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Why does a hospitality business need liability insurance?

If you're in hospitality, public interaction is at the core of what you do. The right insurance gives you peace of mind that you’ll have enough funds to get back to business if something goes wrong.

Why do I need liability insurance?

Even if you run only a small business or hospitality operation, you may find yourself operating on public premises – and that carries risk. If someone is injured or their property is damaged in your premises, public liability can cover your business for legal costs, medical expenses, and damages, the expenses incurred by rendering first aid to others and compensation for any damaged or destroyed customer property. 

Meanwhile, product liability can cover your business if it is sued by a third party as a result of injury or illness caused by your food or drink. You can still be liable if you are providing food or beverages produced elsewhere.

As a hospitality professional you will have: evaluated the particular risks of your operation and the premises it’s located in; come up with a plan to deal with foreseeable incidents; and trained your staff for events where things might go wrong.

However, with so many customers and staff coming and going, the risks of an accident can still be uncomfortably high, considering the potential significant consequences. For example, you might be running the hottest new wine bar in the city. It's a busy night, the venue is filled with happy people and everyone is having a good time, but a misplaced stool creates a trip hazard and a patron takes a tumble. 

The right liability insurance will also give you the peace of mind you need to successfully run a very busy hospitality operation, so that becoming too popular won't be something you have to worry about.

Another hazard can stem from food preparation and storage. An inoperative or damaged fridge or freezer creates a risk of food poisoning for patrons and staff. It’s important to have liability insurance to protect your business in case this situation accidentally occurs, and the addition of equipment breakdown cover can help minimise the risk.

Consider this real scenario: The coolroom compressor in a western Sydney restaurant breaks down, potentially placing the business and its patrons at risk. The compressor repair, worth more than $2500, is covered under equipment breakdown insurance and ensures the restaurant can continue to operate safely.

Other major risks for cafes, restaurants, nightclubs, hotels and other hospitality venues include fire, crime and customer injuries – whether due to patrons, staff, the premises or other causes.

The five most common liability claims for AAMI’s hospitality customers are for:

  • Slips, trips, and falls. A large number of these injuries are caused by customers slipping on wet floors, often after closing time, when the staff were cleaning up for the day. The customers did not realise the restaurant was closed and have slipped on the wet floor as they entered. You should always ensure you have placed warning signs, even when you’re closed.
  • Foreign objects in food. These claims normally arise when the object causes an injury to a customer, such as damage to their teeth. Many claims have been caused by a wide range of unusual objects. AAMI has received claims where metal screws, pieces of perspex, metal shavings or fragments of wood have managed to find their way into foods. Olive pips or seeds left in dips or sauces have also caused dental damage claims.
  • Food contamination. Food poisoning claims are also reasonably common, particularly when they involve home-made products.  AAMI has received many food poisoning claims caused by foods involving raw eggs, such as home-made custards and mayonnaises, or cured meats, such as salami. 
  • Collapsing umbrellas and flying signs. While these are not as common, AAMI has also received many claims caused by an unsecured marquee, umbrella or ‘A-frame’ sign hitting an injuring a customer, or damaging their property.
  • Hot spills. AAMI has also received its fair share of claims where employees have accidently spilt hot food or drinks on a customer, causing some nasty burns.

You may also want to consider these 8 options for hospitality businesses, to cover other contingencies, such as fire damage to premises, theft and special events.