You just got a new catering job. The income is good the price is right and the job is easy. Your insurance should be "okay" right? Maybe yes, maybe no…
If you're like so many other pizzeria owners, you've been thinking about finding new sources of revenue. Some of those may be different from your current business and may take you AWAY from your shop. It could be doing some catering, or taking a mall "kiosk" or doing some school cafeteria work. You might even decide to do a local trade show to get some attention or take a booth at "street fair." All are good strategies when it comes to increasing revenue, but will your business insurance follow you – or are you "Going Out Naked"?
There are three main areas I want to focus on when it comes to doing work off premises: property issues, liability issues and worker's comp insurance. Now, these are certainly not the only areas you should consider, and you should always consult your lawyer and CPA when you get involved in any new business venture. You can't rely on this as your only source of insurance information. Whatever I discuss in these articles is always subject to your home state's insurance regulations. That having been said, let's take a look.
• Property Issues: For the sake of discussion I will refer to your property/business income as a package. These are commonly packaged for insurance purposes and depend on each other for "triggers."
• Liability Issues: These are the exposures you generate from the daily operation of your pizzeria. Not all are insurable and some are a matter of normal "business risk."
• Workers Comp Insurance: This is the all-important exposure you generate by having someone work for you. It is a heavily regulated area in most states and is NOT dependent on how you classify your workers for tax purposes.
The first thing you MUST know about property insurance is that it is location specific. Read your policy – you will see that it covers the "described property" at the "described premises." And, it makes sense. The insurance company prices your insurance based on what you have to insure, where you want it insured and the condition of the place you want it insured in.
Example: My pizzeria in a new masonry non-combustible strip mall with sprinklers is less susceptible to property losses that your pizzeria in the oldest frame building in town that's not even served by fire hydrants. Plus, the location and the character of that location (i.e. security, location, construction, etc.) are known quantities and are priced accordingly.
So, once you take your property "off premises" there are problems. If your policy is typical – the property you have insurance for "on your premises" will NOT be insured "off your premises." Now, most policies will include some token coverage for property off premises, BUT this is usually limited by the amount of property covered and what it's covered for.
If you do a catering job, you may have much more "off premises" than you think. Start adding up the cost of disposables, food, equipment and the like and you may find yourself in for a surprise.
What if the property is not all yours…if you rented the tableware, the tables, linens and the serving dishes? What does your policy say about "property of others" that is "off premises?"
Starting to get the picture? And it's not just catering – how about taking a table at a street fair or trade show? What could that add up to? And what's covered and what's not? What about any cash you generate at the venue, what if it's stolen?
What if the venue itself is damaged and you can't do your catering job? What about the resultant loss of income? As a general rule – if it isn't listed on the policy, it isn't covered. Don't take this lightly – I know of places that make thousands with a stand at local street fairs.
Now, things get more complicated. Liability policies typically have a broad coverage grant that includes the entire United States as the covered territory. But � the policy will also rely on your application as the governing document when policy is issued. So, when the application asked something like "do you have any other business locations other than the named location?"
And you said "NO" – you were not disclosing the fact that you did one or two off premises street fairs or a few catering jobs, and a trade show. Did that change the nature of the risk the insurance company accepted? Maybe. Can they use that to contest a claim? Yes. Will they? Maybe.
Now, before you go ballistic on this one – think about it. As an insurance company you may be perfectly content to insure pizzerias all day long, you just may NOT want to take on the risk of a temporary vending operation at an open air un-controlled street event, or an unknown undisclosed catering location that could be anything from the World Class Yacht Lines to Bubba's Back Bay Bachelor Beer Hall.
Now, catch this one – there's nasty little form out there that I just plain dislike. It's called a "designated premises" endorsement. Its about five lines long and is written in "insurance speak," but the bottom line is that it limits all insurance to the "premises designated" in the policy. So, if the policy says your premises is 123 Main Street, Anytown, USA – that's the only place you have insurance.
What's the big deal? Well, some insurance companies use this as a "catch all" to close the door on any possible claim that did not happen on your premises.
- Your employee walks two doors down to deliver an order to a regular customer. While there he knocks over the soda into your customer's computer. Sorry, not on your premises.
- You go to the Restaurant Depot to pick up a short order on cheese. While there you hit someone with the cart. Sorry, not on your premises.
