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Terry's Restaurant Insurance Blog


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11
Jul

Don’t Put Your Restaurant Liability Insurance Protection At Risk

While restaurant owners certainly have to pay close attention to many different kinds of insurance protections from workers compensation insurance to fire insurance to theft and many others, one could make a case that liability protection has the greatest potential to wipe out a business.  This is due to the nature of liability exposures in that their top end limit is unknown.  You know for sure what you stand to lose if your building burns to the ground but with liability exposures, you are dealing with vague unknowns.  And there is a hidden responsibility in your liability protection that could put you in a very vulnerable position if you are facing a lawsuit.

Any restaurant owner who stays in business long enough will probably face some kind of liability claim.  People slip and fall, claim food poisoning, crack teeth on foreign matter in their food and a whole host of other kinds of risks, not to mention the huge risks for the restaurant owner associated with an entity that serves alcohol.   But have you ever considered what you must do in the event that you are served with suit papers from a claimant?

If you are served with suit papers then your first action should be to contact your insurance agent or your insurance carrier and get copies of those papers to them immediately.  This is particularly true if the suit seems frivolous or even if you have been included in a lawsuit for which you have no connection at all.  The reason for the need for immediate action is that failure to respond in time could put you in a position of having to accept a default judgment against you, even if you have nothing to do with the case.  In addition, if you don’t allow your insurance carrier enough time to respond (and they often need a few weeks to set up the attorney and the claim file), then they have the right to refuse to honor your claim. 

Here’s a personal story that will demonstrate to you just how vulnerable you can become if you ignore suit papers and don’t take immediate action.   Several months ago I was served with papers for a slip and fall claim that happened in the building beside the one I own.  Because that building owner had the same name as me, and because my company was once a tenant in that building, the plaintiff’s attorney decided to name my company in this lawsuit.  My first step was to call the attorney and clarify that he had made a mistake in naming me as a defendant in this suit.  Now all the while he promised to release me from the lawsuit, in fact he never took the action to do so.  As the 30th day approached I decided that I had better respond to the lawsuit and I contacted my liability insurance carrier.  They told me that I had waited too long and that they would be unable to defend me.  At this point I was forced to hire my own lawyer at my own expense to ask for an extension in the time to respond so that I could file the claim with my insurance company.  In the end the claim was filed and with the insurance company’s attorney working for me I was released from the claim.  But I felt a bit blindsided by the fact that a plaintiff’s attorney’s error in naming me could have led me to face a default judgment for a claim to which I had absolutely no connection.

If an insurance agent like me could make that mistake, I worried about my restaurant insurance clients.  Therefore I have written this blog as a way to share this nasty experience with others who might not take so seriously the fact that they have been served with papers naming them as a defendant in a lawsuit.   So, should you ever receive suit papers, do not delay, get them to your insurance carrier as quickly as you can.

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17
Jun

3 Recordkeeping Tips For Restaurant Owners

Hey, you run a restaurant; there are a lot of hands on things to deal with every day and paperwork is something left for quieter times, say after the patrons have left and the kitchen has been scrubbed down for the night. Yeah, right.  When does that down time actually happen?  But poor records can cost you time and money in the long run when it comes to handling your taxes, your restaurant insurance and paying bills and payroll.  So taking a bit of time to make a plan about how you organize your paperwork is worth the small investment of time.   The following are 3 tips that the IRS has for small businesses regarding record keeping for easier tax filing.  I hope you find this information helpful.

Save Certain Business Records – The following are some of the types of records that you should keep:

  • Gross Receipts – This is the income that you receive from your business.  You should keep supporting documents that show the amount and the sources of your gross receipts.

  • Purchases – These are items that you buy and resell to customers – primarily food costs and alcohol costs for most restaurants.  You should keep supporting documents that will show how much you paid for each item or group of items.

  • Expenses – These are the costs you incur, outside of purchase listed above, to carry on your business.  The documentation that you keep should show amount you paid and that the expense was a business expense.

