Restaurants are increasingly using food trucks and home delivery to sell their products. It’s big business but carries substantial risk.
Serving Up Risk
Food delivery is a
huge trend in the
But the road is paved
By Craig Guillot
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.
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.
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
Am WINS 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
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
• Food delivery is the biggest trend
in the food industry, experts say.
• Jury awards against restaurant
companies whose drivers caused
death or injuries run into the tens
• Many drivers might not realize
that their auto insurance policies
exclude commercial use.