This is the first part of a 2 part series of blogs addressing the issues of substance abuse in the work place and the effects on restaurant owners and their insurance and profits.  Part 2 of this series will help you create an action plan to protect your restaurant and your restaurant insurance rates from these dangers.

Let’s start with some numbers surrounding substance abuse and the work place.  A nationwide study indicates that more than 70% of the nearly 120 million admitted drug and alcohol users are employed.  How many are working for you?  Substance abuse costs US employers more than $276 billion each year in lost productivity, workplace accidents and increased health care costs.  Let’s take a look at some of the known facts.

Drug and alcohol abuse affects all of your employees, not just the ones who abuse these materials.  Here are some results of a survey sponsored by the National Institute on Drug Abuse:

Drug using employees are –

2.5 times more likely to have absences of eight days or more per year,

2.2 times more likely to request early dismissal or time off,

3 times more likely to be late for work, and

5 times more likely to file a workers compensation claim.  If you are unsure how them filing a workers compensation claim affects your insurance rates, please read my blog on protection your experience modification factor.

Also, according to the American Council for Drug Education, substance abusers don’t have to use drugs or drink while at work to have a negative impact on productivity.  Compared to their non-abusing coworkers, they are 33% less productive and 10 times more likely to miss work.  They are also 3.5 times more likely to be involved in a workplace accident and it is estimated that 47% of workplace injuries can be linked to alcohol consumption.  Also, health care costs for employees with alcohol problems are at least twice that of other employees.

All of this creates a unique challenge for restaurant owners.  Because you are a small business, you are less likely to have a formal program in place to combat substance abuse and so you become the employer of choice for the abusers who don’t want to risk being tested, observed or caught.  With abusers in your employ, you risk increasing the workload on your non-abusing employees, you risk compromising the quality of your product and services and you face increased turnover.  It is clear that if you don’t have a program to weed out these employees, you will become a catch all for having more employees of this type.  In next week’s blog I will help you with the steps you need to take to create an action plan to solve this potential problem before it creates other problems for your restaurant and your restaurant insurance rates.

Clinard Insurance Group is an independent insurance agency, located in Winston Salem, NC.  We insure over 100 restaurants all across North Carolina and South Carolina and we want restaurant owners to be informed consumers of restaurant insurance products.  If our experience and professional advice would be of help to you in running and insuring your restaurant, then we invite you to call us, toll free, at 877-687-7557 or visit us on the web at www.TheRestaurantInsuranceStore.com.

With this week’s blog, I want to focus on the 5 most common mistakes that restaurant owners make when tackling their restaurant insurance puzzle.   Hopefully you haven’t fallen prey to all of these mistakes but take a moment and consider your own approach to insuring your restaurant and which of these mistakes you may have made in the past.  It’s only too late to fix the mistakes after a claim so today is the day you should read this blog and take immediate action.

Mistake #1 – The Price Blind.   This is the most common mistake that restaurant owners make.  Let’s face it, you are busy and owning a restaurant means putting out small fires in your organization every day.  Taking the time it really takes to evaluate and understand the intricacies of something as important as your insurance contract is just something few owners  ever  take the time to do.  This leads to the restaurant owner becoming blind to all of the moving parts and pieces and just focusing on the easiest lowest common denominator: just the price of the policy.  The problem with this approach is that it ignores so many important variables.  Often there can be huge coverage and protection differences between one policy and the next.  There can also be huge differences between one agent and the next in terms of how well you will be protected (and incidentally how much you pay).  Then consider that not every insurance company is the same and last of all, consider that the rating process leaves lots of places where you might actually pay a higher rate but have a policy that looks like you are paying a lower final premium.  Often this particular problem only shows up a year later at audit, but by then it is too late, you are now going to have to pay more than you thought for your policy.  The best way to combat this mistake is to remember the old insurance adage:  The cost of your insurance program is the sum of  premiums you pay now, plus the premiums you will pay at policy audit, plus the uncovered losses that you will have to pay during the policy life.  