- You go to the Pizza Trade Association meeting and some one trips over your feet during lunch. Sorry, not on your premises.
- You go to the New York Pizza Show and while you are there. . . . Sorry, not on your premises.
I had a talk with the underwriting manager of a local New York insurance company. We were discussing using his company for some pizzeria accounts. As we got into the details, he dropped into this into the conversation "Of course, we will add a 'designated premises endorsement." Acting the innocent, I asked, "Now, why do you think you need that?'" The answer was " Simple – we don't want to be involved in anything these guys do outside their four walls."
If you see a "designated premises" endorsement on your policy – get it off there, now! By the way, do you know what the premium reduction is for putting this restriction on your policy? It's zero.
WORKERS COMP ISSUES
Let's get this out of the way now. You have employees – even if you choose to call them something else – you have employees. If you don't have workers comp insurance – stop reading now and go buy it. Now then, workers comp is a highly regulated form of insurance and it is designed to take care of injured workers. It is subject to regulatory bodies in every state as far as I know. This should tell you something, namely, that if a worker is hurt that worker probably has access to benefits – either an insurance company pays or YOU pay – but someone will pay.
Now, let's take a look at your workers comp policy. The main page, the declarations page, in item number one lists your name, and address has a line titled "all other workplaces." Now, if that line is blank, it means that there are no other work places and it could cause a problem. Clearly, if you have two shops, both locations should be listed on the policy. But what about those temporary locations, like the catering job, the street fairs and the trade shows?
Well, there's two ways to deal with those. First, Get the company to put in the wording "and various other locations." I have to tell you its not likely they'll do it – but it is certainly worth a shot. Second, be sure your application discloses those other workplaces and exposures. If these operations are new to you, insist on having a "change request" filed with the company that specifically says you may do these things "from time to time." Keep a copy of the request with your policy – this piece of paper can be "gold" if you ever need to prove you told someone about these things.
With that in mind, keep decent payroll records and a roster of ALL temporary help you may have had. I've seen cases where someone has claimed to be an employee that got hurt on a job and never even worked at the place!
So, when you take on temporary help for temporary jobs, strange things can happen. A good safeguard is to keep an individual file for each and every off premises job you do. That file should include the date(s), time(s), personnel list and description of the function. Example: February 14th catered the Valentines Dance at Sadie Hawkins Memorial. Served 52 dinners from 7 to 10 p.m. with the attached roster of personnel.
Now, for the oddball stuff. What if you do some work on a boat, or barge, or pier or near the shoreline. Well my friends, you are in for treat. Welcome to the world of the Long Shoreman & Harbor Workers Act – USL&H for short. If you have any employees that work on, near or around navigable waterways, you may be subject to this little gem. Now, I grant you that things have tightened up and that courts may not be so quick to apply this to your normally land-based workers. But, if this one does apply to you, and you don't have the coverage extension on your policy, you can responsible for the difference between your states' workers comp wages and the Federal Harbor Workers Act wages. In some places this amounts to a small fortune.
Suppose you do a summer booth at the boardwalk, on the oceanfront, on a pier, or a regular catering job on a sightseeing boat? (One of my customers actually did!) Do you think it's worth asking about? You can bet your kids' college tuition money it is, and you'd better ask!
How do you know if you are subject? You'll find out when the plaintiff's lawyer files for benefits. But to be safe, I'd ask for the coverage if there is any chance at all that your people work on, near or around navigable waters. If the insurance company says you don't need it – then at least you've done your part and they will have to defend their decision not to give you the insurance. Does it cost more? Of course! How much more? Not much. You'll have to get the exact price from your local agent.
Are there other things to worry about when you work off premises? Sure there are, but I think we've done about as much as we can in this space. I'll tell you this, left unchanged; "off the shelf" policies are usually not up to the task at hand. You need to sit down with your insurance agent and hammer these things out.
My standing offer – if you have any questions, feel free to call me at 201-945-3100 or e-mail firstname.lastname@example.org. I'll do my best to help you or get state specific help where needed.
P.J. Giannini is an author, national seminar speaker, consultant and licensed insurance agent. PJ is founder of Association Agency, Inc. and has spent over 15 years as a commercial insurance niche marketer.