  • Assets – This is property, such as equipment and real estate as well as intangibles.  You will need clear records of your costs for these assets so that you can compute annual depreciation and the gain or loss on each item when you sell them.

 

Keep Employment Records – There are a number of employment related records that you will need to maintain as available for IRS review at some point in the future.  They include the following:

  • Your Employer Identification Number

  • Amounts and dates of all wage, annuity, and pension payments as well as records on costs of health insurance or other benefits that you provide to your employees.

  • Amounts of tips reported

  • The fair market value of in-kind wages paid

  • Names, addresses, social security numbers, and occupations of employees and recipients

  • Any employee copies of form W-2 that were returned to you as undeliverable

  • Dates of employment

  • Periods for which employees and recipients were paid while absent from the job due to injury or sickness and the amount and weekly rate payments you or third party payers made to them

  • Copies of employees’ and recipients’  income tax withholding allowance certificates

  • Dates and amounts of tax deposits made by you

  • Copies of tax returns filed

  • Records of allocated tips, and

  • Records of fringe benefits provided, including substantiation of these benefits

 

Store and Organize Your Records – The IRS advises that business owners should generally keep all employment related tax records for at least 4 years after the tax is due, or after the tax is paid, whichever is later.  The length of time that you should keep other documents depends on the action, expense, or event that the document records.  For more detailed information about IRS rules and recordkeeping, please consult your tax attorney, your accountant or visit the IRS online

Keeping good records will also help with insurance issues such as your annual workers compensation or general liability insurance policy audits.  In addition, should you experience a property loss, these records may help to speed the insurance claims process.  Of course no record keeping discussion is complete without the caveat that your records should be backed up and the back up kept off premises from your original files.

Should you need any help with your restaurant insurance needs, I hope that you will call us, toll free, at 877-687-7557 or visit us on the web at www.TheRestaurantInsuranceStore.com.

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26
Mar

Is Your Agent Blocking You From Valuable Insurance Markets?

At Clinard Insurance Group, one of the niche markets that we serve is restaurants.  We help restaurant owners all across the eastern seaboard states with their restaurant insurance needs.  In the process of insuring hundreds of restaurants and speaking with thousands of restaurant owners we have learned a bit about the relationship between restaurant owners and their insurance agents.  And one practice that is pretty widespread is a dirty little secret that many agents wouldn’t want their restaurant clients to know.  That is the practice of blocking markets.

Here’s a quick scenario of what often happens when a restaurant owner calls our office asking for help with his or her restaurant insurance program.  First of all, understand that while there are hundreds of insurance companies out there, perhaps only a half dozen or so would be both strongly interested in writing insurance for restaurants and also willing to take a chance on lower rates in order to entice a restaurant to buy from them.   So while it may seem that the universe of possible insurance solutions is nearly unlimited, in fact it is a pretty small fraction of that universe that holds any potential for saving a restaurant owner money.  We are constantly keeping tabs on this subset of insurance companies and trying our best to maintaining access to as many open markets as possible for our prospective clients.  But despite this, we often find that the agent who is currently insuring our prospective client has blocked one or more of these key markets so that we are unable to get a pricing quote from them for that particular restaurant.  This often means that the restaurant owner stays with his or her current agent, all the while never knowing that the current insurance agent has created a scenario where they are unable to save money by using one of these blocked markets.

How in the world can this happen?   Surely the insurance company with an appetite to write new policies for new clients wouldn’t let one insurance agent take them out of the game.  Why would they do something so foolish?  Well, to understand this you have to start by understanding that insurance companies are like slow moving dinosaurs.  They are not quick to embrace change in any form or fashion.  Most of them are operating on arcane rules that may have been created half a century ago to solve a problem that now may not exist.  In short, most insurance companies have a silly rule that says that if two agents want to quote their prices for the same client, then the first one to submit a quote request gets to control that insurance market vis-à-vis that particular client.   With this crazy rule in place, there are agencies that routinely generate partial quotes in all of their insurance companies’ quote engines to block those markets for that particular client.  This allows them to continue to use a different insurance company which may have higher rates but perhaps offers a better commission rate to the agent or worse, may be offering a free trip if the agent can generate a certain amount of policies for them.

