How to find the right insurance and limit exposures

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Three insurance executives give hoteliers the inside scoop on pitfalls and best practices.

by ALICIA HOISINGTON

For an industry as specialized as the hotel business, its insurance coverage needs to be just as specialized. With policies that can range hundreds of pages long, hoteliers might not always have the time to dive deep into what’s covered until it’s too late. Here, three insurance executives give insight on what hoteliers need to know when it comes to finding the right insurance for their properties.

Paul Mayo, senior account executive at RPA America, says hoteliers should first look to work with insurance providers who specialize in the industry, know how to work with carriers and understand the claims aspect.

“Claims in the hotel industry are different from restaurants or manufacturing. Work with someone that has access to provide for all the exposures and does a good job detailing those,” he says.

Ron Thomas, president of the United Insurance Agencies, says agents should understand franchise requirements and what is needed to fulfill those agreements.

“They should provide certificates to franchises or lenders or anyone requiring them in a prompt fashion and know how to do it,” he says.

Whatever the coverage hoteliers decide to purchase, the executives say that in addition to working with someone who specializes in the industry, it’s important that hoteliers trust their insurance agents. They are not there to simply sell insurance, but rather they should act as partners who have your best interests at heart.

Marsha Dewart, insurance operations manager for Universal Insurance Agency, says that hoteliers shouldn’t be afraid to ask their agent to sit down and review the policy to discuss coverage and exclusions.

“People think insurance is simple, but you have different people in and out of your hotel, and it exposes you to so much,” she says.

Mayo says the insurance agent should be thinking ahead for hoteliers who are busy with the day-to-day operations of their business.

“They should be proactive on renewals and work with multiple carriers to get the best proposals in the industry and then they should explain those proposals,” he says. “The main thing is to work with someone who is knowledgeable and helps you as the owner become knowledgeable.”

Coverage to consider

With so many facets to the hotel business, exposures can be abundant. That’s why Dewart says hoteliers need to ask their providers what is excluded in their policies. Many times hoteliers only ask what is included without realizing how much can actually be excluded, such as bed-bug coverage, which isn’t included in many standard policies.

“Ask what can you get sued for, because people are always looking for the big pockets,” she says. “You want to be covered and comfortable.”

The executives called out some coverage options that might not be top of mind but should be:

Cyber liability: All guest information is online and can be compromised in a multitude of ways, Dewart says. Not only can credit card information be stolen, but other personal information can be compromised.

What’s more, Mayo says cyber threats are quickly becoming a top issue in the industry, and 99 percent of hoteliers aren’t covered. Hoteliers shouldn’t fall victim to the line of thinking that just because they have a small select-service hotel in, say, Kansas City that they can’t be hacked.

“Anyone can be hacked,” Mayo says.

Food and beverage: While this coverage option might seem like a no-brainer, Dewart says hoteliers may not realize that if any food or beverage is offered, even as small as a bag of peanuts, coverage is needed in case of food poisoning.

Employment practices liability insurance: Also known as EPLI, this coverage is relatively new to the small business world, according to Thomas. This insurance provides coverage to employers against claims that employees might make that allege discrimination, wrongful termination, harassment and other employment issues.

Mayo says that some franchisors require this type of coverage. “It’s a big exposure, and claims are happening month after month,” he says.

Flood insurance: “You have to be careful with flood insurance,” Thomas says, adding that hoteliers need to have a complete discussion when it comes to this type of coverage. But that discussion has to happen before a disaster strikes, he says, because the National Flood Insurance Program has a 30-day waiting period to purchase flood insurance unless it’s required at closing.

Wind and hail: Mayo says a big issue right now across the United States is damage from wind and hail. It’s not just happening in the coastal regions, but everywhere across the country.

“You need to be watching and looking at what your deductibles are and what your policy covers,” he says. “It’s the No. 1 issue in the industry, and it’s driving a lot of changes.”

Roof coverage: Likewise, replacement costs for roofs are something hoteliers should watch out for in their policies, Dewart says. If hoteliers aren’t covered, they could receive a partial check for damage and find that their insurance provider might only give $3,000 for a roof that will cost $25,000 to replace, for instance.

She cautions hoteliers to be aware of their deductibles, as many policies will have separate ones for wind and hail, which often will be a percentage deductible. For instance, hoteliers may think their percentage deductible is for 2 percent on the roof, but it’s actually for the whole building cost, which means a far more costly bill.

“A lot of agents don’t tell people that,” Dewart says.     ■

Questions to ask your agent

Sometimes it seems insurance policies exclude more than they cover, so it’s important that hoteliers ask their agents questions about exposures that could lead to costly bills. Marsha Dewart, insurance operations manager for Universal Insurance Agency, says insurance companies will sometimes give coverage on Page 2 of a 200-page policy, and then on the last few pages take that same coverage away. She breaks down some of the critical questions hoteliers need to ask their agents.

  1. Are you covered if one of your drivers has an accident while making a delivery? What if an employee gets into an accident while driving their own vehicle when picking up supplies for you?
  2. Are you covered for injuries to customers and guests? What if they were to trip on your premises? What if they slip and fall in your parking lot?
  3. Who pays if a consumer is injured or becomes ill from contact with one of the products you distribute?
  4. Who will pay if your customer/guest eats damaged or spoiled food?
  5. Will you be able to rebuild your establishment and replace your equipment after a fire?
  6. With all of the equipment you depend on to run your business, are you covered for breakdowns?
  7. Are you covered if an overnight guest is injured while being transported in one of your vehicles?
  8. Do you have coverage if a guest trips over a cord left by housekeeping across a hallway?
  9. Who will pay if a customer is injured by a defective gift or souvenir purchased at your hotel?
  10. Will your employees be taken care of if they are injured on the job?
  11. Will your cash or furnishings be replaced if there is a robbery?
  12. Who will compensate guests for their property that is stolen in a robbery?
  13. What if an employee steals from you or a guest?
  14. What if an employee uses a guest’s credit card number?
  15. With all of the fire sources found in a hotel, will you be able to rebuild your establishment and furnish it if everything is destroyed by fire?
  16. Will you be responsible if an employee serves too much alcohol to a patron who later causes bodily injury or property damage?
  17. Hotels rely heavily on heating and air conditioning systems. Who will pay the cost to repair a breakdown and replace perishable goods that are destroyed as a result of the breakdown?
  18. Most insurance policies exclude coverage if the power is out due to overhead lines. What if the power goes out for days, and you have to shut down your operation? Who will pay for the loss of income during the period you are shut down?

Photo credit: Chinnapong/Shutterstock.com

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