Restaurant Insurance and Food Poisoning

No matter how well your staff is trained in food handling and safety procedures, inadvertently serving contaminated food products is a threat to every food establishments.

Food Poisoning in Restaurants

Take a look at the following statistics… 

  • According to the Centers for Disease Control and Prevention , 48 million people in the U.S. get food poisoning each year. Of those, 128,000 are hospitalized and 3,000 die.
  • Compared to meals eaten at home, roughly double the cases of foodborne illness stem from restaurant meals.  
  • A study by researchers at Johns Hopkins revealed that the cost of a single outbreak of a food borne illness at a fast / casual restaurant costs between $6,330 and $2.1 million, depending on the severity. Costs include fines, defense costs and legal fees as well as the actual adjudication of claims.
  • The costs increase for casual dining chains with full-table service to $8,030 – $2.2 million. 
  • For fine dining upscale venues, $8,273 – $2.6 million.
  • Outbreaks can cost restaurants between 10% – 5,790% of what they spend on marketing each year, and between 0.3% – 101% of their annual revenue. 

Causes of Food Poisoning

Who’s the culprit? What’s making this such an issue for restaurants? Some of the most common causes of food poisoning in eateries are caused by:

Tainted ingredients from the supplier: Until someone has already gotten sick, the restaurant owner may not realize that they are receiving hazardous food items from suppliers. Across several states there was an outbreak of Hepatitis A linked to tainted frozen strawberries that sickened hundreds of people.
Cross-contamination: Clean and sanitary food can be contaminated with harmful bacteria from improperly washed cutting boards, utensils, and more. Ingredients used in food preparation touching cleaning products or other chemicals. 
Food Storage: Food storage is important in preventing food poisoning, and poorly regulated food temperature is a key factor. Perishable foods must be maintained at a safe internal hot or cold temperature to prevent the growth of dangerous bacteria. 
Hand Washing: Proper handwashing is essential to safe food handling . When employees don’t wash their hands with soap after handling raw meats, poultry, touching their hair or face, or after using the bathroom, disease-causing organisms can spread to the food they serve.
Sick food handlers: Several types of serious illness may be spread by infected food handlers . Sometimes workers don’t know they are ill or don’t disclose a known illness to their employer. Despite active symptoms of a disease, food handlers may continue working as cooks and servers because they need the income or are afraid of losing their job. An emerging ‘food handler’ type is delivery personnel. Restaurant managers may consider requesting delivery workers to sanitize and wear a mask when handling food items.

Government Oversight

Several federal agencies govern food safety in the United States, with the Food and Drug Administration being the foremost related to the restaurant industry.

Each state has its own safety and health regulations governing restaurants and commercial food establishments.

Here’s a list of the FDA table of Retail and Food Service Codes and Regulations by State

State Retail and Food Service Codes and Regulations by State

State rules are enforced by agents who make unannounced visits to see if the restaurant is following the rules and inspect the premises.

Failure to follow health regulations can result in stiff penalties for the restaurant and even closure.

Legal Duty to Patron

Restaurants have a legal duty of care to protect their patrons from food poisoning. 

When the restaurant fails in its legal duty, and a patron is injured, the restaurant may become liable for the injuries and resulting damages.

It’s helpful for establishments should know what elements constitute ‘legal duty to patrons’ and what could lead to litigation. Such items may include:

A duty of care to serve patrons safe food

The restaurant breached their duty by serving contaminated food

The restaurant’s negligence led to the food being contaminated 

The contaminated food was the cause of your illness

There are clear and measurable damages (ie – medical costs)

It also might be helpful for restaurants to understand which demographics may be more susceptible to foodborne illnesses. To establish a higher standard of care for these individuals, you may consider making warning material available or visible.   

People likely to suffer complications from food poisoning include:

  • Pregnant women
  • Young children
  • Older adults
  • People with compromised immune systems (diabetes, liver disease, kidney disease, organ transplants, HIV/AIDS, chemotherapy or radiation treatments)

Checklist & Health Safety

Considering what can go wrong in a restaurant – from the kitchen to the waitstaff and beyond – an establishment should have a facility inspection checklist prominently displayed..

Your checklist should act as a constant reminder for your entire staff regarding standard safety procedures.

The checklist should be easy to update as local, state and national health department standards change. 

Here’s a sample checklist that provides a comprehensive list of safety and hygiene items.

Restaurant Health Inspection Checklist

Insurance for Food Poisoning

And as previously mentioned, recovering from an illness outbreak can be costly.

Fortunately, restaurant insurance can help you handle the costs and challenges of an outbreak. 

General liability insurance may be best known for covering slip-and-fall accidents and customer injury.  

Included in most general liability policies is products liability insurance. This is the key coverage that helps in the event of an illness outbreak. Products liability refers to the responsibility you have as a restaurant owner to the people buying your menu items or food products.

In the event of a large outbreak stemming from your establishment, hefty medical bills or even a class action lawsuit may be the result. 

Even for a single incident (ie – someone dies or is permanently maimed) the cost can reach multi-millions in damages.

For restaurants, product liability insurance is intended to: 

Cover claims of Bodily injury including medical expenses – If the food is contaminated and a customer gets sick, then the policy will pay for their doctor or hospital bills.

Pay legal defense costs including judgments – Court fees and lawyer fees can add up quickly, putting a huge strain on the business. General Liability will cover these costs. Be sure to know if the defense costs coverage is included in the liability limit, or if it is outside the limit. If you end up having to pay a judgment in addition to paying the lawyer and court fees, you want to make sure you have enough coverage limits and may consider liability limits in excess of 1m.

Exclusions to Be Aware of

Although restaurant liability insurance is designed to pay the medical and legal fees associated with a food poisoning claim, it is important to be aware of exclusions that may apply to your policy. Such endorsement forms might result in a denied claim. Here are a few specific exclusions for hospitality operations that restaurant owners should be mindful of:

Contamination exclusions: Contamination exclusion wording (generally speaking) indicates that the insurance provider will not cover the damages caused by contamination. This applies specifically to a liability situation (as opposed to ‘contamination’ to your personal property or building). This is a significant coverage limitation restaurant establishments should keep an eye out for in their policy. Much protection is lost when this type of policy verbiage applies to an establishment’s insurance program. 
Pollution exclusions: If food was contaminated as a result of pollution on the premises, then a commercial liability policy may deny coverage for resulting claims. If ‘Pollution Exclusion’ type of language applies to your policy you would need a separate ‘Pollution Legal Liability’ policy for this type of risk exposure. There has been much debate concerning what constitutes a ‘pollutant’ and many claims have been fiercely debated on this issue. If you are concerned that food contamination may stem from a ‘pollutant’ at your restaurant, ask your agent about stand-alone Pollution Legal Liability.  

Restaurant Insurance Quote

At Rekerdres & Associates, we are specialists in restaurant and bar insurance.

We have 35 years niche experience for this class of business and use that expertise to help establishments improve their bottom line and enhance coverage protection.

Book a meeting with David to discuss risk goals and see if we’re a fit as insurance partners.

Please complete the form below for a quote.

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