surance business calls a BOP, or a business owner’s policy. It’s the insurance world’s equivalent of a sampler plate, combining some property and casualty insurance with a dollop of liability coverage and maybe even some protection from a data breach. Awards in liability lawsuits, as well as the sheer number of suits, have been soaring, according to in- surers, hiking the rates for those all- in-one policies. “If someone hit a pothole in your parking lot, there was probably a time when you could just buy them dinner and everything would work out,” said John Cassetta, sales man- ager for the insurance giant AON. “Now we could probably sing three jingles from memory of law firms looking on TV for liability clients.” Because of that dynamic, the in- creases have been particularly steep for places that serve alcohol. “Insurance is probably still going to be less than 1% [of sales],” said insurer and restaurateur DeLoren- zo. “If you’ve had a couple of DWIs or an assault, it might be in the 3% range.” THROWING IN THE TOWEL Operators in Florida and California have the added burden of far fewer insurers now serving those markets. Two behemoths of the busi- ness, Allstate and State Farm, have stopped offering commercial prop- erty and casualty insurance in Cali- fornia, saying they couldn’t keep up with escalating construction costs and the surge in claims from wild- fires. Operators there have also seen insurance rates elevated by insur- ers taking crime risk into account in setting the charges for a prospective client interested in a BOP, accord- ing to a spokesperson from the Cali- fornia Restaurant Association. Assault of a customer or employ- ee is the third most-common rea- son for an insurer to pay out at least $100,000 on a claim, according to Next’s data. Five major insurers, including
big names like Farmers, AIG and Progressive, have pulled out of Flor- ida. Two others, Southern Fidelity and Weston Property and Casualty, ran out of money and had to stop taking customers. All cite the same factors for their exits: Soaring payouts in liabili- ty lawsuits, and the damage that's been done to the nation's south- ern-most state by Mother Nature. You can still get insurance for a restaurant there, said Nick Valen- ti, the former president of Patina Restaurant Group and a longtime veteran of the business, but the price is steep. He did not reveal how much he’s paying to cover Simply Capri, his restaurant in Winter Park, Florida. Elsewhere, the number of mid- and smaller-sized insurers is drop- ping because the financial viability isn’t there, said DeLorenzo. Most of those heartland companies have a pool of less than $100 million, “and that’s nothing,” he said. “You don’t have a surplus of car- riers looking to insure restaurants,
because they’re risky,” DeLorenzo said. “They’ll just pull out of the market. Why bother?” With the disappearance of so many providers, the pricing lever- age of the survivors grows accord- ingly. The insurance industry hasn’t seen construction costs ebb signifi- cantly as inflation has eased, so it’s not expecting a return to the rates of pre-pandemic times. And then there’s the wildcard of climate change. “There is no doubt it’s having a significant impact,” said AON’s Cassetta. “It’s forcing people to look at things differently.” A KEENER ASSESSMENT The increased risk present in some zip codes has made insurers that much keener and hardnosed in as- sessing risks, be it to extend a policy or initially price it. “They’re look- ing at structures, and saying, ‘Gosh, when you look at these things, they need all kinds of improvement,’” Cassetta said.
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JANUARY 2025 RESTAURANT BUSINESS
ILLUSTRATION BY DIMITRI MORSON/MIDJOURNEY
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