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

Exclusive | Hank Greenberg on China Trade, Starr’s Rapid Growth and 100th, Spitzer, Schneiderman and More

In a robust and frank conversation, the insurance legend provides unique insights into global trade, his past battles and what the future holds for the industry and his company.
By: | October 12, 2018 • 12 min read

In 1960, Maurice “Hank” Greenberg was hired as a vice president of C.V. Starr & Co. At age 35, he had already accomplished a great deal.

He served his country as part of the Allied Forces that stormed the beaches at Normandy and liberated the Nazi death camps. He fought again during the Korean War, earning a Bronze Star. He held a law degree from New York Law School.

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Now he was ready to make his mark on the business world.

Even C.V. Starr himself — who hired Mr. Greenberg and later hand-picked him as the successor to the company he founded in Shanghai in 1919 — could not have imagined what a mark it would be.

Mr. Greenberg began to build AIG as a Starr subsidiary, then in 1969, he took it public. The company would, at its peak, achieve a market cap of some $180 billion and cement its place as the largest insurance and financial services company in history.

This month, Mr. Greenberg travels to China to celebrate the 100th anniversary of C.V. Starr & Co. That visit occurs at a prickly time in U.S.-Sino relations, as the Trump administration levies tariffs on hundreds of billions of dollars in Chinese goods and China retaliates.

In September, Risk & Insurance® sat down with Mr. Greenberg in his Park Avenue office to hear his thoughts on the centennial of C.V. Starr, the dynamics of U.S. trade relationships with China and the future of the U.S. insurance industry as it faces the challenges of technology development and talent recruitment and retention, among many others. What follows is an edited transcript of that discussion.


R&I: One hundred years is quite an impressive milestone for any company. Celebrating the anniversary in China signifies the importance and longevity of that relationship. Can you tell us more about C.V. Starr’s history with China?

Hank Greenberg: We have a long history in China. I first went there in 1975. There was little there, but I had business throughout Asia, and I stopped there all the time. I’d stop there a couple of times a year and build relationships.

When I first started visiting China, there was only one state-owned insurance company there, PICC (the People’s Insurance Company of China); it was tiny at the time. We helped them to grow.

I also received the first foreign life insurance license in China, for AIA (The American International Assurance Co.). To date, there has been no other foreign life insurance company in China. It took me 20 years of hard work to get that license.

We also introduced an agency system in China. They had none. Their life company employees would get a salary whether they sold something or not. With the agency system of course you get paid a commission if you sell something. Once that agency system was installed, it went on to create more than a million jobs.

R&I: So Starr’s success has meant success for the Chinese insurance industry as well.

Hank Greenberg: That’s partly why we’re going to be celebrating that anniversary there next month. That celebration will occur alongside that of IBLAC (International Business Leaders’ Advisory Council), an international business advisory group that was put together when Zhu Rongji was the mayor of Shanghai [Zhu is since retired from public life]. He asked me to start that to attract foreign companies to invest in Shanghai.

“It turns out that it is harder [for China] to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

Shanghai and China in general were just coming out of the doldrums then; there was a lack of foreign investment. Zhu asked me to chair IBLAC and to help get it started, which I did. I served as chairman of that group for a couple of terms. I am still a part of that board, and it will be celebrating its 30th anniversary along with our 100th anniversary.

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We have a good relationship with China, and we’re candid as you can tell from the op-ed I published in the Wall Street Journal. I’m told that my op-ed was received quite well in China, by both Chinese companies and foreign companies doing business there.

On August 29, Mr. Greenberg published an opinion piece in the WSJ reminding Chinese leaders of the productive history of U.S.-Sino relations and suggesting that Chinese leaders take pragmatic steps to ease trade tensions with the U.S.

R&I: What’s your outlook on current trade relations between the U.S. and China?

Hank Greenberg: As to the current environment, when you are in negotiations, every leader negotiates differently.

President Trump is negotiating based on his well-known approach. What’s different now is that President Xi (Jinping, General Secretary of the Communist Party of China) made himself the emperor. All the past presidents in China before the revolution had two terms. He’s there for life, which makes things much more difficult.

R&I: Sure does. You’ve got a one- or two-term president talking to somebody who can wait it out. It’s definitely unique.

Hank Greenberg: So, clearly a lot of change is going on in China. Some of it is good. But as I said in the op-ed, China needs to be treated like the second largest economy in the world, which it is. And it will be the number one economy in the world in not too many years. That means that you can’t use the same terms of trade that you did 25 or 30 years ago.

They want to have access to our market and other markets. Fine, but you have to have reciprocity, and they have not been very good at that.

R&I: What stands in the way of that happening?

Hank Greenberg: I think there are several substantial challenges. One, their structure makes it very difficult. They have a senior official, a regulator, who runs a division within the government for insurance. He keeps that job as long as he does what leadership wants him to do. He may not be sure what they want him to do.

For example, the president made a speech many months ago saying they are going to open up banking, insurance and a couple of additional sectors to foreign investment; nothing happened.

The reason was that the head of that division got changed. A new administrator came in who was not sure what the president wanted so he did nothing. Time went on and the international community said, “Wait a minute, you promised that you were going to do that and you didn’t do that.”

So the structure is such that it is very difficult. China can’t react as fast as it should. That will change, but it is going to take time.

