Program Business

Serving Up Risk

Food delivery is a huge trend in the restaurant business. But the road is paved with risk.
By: | May 2, 2017 • 5 min read

From fast food chains with nationwide delivery programs to neighborhood restaurants using third parties, restaurant delivery is now a multibillion-dollar business. And from the parking lots of office buildings to chic events, more restaurants are using food trucks to bring their kitchens into the community.

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Making dining mobile is a viable means to boost revenues, but insurance experts and risk managers say restaurants could be opening new doors of exposure. Those who want to implement deliveries need to ensure they’re properly validating employees or third-party drivers, and obtaining the right coverages.

Restaurant Deliveries on the Rise

The business of delivering food is booming. UberEATS now operates in 65 U.S. cities, and chains like Panera Bread, Outback, Starbucks and Applebee’s have either started or intend to introduce delivery programs. McDonald’s recently announced a pilot delivery program in Florida, and many independent restaurants have been inspired to put their food on the road.

Tom Metzner, vice president and senior loss control consultant with Lockton, said while it can be tempting for independent restaurants to establish a pilot delivery program, they could be opening new areas of risk. Metzner said many are partly absorbing the liability and not doing due diligence by thoroughly checking backgrounds, driving records and insurance coverage.

“If there’s an accident and the party is able to determine the driver was operating in the scope of business and had a poor driving record, courts have made sizeable awards under the doctrine of negligent entrustment,” said Metzner.

Tom Metzner, vice president, senior loss control consultant, Lockton

In 2013, a Texas jury delivered a $32 million verdict against Domino’s after an accident with a delivery driver killed a 65-year-old woman and left her 70-year-old husband with brain injuries. In April 2016, a jury in Georgia awarded $11 million to an injured woman from a crash with a Papa John’s delivery vehicle.

Restaurants can also potentially be held liable for injury to their drivers. The U.S. Bureau of Labor Statistics reports that pizza delivery driver is one of the most dangerous occupations in the U.S. due to accidents and robberies. Another common risk, which should be covered under most businessowners’ policies, is the potential for sickness due to improper food handling.

“It’s called time-temperature abuse. If [a driver] doesn’t maintain the proper temperatures, food can become contaminated and that creates the potential for foodborne illnesses,” said Metzner.

Third party services growing yet could face new regulations

AmWINS Program Underwriters recently announced a partnership with General Star Management Co. to offer a restaurant delivery program for hired and non-owned auto liability risks for those with 20 or fewer locations.

Some restaurants are using third parties for deliveries. Big chains and independent restaurants alike are looking to UberEATS and GrubHub to outsource their deliveries. UberEATS is currently available in more than 60 cities and charges a flat fee of $4.99 for all orders. The company’s agreement requires that “each party” maintain commercial general liability coverage of $1 million single limit per occurrence and $2 million aggregate, and workers’ compensation insurance where required by law.

Yet some attorneys say there could be court challenges in the coming years regarding exclusions, coverage and limitations of liability.

While Uber’s general commercial insurance applies when the driver is in the process of picking up or delivering food, there are questions about whether it applies when the app is open and they are “on the clock” but not specifically delivering food.

The growing restaurant delivery industry could also face regulatory challenges in the near future. In 2016, the Texas Restaurant Association said regulations may be necessary to address things like food safety, liability for bad delivery, and intellectual property violations. A bill being floated in California (AB-1461), addresses food delivery enterprises and could potentially require drivers to obtain a food handler card.

If [a driver] doesn’t maintain the proper temperatures, food can become contaminated and that creates the potential for foodborne illnesses.” —Tom Metzner, vice president, senior loss control consultant, Lockton

Regardless, AmWINS’ Managing Director Keith George said the issue is coming to the forefront as more restaurants offer delivery services.

He said both restaurants and their contract drivers should have their own insurance policies in place.

In the case of UberEATS, where a driver may be delivering for multiple restaurants in the area at the same time, determination of liability in court could be foggy.

“Could the restaurant owner be drawn into a claim if the delivery driver was happening to deliver their product at that particular time [during] the accident? Sure, I think a creative attorney could argue that,” said George.

Carrying Complex Risks

More restaurants are also using food trucks as a means to bring their culinary creations to events and high traffic areas. “Mobile Cuisine” magazine reports that in 2015, 4,130 food trucks pulled in $1.2 billion in revenues nationwide.

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Food trucks house complex risks because they add all the components of a restaurant to a moving vehicle that often operates on someone else’s property. Denny Christner, consultant and sales manager at Brown & Brown Insurance, operates the company’s affiliate Insure My Food Truck.

Christner said his company started writing these policies specifically for food trucks in the Bay Area in 2012 and has since gone nationwide; with more than 900 accounts.

“I like to use the analogy of, let’s say, a 6-ton truck carrying flammable propane to cook and to get around, and oils for their cooking. It’s definitely a dangerous scenario,” said Christner.

Because food trucks often operate on property that they don’t own, personal injury liability could come down to how an incident occurred and whether there was negligence on the part of the food truck operator.

