General Liability Where Gross Sales Isn’t The Rating Basis!
Traditionally, the General Liability (GL) portion of a Commercial Package Policy (CPP) used sales as the rate basis to determine rates.
Business Owners Policies (BOP) base General Liability rates on the amount of property at the insured location instead. Some hospitality businesses still benefit from this rate structure, like delicatessens that don’t have deep fat fryers or table service.
Full service restaurants aren’t so lucky. Their BOP functions much like the CPP for liability rating – with sales providing the basis for General Liability rates.
What is General Liability Anyway?
General Liability insurance protects your business from Bodily Injury and Property Damage claims made against your business.
Common GL claims for restaurants would be
- Someone chips a tooth on their food
- Slip and fall in the parking lot
- Alleged food poisoning
- Server spills food on patron, possibly burning them, but also ruining their suit
Get a BOP that Beats the Insurance Audit!
There are some BOP policies that rate for liability based on square footage open to the public instead of sales. This rating structure allows you to use a STATIC feature of your restaurant to generate your liability premium.
Since square footage doesn’t change even if your sales increase, you won’t be penalized when your restaurant turns more tables!
The Commercial Package illustrated above estimated $300,000 in annual sales, but in reality the actual sales for their first year were going to be closer to $900,000 to $1,000,000 in gross sales.
If this restaurateur hadn’t switched, at the end of his policy he would have been looking at a MASSIVE insurance audit bill.