R&I: That’s interesting, because during the financial crisis in 2008 there was talk that China, given their more centralized authority, could react more quickly, not less quickly.

Hank Greenberg: It turns out that it is harder to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.

R&I: Obviously, you have a very unique perspective and experience in China. For American companies coming to China, what are some of the current challenges?

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Hank Greenberg: Well, they very much want to do business in China. That’s due to the sheer size of the country, at 1.4 billion people. It’s a very big market and not just for insurance companies. It’s a whole range of companies that would like to have access to China as easily as Chinese companies have access to the United States. As I said previously, that has to be resolved.

It’s not going to be easy, because China has a history of not being treated well by other countries. The U.S. has been pretty good in that way. We haven’t taken advantage of China.

R&I: Your op-ed was very enlightening on that topic.

Hank Greenberg: President Xi wants to rebuild the “middle kingdom,” to what China was, a great country. Part of that was his takeover of the South China Sea rock islands during the Obama Administration; we did nothing. It’s a little late now to try and do something. They promised they would never militarize those islands. Then they did. That’s a real problem in Southern Asia. The other countries in that region are not happy about that.

R&I: One thing that has differentiated your company is that it is not a public company, and it is not a mutual company. We think you’re the only large insurance company with that structure at that scale. What advantages does that give you?

Hank Greenberg: Two things. First of all, we’re more than an insurance company. We have the traditional investment unit with the insurance company. Then we have a separate investment unit that we started, which is very successful. So we have a source of income that is diverse. We don’t have to underwrite business that is going to lose a lot of money. Not knowingly anyway.

R&I: And that’s because you are a private company?

Hank Greenberg: Yes. We attract a different type of person in a private company.

R&I: Do you think that enables you to react more quickly?

Hank Greenberg: Absolutely. When we left AIG there were three of us. Myself, Howie Smith and Ed Matthews. Howie used to run the internal financials and Ed Matthews was the investment guy coming out of Morgan Stanley when I was putting AIG together. We started with three people and now we have 3,500 and growing.

“I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

R&I:  You being forced to leave AIG in 2005 really was an injustice, by the way. AIG wouldn’t have been in the position it was in 2008 if you had still been there.

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Hank Greenberg: Absolutely not. We had all the right things in place. We met with the financial services division once a day every day to make sure they stuck to what they were supposed to do. Even Hank Paulson, the Secretary of Treasury, sat on the stand during my trial and said that if I’d been at the company, it would not have imploded the way it did.

R&I: And that fateful decision the AIG board made really affected the course of the country.

Hank Greenberg: So many people lost all of their net worth. The new management was taking on billions of dollars’ worth of risk with no collateral. They had decimated the internal risk management controls. And the government takeover of the company when the financial crisis blew up was grossly unfair.

From the time it went public, AIG’s value had increased from $300 million to $180 billion. Thanks to Eliot Spitzer, it’s now worth a fraction of that. His was a gross misuse of the Martin Act. It gives the Attorney General the power to investigate without probable cause and bring fraud charges without having to prove intent. Only in New York does the law grant the AG that much power.

R&I: It’s especially frustrating when you consider the quality of his own character, and the scandal he was involved in.

In early 2008, Spitzer was caught on a federal wiretap arranging a meeting with a prostitute at a Washington Hotel and resigned shortly thereafter.

Hank Greenberg: Yes. And it’s been successive. Look at Eric Schneiderman. He resigned earlier this year when it came out that he had abused several women. And this was after he came out so strongly against other men accused of the same thing. To me it demonstrates hypocrisy and abuse of power.

Schneiderman followed in Spitzer’s footsteps in leveraging the Martin Act against numerous corporations to generate multi-billion dollar settlements.

R&I: Starr, however, continues to thrive. You said you’re at 3,500 people and still growing. As you continue to expand, how do you deal with the challenge of attracting talent?

Hank Greenberg: We did something last week.

On September 16th, St. John’s University announced the largest gift in its 148-year history. The Starr Foundation donated $15 million to the school, establishing the Maurice R. Greenberg Leadership Initiative at St. John’s School of Risk Management, Insurance and Actuarial Science.

Hank Greenberg: We have recruited from St. John’s for many, many years. These are young people who want to be in the insurance industry. They don’t get into it by accident. They study to become proficient in this and we have recruited some very qualified individuals from that school. But we also recruit from many other universities. On the investment side, outside of the insurance industry, we also recruit from Wall Street.

R&I: We’re very interested in how you and other leaders in this industry view technology and how they’re going to use it.

Hank Greenberg: I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.

R&I: So as the pre-eminent leader of the insurance industry, what do you see in terms of where insurance is now an where it’s going?

Hank Greenberg: The country and the world will always need insurance. That doesn’t mean that what we have today is what we’re going to have 25 years from now.

How quickly the change comes and how far it will go will depend on individual companies and individual countries. Some will be more brave than others. But change will take place, there is no doubt about it.

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More will go on in space, there is no question about that. We’re involved in it right now as an insurance company, and it will get broader.

One of the things you have to worry about is it’s now a nuclear world. It’s a more dangerous world. And again, we have to find some way to deal with that.

So, change is inevitable. You need people who can deal with change.

R&I:  Is there anything else, Mr. Greenberg, you want to comment on?

Hank Greenberg: I think I’ve covered it. &

The R&I Editorial Team can be reached at [email protected]