The net result is that the restaurant owner, often placing all of their trust in their current agent, is unable to check pricing in the open marketplace and they remain a client of that same agent who secretly managed to limit their view of the marketplace for the insurance products that they buy.

So what can you, the restaurant owner do to prevent this from happening?  Well, if you decide that you want to shop out your insurance policies for better pricing or better coverage but you still want your current agent to have a fair shot at keeping your business then you need ask him which companies he has quoted for you.  Not which has the best price, but ask to see all of the quotes.   And when you have chosen a new agent to provide you with competitive quotes, ask him if any of his markets were blocked and if so by which agent.  If your incumbent agent is blocking those markets, ask him to show you the quotes from them and then run those by the competing agent to be sure that they are the best that the competing agent could do with those markets.  Remember, restaurant insurance pricing can be a fluid thing and often the insurance company might offer the agent the opportunity to apply additional credits to the rate at his or her discretion.  Your current agent might show you a quote for one price on a blocked market but if the full available credits weren’t taken, then the competing agent could have applied full credits and saved you even more money if that market were not blocked.

At Clinard Insurance Group we insure hundreds of restaurants all across NC, SC, GA, TN and many other eastern seaboard states.  If you would like help with your restaurant insurance policies, please feel free to call us, toll free, at 877-687-7557.

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26
Feb

Well Somebody Needs To Take The Beating

This blog entry will not be so much insurance related as simply business related.  Like you restaurant owners out there, I too am a small business owner.  As such, we suffer the IRS and its lack of clarity and lack of efficiency together.  My recent experience with them regarding the federal unemployment tax rules left me just shaking my head, and then left me wondering how many other NC small businesses owners will spend some of their valuable time trying to find an answer that will in the end confound them.  Once I learned the truth of why my FUTA tax bill was increased for 2013 I could only shake my head in disbelief and wish I could get back the 23 minutes of hold time that I waited to learn this unreasonable truth.  In the end I was left feeling like a kid in the backseat of a car that got smacked indiscriminately by a parent driver for something my sibling did.   To complain might only draw more ire and perhaps the comment that somebody needs to pay and besides that smackdown is just a downpayment on my future transgressions.

Ok, enough lead in, let’s get to the nitty gritty of my dilemma.  I will share the actual numbers from my FUTA tax bill in an effort to make clear what the IRS so hopes will be hazy to all NC business owners.  When I filed my 940 report for 2013, my FUTA tax bill per the IRS form and IRS rules was $378.  I had made a deposit against this tax in May of 2013 in the amount of $500 so my 940 form indicated that the IRS owed me a refund of $122.  I choose to have this amount refunded to me via a check from the IRS sometime in the next few months.   Of course the 940 form doesn’t offer to pay me interest on the overpayment of my taxes but you’d better believe that lack of consideration does not run both ways.

To my surprise, yesterday I received an invoice from the IRS indicating that in fact, my FUTA tax liability for 2013 was not $378 as their 1040 form indicated, but rather a whopping $945.  The explanation on their letter included a line with the simple notation that a Credit Reduction of $567 was added to my tax liability.  Now instead of a refund due, I owe them $446.14.   This total includes an interest charge for late payment of $1.14.

Since this vague term, credit reduction, really didn’t mean much to me, I chose to call the number listed on the letter for those with questions.  I then waited, on hold, for 23 minutes before a human came on the line to help explain this credit reduction issue.  The explanation that I was given was simple enough.  I was told that since the state of North Carolina had to borrow money from the federal government to pay unemployment benefits in 2013, and since North Carolina was late in repaying this loan, then a hidden credit in the FUTA tax rate is denied all NC businesses for the 2013 tax year.  In essence, the state of North Carolina screwed up and someone needed to pay for that.  The punishment it seems will fall on business owners in our state.  I asked if, when the loan is repaid by the state government, will I then be refunded this penalty money.  The answer was no.   So, the federal government penalizes me at a rate far above their actual costs for a late payment by my state government and if and when the state government’s transgressions are rectified, the federal government gets to keep my punishment money. 

