wearing? Interview the person and witnesses about what happened; and take photos, lots of photos.

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