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Kevin O’Connor, president of McGowan Hospitality, is no stranger to insuring the risks associated with restaurants, bars, taverns and nightclubs. He has spent the past 33 years in the sector as a reinsurance broker, managing general agent and now program administrator.
In this interview with Insurance Journal, O’Connor offers a few tips to consider when securing coverage for today’s restaurants and bars.
Beyond Price
One of the more important things for agents and their insureds to consider is price. But O’Connor says it’s important to look beyond pricing. “The financial stability of the carrier and the carrier’s commitment to the class is very important,” he said. The hospitality market tends to be a class where O’Connor sees markets moving in and moving out. He said there have a number of new players entering this space in the past 12 months, but he cautions against a quick move to a new carrier for a small cost-savings. “You want to be with a stable player that’s been in the class for a long time and has the ability to stay in it for a long time,” he said.
Coverage
Coverage can vary from policy to policy so O’Connor recommends that agents take a close look at the policy wording. “You have to make sure you have proper enhancements on your property, make sure you have proper endorsements on the liability. Make sure the coverage is afforded by the carrier and that you are not getting a stripped down version of that coverage. Make sure you’re getting a Cadillac if you are paying for a Cadillac.”
Assault & Battery
One of the most important coverages for bars, taverns and nightclubs is assault and battery coverage. Agents and their insureds should understand whether assault and battery exposures are fully covered, excluded or whether there’s a sublimit in the policy when securing coverage. Questions to consider: “How are they handling the assault and battery? Do they subcontract out to a security firm? Do they hire their own security team?” In O’Connor’s experience bars, taverns and nightclubs that contract out security end up as better risks. “A professional security firm that has their own training and insurance is usually the stronger way to go. It will eliminate a lot of losses.”
Property
O’Connor said that it’s important for restaurants and bars of all sizes to consider purchasing business interruption coverage and wind coverage. Agents should look at “How they are handling wind? How are they handling the business interruption?” Hurricane Sandy left many restaurants without power for days. “Sandy taught us a lot of lessons about why it’s important to have business interruption. Prior to Sandy people didn’t think about securing that coverage but today they do.”
Claims Handling
One of the most important aspects to consider is a carrier’s claims handling ability. “Insurance is a promise to pay a claim,” O’Connor said. “For first party claims, you want to make sure that you get these people back in business quickly. For your third party claim you want to make sure you investigate the claim quickly.” O’Connor advises agents to make sure that the carrier can provide independent adjusters, preferably local.
Specialize
Lastly, O’Connor advises agents looking to find success in the restaurant, bar and tavern space to take the time to truly understand the market. “What I think it takes to be successful is to dedicate yourself to that space and really focus on hospitality,” O’Connor said. Don’t be shy; get involved in the industry. “Join associations and really get engaged with those associations so you can keep up on industry affairs and know what’s going on.”
McGowan Hospitality currently writes general liability, liquor, property, and umbrella coverage and effective in January the firm will write restaurant/bar/tavern risks on a separate program.