Hospitality Industry – Risk Assessment
The hospitality (travel and tourism) industry has seen its ups and downs but currently is thriving as determined by the World Travel and Tourism Council, as among the largest and fastest growing industries worldwide and projected to support 328 million jobs by 2022. This is an exciting time to be in the hospitality industry and it is also a time to re-evaluate your risk assessments associated with the changing trends of the industry.
Des Armstrong, president and CEO of The Armstrong Company Insurance Consultants, lists the following areas to consider for hotels and related risks.
- Property insurance with correct co-insurance percentage. If an insured does not maintain insurance for an amount equal to at least 80% or of the full replacement cost of the building at the time of a loss, the insured will not be fully reimbursed for a loss and could be charged with a “co-insurance penalty”.
- Flood insurance – Most commercial property policies exclude flood as a covered cause of loss.
- Earthquake coverage – While all states have some level of earthquake risk, the U.S. Geological Survey has identified 42 states that have a reasonable chance of experiencing damaging ground shaking from an earthquake over a 50-year period and 16 states that have a relatively high likelihood plus a history of earthquakes of magnitude 6 or greater, including California, Hawaii, Missouri, Oregon, South Carolina, Tennessee, and Washington.
- Hurricane or Named Storm coverage – This is a must have if you are in a coastal region.
- Cyber Liability Insurance – Cyber attacks on business enterprises are increasing dramatically, and the hotel industry is among the most venerable industries with its access to customer information.
- Directors and Officers Insurance (D&O) – D&O covers directors and officers of a company for negligent acts or omissions and for misleading statements that result in lawsuits against the company. There is a variety of Directors and Officers coverage available such as corporate reimbursement coverage, personal liability, and entity coverage. D&O policies may be broadened to include coverage for employment practices liability as well.
- Employment Practices Liability Insurance (EPLI) – To cover employment-related liabilities other than on-the-job injuries. This can include legal fees and damages for suits such as wrongful termination, discrimination, sexual harassment, and other alleged violations of employees’ legal rights. You may also want to include Guest discrimination coverage.
- General Liability Insurance – General liability, also known as “commercial liability insurance” is a broad commercial insurance policy that covers general liability exposures of a business. The Armstrong Company Insurance Consultants recommends that all businesses have general liability coverage in place.
- Employee dishonesty coverage – Hotel owners think they’ll never use this, and then learn their controller has been siphoning off small amounts of money for years, and the total loss is substantial.
- Health care professionals as insureds – Resorts with spas have this exposure and need this coverage.
- Garagekeepers’ Liability Insurance – Garagekeepers coverage provides protection for damage to customer’s vehicles due to the insured’s legal liability. This additional coverage is needed because of the “care, custody or control” exclusion in the liability section of the standard commercial general liability policy. This form of insurance is similar to bailee’s insurance.
- Building Ordinance and law with increased cost of construction higher limits – This is key property coverage with the ever-changing building codes. Buyers either buy too little or go without to help control cost. That’s not a good decision.
- Boiler and Machinery (elevators, sump pumps, pool equipment) – This type of insurance provides coverage for loss caused by mechanical or electrical equipment breakdown, including damage to equipment.
- Business Income (Business Interruption Coverage) – Business Income is the net profit or loss that would have been earned or incurred if the suspension of the business had not occurred, plus any normal operating expenses that must continue during the suspension of the business. Business Income insurance pays the actual loss of business sustained by the insured because of necessary suspension of the insured’s operation during the period of restoration following a loss.
- Umbrella or Excess Liability coverage – There are several metrics used to decide on adequate limits: total assets, market cap, nature of your business, historical claims in your business and your appetite for risk. There is no standard limit. Typically limits layers are 5, 10, 25, 50 & 100 million dollars. The initial 5 million dollars will be the most expensive layer.
The Armstrong Company Insurance Consultants (License #0440075)