While a tripping hazard could be the responsibility of the property owner, leaking oil or improper placement of the food truck could change the equation. Christner said most venues are growing aware of the issues and are requiring food trucks to carry their own general liability.

Denny Christner, consultant and sales manager, Brown & Brown Insurance

Insure My Food Truck offers packages that can include commercial auto, general liability, property, loss of business income and workers’ compensation.

“It’s often a mess when they get to us and we have to clean it up and get them the right coverage. Sometimes it’s more expensive and a hard pill to swallow but most savvy business owners understand that,” said Christner.

As mobile food solutions increase, more insurers are entering what has traditionally been considered a high-risk market. George said until recently there have been limited providers in the field due to high turnover of delivery employees; forcing insurers to frequently change their insured parties.

“The bottom line is that it tends to be more of a severity-driven risk versus a frequency risk,” said George. &

Craig Guillot is a writer and photographer, based in New Orleans. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

2017 Teddy Awards

The Era of Engagement

The very best workers’ compensation programs are the ones where workers aren’t just the subject of the program, they’re a part of it.
By: | November 1, 2017 • 5 min read

Employee engagement, employee advocacy, employee participation — these are common threads running through the programs we honor this year in the 2017 Theodore Roosevelt Workers’ Compensation and Disability Management Awards, sponsored by PMA Companies.

A panel of judges — including workers’ comp executives who actively engage their own employees — selected this year’s winners on the basis of performance, sustainability, innovation and teamwork. The winners hail from different industries and regions, but all make people part of the solution to unique challenges.

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Valley Health System is all-too keenly aware of the risk of violence in health care settings, running the gamut from disruptive patients to grieving, overwrought family members to mentally unstable active shooters.

Valley Health employs a proactive and comprehensive plan to respond to violent scenarios, involving its Code Atlas Team — 50 members of the clinical staff and security departments who undergo specialized training. Valley Health drills regularly, including intense annual active shooter drills that involve participation from local law enforcement.

The drills are unnerving for many, but the program is making a difference — the health system cut its workplace violence injuries in half in the course of just one year.

“We’re looking at patient safety and employee safety like never before,” said Barbara Schultz, director of employee health and wellness.

At Rochester Regional Health’s five hospitals and six long-term care facilities, a key loss driver was slips and falls. The system’s mandatory safety shoe program saw only moderate take-up, but the reason wasn’t clear.

Rather than force managers to write up non-compliant employees, senior manager of workers’ compensation and employee safety Monica Manske got proactive, using a survey as well as one-on-one communication to suss out the obstacles. After making changes based on the feedback, shoe compliance shot up from 35 percent to 85 percent, contributing to a 42 percent reduction in lost-time claims and a 46 percent reduction in injuries.

For the shoe program, as well as every RRH safety initiative, Manske’s team takes the same approach: engaging employees to teach and encourage safe behaviors rather than punishing them for lapses.

For some of this year’s Teddy winners, success was born of the company’s willingness to make dramatic program changes.

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Delta Air Lines made two ambitious program changes since 2013. First it adopted an employee advocacy model for its disability and leave of absence programs. After tasting success, the company transitioned all lines including workers’ compensation to an integrated absence management program bundled under a single TPA.

While skeptics assume “employee advocacy” means more claims and higher costs, Delta answers with a reality that’s quite the opposite. A year after the transition, Delta reduced open claims from 3,479 to 1,367, with its total incurred amount decreased by $50.1 million — head and shoulders above its projected goals.

For the Massachusetts Port Authority, change meant ending the era of having a self-administered program and partnering with a TPA. It also meant switching from a guaranteed cost program to a self-insured program for a significant segment of its workforce.

Massport’s results make a great argument for embracing change: The organization saved $21 million over the past six years. Freeing up resources allowed Massport to increase focus on safety as well as medical management and chopped its medical costs per claim in half — even while allowing employees to choose their own health care providers.

Risk & Insurance® congratulates the 2017 Teddy Award winners and holds them in high esteem for their tireless commitment to a safe workforce that’s fully engaged in its own care. &

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More coverage of the 2017 Teddy Award Winners and Honorable Mentions:

Advocacy Takes Off: At Delta Air Lines, putting employees first is the right thing to do, for employees and employer alike.

 

Proactive Approach to Employee SafetyThe Valley Health System shifted its philosophy on workers’ compensation, putting employee and patient safety at the forefront.

 

Getting It Right: Better coordination of workers’ compensation risk management spelled success for the Massachusetts Port Authority.

 

Carrots: Not SticksAt Rochester Regional Health, the workers’ comp and safety team champion employee engagement and positive reinforcement.

 

Fit for Duty: Recognizing parallels between athletes and public safety officials, the city of Denver made tailored fitness training part of its safety plan.

 

Triage, Transparency and TeamworkWhen the City of Surprise, Ariz. got proactive about reining in its claims, it also took steps to get employees engaged in making things better for everyone.

A Lesson in Leadership: Shared responsibility, data analysis and a commitment to employees are the hallmarks of Benco Dental’s workers’ comp program.

 

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]