As if this isn’t bad enough, add in the fact that their 940 form doesn’t even hint at this possibility but they still need to collect interest for this penalty money until they get around to finally notifying me that I owe it.   Add to that the fact that a simple asterisk beside that line with a better explanation on the letter might have prevented me from needing to call them and waste my 23 minutes on hold plus another 10 minutes time of the nice lady who finally came on the line to help explain this crazy scenario to me.

By my calculations, the fact that someone in the NC state government decided not to pay the federal loan back in time cost me about $71 per employee.  So, for you restaurant owners out there with many more employees than I have, get prepared for a large additional FUTA tax bill.  It is coming and you will have to pay it.  I got my frustration out by blogging about it.  How will you handle it?

Here at Clinard Insurance Group, we insure hundreds of restaurants all across NC, SC, GA and TN.  If you have questions or need help with your restaurant insurance, please call us, toll free, at 877-687-7557.  We look forward to helping you.

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18
Nov

Restaurant Insurance And Cyber Liability – 4 Mistakes Restaurant Owners Make

Cyber liability is a very new area of risk that restaurants owners face.  As more and more customer data is obtained and stored by restaurants on their clients, the chances of a data breach, emanating from either the inside or outside of the restaurant increase each year.  There are many criminals, often operating beyond the reach of our legal systems who are working hard to find a way to access your data and use it to turn a quick profit for themselves.  And in the midst of of this are some very dangerous misconceptions and beliefs held by restaurant owners that keep them from taking the steps needed to better understand and perhaps to insure this catastrophic risk.  Let’s take a look at 4 of the most common mistakes that restaurant owners make in this area of risk management.

Assuming that general liability insurance will protect them.  Most restaurant owners purchase businessowners insurance policies which have a general liability component built in to the policy.  Many mistakenly believe that this general liability insurance will protect them from cyber liability losses.  In short, this is just not the case.  Your general liability insurance policy alone does not anticipate, or in any way protect you from cyber liability losses.  You must purchase cyber liability insurance for this protection.

Assuming that cyber liability insurance will be unaffordable.  While this protection is not always inexpensive, it is a relatively new form of insurance and is currently evolving.  Over time I expect that more and more insurance companies will spread this risk of this protection out over many clients by adding it as an optional coverage on their businessowners insurance policy form.  But for now that is rare and you will generally need to purchase cyber liability as a stand-alone product.  While it may be expensive, it could also be very affordable and you must go out and shop the marketplace to determine the truth of this question.  The risks of loss may be too great to ignore this protection.  Not investigating this closely is akin to just sticking your head in the sand, not a great strategy for taking care of your restaurant’s risks.

Assuming that your firewalls and your IT guy will protect you.  Keep in mind here that many data breaches occur because of an employee error or an inside job from rogue employees.  From handwritten passwords taped to computer screens to opening suspicious emails or downloading malware or even losing smartphones with connections or memorized passwords, your employees pose huge risks to the safety of your cyber data.  And don’t forget that a data breach can occur with paper files as well if they are not well protected or disposed of properly.

Assuming that the use of a third party vendor for reservations or credit card transactions is protection enough.  While this might give a restaurant owner a bit of hope, chances are that you are still responsible for protecting your client’s data as it passes through your system.  What will the costs be to your restaurant if the third party vendor doesn’t agree or fights you on the question of who is responsible?

Cyber liability losses can strike with little to no warning and leave you with tremendous clean up costs from data recovery to rebuilding your restaurant’s reputation.  If your current quiver of insurance policy policies does not include cyber liability, then you owe it to your restaurant and your employees to investigate this protection and risk in much more detail before you decide to not worry about it.  At Clinard Insurance Group, we insure hundreds of restaurants, all across North Carolina, South Carolina, Tennessee and Georgia.  If you would like to discuss your cyber liability risks and the possible insurance protections available to you, please call us, toll free, at 877-687-7557.