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March 26, 2020

Restaurant Risk Management During the COVID-19 Outbreak

COVID-19 is taking a heavy toll on restaurants. Some states and cities have issued orders for people to stay at home, while others have ordered certain businesses to close. Many restaurants are either closing their doors or changing the way they operate.

Complying with Official Orders and Guidelines

Despite orders from state governors and other officials, some businesses are reluctant to close their doors, but defiance may lead to even bigger problems. According to WLWT, police boarded up a bar in Cincinnati after it refused to comply with an order to close. The business may lose its liquor license and food permits as a result.

Some establishments that stay open may also face public outrage as a result. According to the Los Angeles Times, this is what happened to a Pasadena pub that decided to open for St. Patrick’s Day.

Staying Open for Delivery and Take Out

In many cases, restaurants may be allowed to stay open as long as they stick to delivery and take out.

Some restaurants are even delivering alcohol. According to Tablehopper, California restaurants that offer food service and have a Type 41 (beer and wine) or Type 47 (liquor) license, can now prepare cocktails, snap a secure lid on, and sell it to you at their takeout window to go, or via a third-party delivery app. Before considering this route, restaurants should consider the potential for liability and make sure they’re compliant with the restrictions that come with the temporary waiver.

Being able to stay open may come as a relief to many restaurant owners, but there may still be challenges involved. Some workers may decide to stay home because they are sick, caring for someone who is sick or worried about becoming sick. Many restaurants may be operating on a skeleton crew.

Some restaurants may decide to use third-party delivery systems. This typically involves paying a commission, but that fee may be waived in some circumstances. According to Reuters, Uber Eats is waiving the delivery fee for independent restaurants.

For restaurants that decide to handle deliveries themselves, proper insurance is essential. Employees may be using their own vehicles, but their personal auto insurance coverage likely won’t cover the deliveries. Businesses need hired and non-owned auto insurance that includes coverage for deliveries.

Even if restaurants switch to delivery and take out, the risk for contagion remains. Business owners and managers should refer to the CDC’s Interim Guidance for Businesses and Employers to Plan and Respond to Coronavirus Disease 2019 for guidance.

Closing Your Doors

Some restaurants are having to close temporarily. While this may be necessary, it’s a difficult decision, and steps should be taken to mitigate the possible damage.

One concern comes from the possibility of vandalism or theft. According to San Francisco Chronicle, some business owners have boarded up their storefronts while closing due to coronavirus. Although this is a violation of building codes, city enforcement agents have said business owners would not be cited.

In addition to being aware of city codes, businesses should consider their property insurance. There may be a vacancy clause. Read this clause carefully and talk to your insurer if you have any questions or concerns.

Laying Off Workers

Unfortunately, many businesses have had to lay off workers because of coronavirus. According to the Oregonian, McMenamins announced that it would lay off 3,000 people because of the pandemic.

Some businesses, including McMenamins, have seen this as the best way of dealing with closures while letting workers file for unemployment benefits. However, before deciding to lay people off, employers should consult with legal counsel.

New Paid Leave Requirements

Restaurants may also have to comply with temporary paid leave requirements.

The Families First Coronavirus Response Act requires certain employers to provide paid medical and family leave. The rule applies to private employers with fewer than 500 employees. Employees are eligible for two weeks of paid family and medical leave, and employees who have been employed for at least 30 days may be eligible for an additional 10 weeks of paid leave. Employers with fewer than 50 employees may be exempted from some of the requirements. The rule is in effect through December 31, 2020.

Premium Payment and Policy Renewal

While restaurants are dealing with coronavirus-related closures, they may have difficulty paying bills, including their insurance premiums. It’s best to be proactive regarding likely problems.  

  • Call the billing department of your insurance carrier to see what options are available. Different carriers will offer different arrangements, which could include reduced payments or deferred payments.
  • Right now, many things are uncertain. If your insurance policy is up for renewal soon, ask your insurer if you can have a 90-day extension. By then, you will hopefully have a clearer picture of your situation.
  • Contact your Heffernan Insurance Broker to see what you can do to reduce your exposures.




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