Food Contamination – What's Really Covered?

Insurance carriers offering restaurant insurance have specialized endorsements specifically tailored to the restaurant industry.

Food Contamination is a generic term used in many of these endorsements. A close inspection of the policy provisions will reveal that the first party coverage (your income, your property) provided for food contamination can differ significantly from one insurance carrier to another. Many policies first party coverage will only respond to claims triggered by a Board of Health action that suspends or closes your restaurant.

Your restaurant's reputation is its most valuable asset. One of the first steps a restaurant owner should take to preserve its reputation in the event of a suspected or proven food borne illness outbreak is to voluntarily close its doors until the problem can be identified and corrected.

When you purchase coverage for first party food contamination look for policy language which provides coverage:

(1) If a Board of Health orders your premises closed; or

(2) Either you or any government body makes an announcement warning the public of a health hazard because of either the discovery or the suspicion that contaminated food has been served to your patrons at a location described in the Declarations.

Avoid surprises by reviewing your policies language which may contain coverage restrictions. A definition commonly found in many insurance carriers policies is:

"Food contamination" means the occurrence of food poisoning or suspected food poisoning of one or more of your customers resulting from tainted food purchased by you, or a "communicable disease" transmitted by one or more of your employees.

This definition contains two triggers for coverage: one, food poisoning from tainted food you purchased; and, two, a communicable disease transmitted by one or more of your employees.

The first trigger, tainted food you purchased, could form the basis for a denial of coverage, when for example the source or cause of contamination is inadequate holding temperature or cross contamination.

The second trigger, a communicable disease transmitted by one or more of your employees, could form the basis for a denial of coverage due to the policy definition of communicable disease. The definition of communicable disease found in a number of policies is:

"Communicable disease" means a bacterial microorganism transmitted through human contact with food.

This could eliminate coverage for food contamination transmitted by one or more of your employees from a virus such as Hepatitis A or a Norovirus, which are classified as viruses and are not bacterial microorganisms. What else should you consider regarding first party coverage? Consider that many policies do not cover:

your cost to replace consumable goods declared contaminated by the local Board of Health;
the cost of necessary medical tests and vaccines for infected employees; and,
your actual expenses to reimburse patrons for reasonable doctor's care, medical tests and hospitalization, made necessary by their actual or suspected consumption of contaminated food at a covered location;

Extended business income beyond 30 days;

Loss of business income which includes your servers tips;

Advertising cost to restore your reputation.

Food contamination claims may represent a small percentage of claims when you consider there are approximately 935,000 eating establishments in the US. The majority of restaurant owners are aware of the dangers and take proactive steps to prevent food borne illness from occurring.

Even the best operations have found themselves embroiled in lawsuits from food borne illnesses alleged to have come from their restaurant.

An event can easily drive a restaurant into bankruptcy. Taking proactive safety measures, developing a crisis management plan, and buying the proper insurance can go a long way to mitigating this risk and preserving the assets of the business.