Blog: Are You Covered? Policy Exclusions in Hospitality

By November 15, 2018 January 4th, 2019 Blog

A unique industry

This article is from Sterling’s Spring 2018 issue of its Risk & Business Magazine. Want a copy? Email jgiffels@sterlingagency.com. Please enjoy and share.

The Hospitality Industry faces many unique risks and exposures to loss. Whether it be a hotel, resort or a Bed & Breakfast, all of them have one thing in common: they need extensive Commercial General Liability and Commercial Umbrella policies that cover and mitigate each of their potential sources of risk.  

Ultimately, it will depend on what type of business is being conducted, but it is safe to assume that anything outside of “ordinary business operations” is going to require additional coverage. Examples include children’s programs, pools, fertilizers/herbicides, snow removal, and banquet/meeting facilities are just some of the areas of loss to bear in mind.

Where to begin?

The first step for businesses in the Hospitality Industry should be to ensure their Commercial General Liability and Commercial Umbrella Insurance protects them from the myriad of claims they may face by reviewing policy exclusions. Those exclusions could prove financially ruinous after any loss and, worse, many business owners don’t realize they exist until it’s too late to do anything about them. A quick review of the policy exclusions shown on the policy’s applicable forms page is a great first step.

Here are a few quick examples, but they are by no means exclusive:

  • Hotels, resorts, amusement parks, restaurants and others offering childcare, play areas or childcentered activities absolutely must have coverage for specific claim issues such as Abuse and Molestation. Yet, all too often, this is excluded from their policy.
  • Another often-excluded issue in Commercial General Liability and Commercial Umbrella policies is Bodily Injury from fungi or bacteria. This could become a problem, should people fall ill after being in a pool or hot tub. Most of the time, this is excluded from policies so, be sure to double-check all exclusions in a policy.
  • Coverage for Legionnaires Disease from heating, cooling and dehumidifying equipment will not be covered without adding the proper endorsement modifying the policy’s pollution exclusion. The endorsement is readily available but, your insurance broker must request the modification.

Preparation is key

As you can see, these exclusions are not always immediately obvious and they can sometimes feel as though they are coming out of left field. If there is one thing that business owners know, however, it’s that being prepared is always going to be better than the alternative. Could your company risk being caught unaware by one of these exposures or by others that you simply haven’t thought of?

Your Broker can help

Work with your insurance broker or insurance company to make sure these exclusions are eliminated or modified in order to mitigate risk.  An insurance company should be willing to work with you to either make policy amendments or remove the exclusions of concern.

Too often, we see cases where policy exclusions exist unbeknownst to the policy holders.  About 85 percent of the time, an insured will have at least one of the three aforementioned exclusions. Whether it’s Abuse and Molestation, or a complete exclusion for fungi or bacteria or a total pollution exclusion – it’s not helpful regardless of the premium savings.

When Sterling reps point out these exclusions people are surprised and sometimes even angered.  Hopefully they find the exclusions before any loss with an insurance expert who knows the Hospitality Industry.  If you read nothing else in your policy, please read the applicable forms page, the exclusions will be shown. With insurance, as with many preventative services, it can feel like a money grab at times. But it isn’t. Just like you would go to get regular checkups at a doctor before something bad happens with your health, you want to be prepared for potential liabilities before they become a serious issue for your business.

Choosing the right broker

Insurance companies not willing to work with your hotel, resort, or B & B to create a tailored policy that considers every risk unique to the world of Hospitality need to be reconsidered and possibly replaced. A claim of wrongful death or debilitating illness from a guest can destroy a business. The last thing a business owner in this industry wants is to find out – for any number of issues – they are not insured because of the exclusions contained in their Commercial General Liability or Commercial Umbrella policy in an effort to save premium. All too often, at the risk of losing a bit of business or making a client unhappy, companies will avoid mentioning some of these policy exclusions or pushing for additional coverage. That is a huge issue on both sides of the table.

Bottom line: The coverage has to be there. Many carriers can sell you an insurance policy at a good price, but, unfortunately, a business may not know if the policy is any good until there is a loss.  As an Insurance professional, I see this too often. Sometimes, I don’t see it until after being brought in to find coverage for a denied claim.

When it comes to insurance for your business, the price has to come second. If the coverage is not there, the cost savings from a discounted insurance policy will not mean a thing if a business does not survive. Fortunately, the Sterling Insurance Group’s proven Risk Path Process takes an audit-like approach to insurance. We partner with our clients by taking a deep dive into their businesses to identify then reduce and/or transfer their risks, thereby protecting their investment, reducing their costs and increasing their bottom line.

Learn more about our proprietary Risk Path Process and begin reducing your company’s risk by contacting Sterling Insurance Group today.