Restaurants' unique features add excitement - and more insurance risk

Lori Johnston

Some restaurants are catering to Americans' appetites for big portions and new adventures.

Whether people are dining in the dark, munching while suspended in the air, or stuffing their faces to compete for glory and free food, eateries from coast to coast are seeking to create thrilling dining experiences for folks looking for something a little different -- and willing to pay for it, of course.

As the economy slowly recovers, total restaurant sales are expected to reach a record high of $632 billion in 2012, according to a study by the National Restaurant Association, a trade group.

To stand out, some restaurants push one-of-a-kind menus and experiences:

  • In Las Vegas, there's the Heart Attack Grill, which serves the 9,982-calorie "quadruple bypass burger." This set a Guinness World Record for the highest-calorie burger.
  • Sin City also offers Dinner in the Sky, where 22 diners are strapped to leather seats and suspended 180 feet in the air.
  • Darkness abounds at Opaque in New York, Los Angeles, San Diego, Dallas and San Francisco, where diners rely on their senses of taste, smell, touch and hearing in a pitch-black setting.

These places aren't getting cases of insurance indigestion, though. Business insurance riders, which provide extra protection beyond standard coverage, aren't required for restaurants that serve up unique dining environments and menus, insurance agents and restaurant owners say.

Jon Basso, owner of Heart Attack Grill, says his restaurant's insurance is "just normal, run-of-the-mill coverage."

However, many restaurant owners wind up buying insurance riders to give them some piece of mind.

Being different can be costly

A restaurant may require a customer to sign a waiver before participating in an eating challenge or stepping into the darkness. Despite a waiver, if a restaurant's setting or menu presents a greater risk to diners, the owners could have a more difficult time finding affordable coverage, says Mark Dyleski, a producer with AI Insurance Group in Georgia, whose clients range from fast-food restaurants to fine dining establishments. In some cases, an insurer may not be comfortable with the risks and choose not to offer coverage.

Bobby Lee is co-owner of the Big Texan Steak Ranch, an Amarillo, Texas, institution founded in 1960 that offers a 72-ounce steak challenge eat the steak within an hour and it's free). Lee says insurance never has been a problem for the family-owned eatery.

"In 52 years of doing that crazy contest, we have never had additional riders," he says.

He adds that "sometimes we throw a pretty good curve" at insurers. In 1996, for example, the Big Texan put a live rattlesnake on display at the restaurant. Lee says the eatery had to go through a few extra steps, including having a representative for the insurer inspect the cage and providing a copy of the permit to have the snake on its premises.

Representatives for an insurer also may visit an eatery to recommend changes to reduce risks, Dyleski says. Those adjustments could include installing lights along stairways at restaurants with low lighting levels.

Neither Lee nor Basso, owner of Heart Attack Grill, would disclose how much insurance he carries or how much he's paying for it. But Dyleski says restaurants with unique features likely pay more than traditional restaurants because insurers anticipate they'll rack up more claims.

For example, drive-in restaurant Sonic, which has more than 3,500 locations, can be deemed more of a risk to insure because of its roller-skating carhops. When Dyleski has worked with Sonic, he has sent requests for insurance quotes to 20 insurers and received only two quotes back. USA Today reported in 2010 that the insurance premium to cover skaters is $20,000 for each Sonic location.

"You can find coverage for anything, but) are you willing to pay for it?" Dyleski says.

Insurance protects against damage, falls, sickness

The cost of insurance eats into a restaurant's profit, whether the eatery has an unusual feature or not.

A typical insurance policy for restaurant owners includes property insurance and general liability coverage. Insurers such as Nationwide and Farmers sell restaurant policies. Representatives of those companies could be reached for comment.

Property insurance

What it covers: The building, equipment and inventory such as food, chairs and tables). In the event of a fire or other damage, property insurance will cover the replacement cost of items and the cost to rebuild the restaurant.

Coverage amounts: Depends on the type of property and its contents. Some may have $50,000 worth of coverage, while others may have $2 million, Dyleski says. For example, a typical Wendy's may have $700,000 in insurance for its building and $250,000 for the contents.

General liability

What it covers: Coverage applies if the restaurant, its food or its employees cause bodily injury to customers or damage customers' property. Falls and sickness are the most common scenarios that can lead to claims or lawsuits.

Coverage amounts: Most policies cover up to $1 million per occurrence, Dyleski says. The insurer usually determines the premium based on the restaurant's sales. If restaurants serve alcohol, they can add a general liability endorsement to cover liquor liability, in case someone is served alcohol, gets drunk, leaves the establishment and gets into a wreck. Liquor liability usually covers up to $1 million per occurrence.

If a restaurant owner is concerned that the basic coverage limits aren't sufficient, he can buy an "umbrella" policy, which will kick in after the basic limits are exhausted.

Restaurant owners also can pay extra for optional coverage, such as food containment coverage, business auto coverage if employees drive on the job) and equipment replacement coverage for items such as computers, which aren't included in property insurance). Worker's compensation coverage also may be needed if it's required by law.

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