Mistake #2 – The General Agent.  This mistake is a biggie and could even cost you your business.  Insurance is a funny business because, unlike most  professional services,  hiring a specialist to help you with your insurance will generally cost you less money than using a non-specialist.  But the truth is even scarier.  Unlike your family doctor, who would never operate on a brain tumor, an insurance agent can take a stab at insuring just about anything that walks in his door.  If you bought your restaurant insurance from a friend, or your brother in law, or the agent that just happens to insure your house or your cars, you may be walking into the trap of inexperience and not even know it.  And few insurance agents will tell you that they don’t really understand insuring restaurants.  Instead, they will practice and learn on your dime.  This could leave you with a huge, uncovered loss.   Also, consider the fact that insurance agents with niche specialties in restaurant insurance, not only understand the coverage ins and outs, but they also more than likely have access to better priced programs simply because they have a high volume of that kind of business and are more trusted by their underwriters.  This is one of the anomalies of insurance; in most cases using a more highly experienced professional will actually cost you less money.

Mistake #3 Skipping Protection Reviews.  Insurance should never be a set it and leave it kind of purchase.  Your restaurant is constantly changing as is the world around you.   You should take the time, at least every couple of years if not every single year, to review your policies in detail with your agent.  Think about how your restaurant has changed since your last review.  Have you bought new equipment, changed your hours of operation, or began offering new services or products like home delivery or liquor in your bar?   Sometimes even the smallest change in your business, one that might seem insignificant to you, could have a huge impact on your insurance.

Mistake #4  Shaving It Too Thin.  The long economic downturn that we have experienced since 2008 has left many restaurant owners looking for ways to cut costs and translate those saving directly to their bottom line.  Be careful when you choose your insurance protection as the place to cut.  Some cuts may be justified and make sense, but if you can’t afford to actually pay for the new uninsured losses that  you decisions might be creating, then these cuts are probably not worth the risks.

Mistake #5  One Size Fits All.   Not all restaurants are the same and so you probably don’t want a restaurant insurance program that is designed as a one size fits all program.  This is the type of result you will probably get when you don’t use an agent who insures many other restaurants as mentioned in mistake #2.  But the point is well taken.  If you are a high end, fine dining restaurant, then your insurance needs will be quite different from a lunch and breakfast grill.  You can read more about this particular mistake by reading my blog on one size fits all restaurant insurance programs.

Clinard Insurance Group is a full service, independent insurance agency located in Winston Salem NC.  Restaurants are one of our niche groups and we insure over 100 restaurants all across North Carolina and South Carolina.  If you own a restaurant or catering company located in NC or SC, please feel free to contact us to discuss your restaurant insurance needs.  You can reach us by phone, toll free, at 877-687-7557 or you can visit us on the web at www.TheRestaurantInsuranceStore.com.

As the owner of a restaurant, you have many things to worry about.  Most of the time you worry about the things that you know could go wrong in your business.  It’s tougher to worry about the things that you don’t know could go wrong, but in the end, those are the kinds of things that can bite you in the rear end the worst.  So what in the world do boats and trailers have to do with you running your restaurant and making a profit?

Bear with me, this may at first seem like a convoluted way to tell you about what I like to refer to as an unknown unknown.  But the reality is that there are a number of restaurant owners out there who own personal watercraft and don’t realize that every time they pull them down the road, that they are putting their very restaurant at risk.  So how can this happen?

Well, let’s start with the vehicle pulling the boat or jet ski.  Many successful restaurant owners have found nice tax advantages in titling their new cars in the company name.  Doing so almost invariably means that the company car is insured with a commercial auto policy.  And that is the correct way to do it as you want to be sure that your corporation or LLC is protected from liability as a result of an accident with this vehicle.  But this is where it gets a bit tricky.  Many successful restaurateurs also own boats, jet skis and other personal watercraft that they move about on trailers, towed by their company vehicles.  In NC, if you tow a vehicle with your personal car which is insured by a personal auto policy, then coverage automatically extends to liability caused by the trailer you are towing.  But with a NC business auto policy, this is not the case.  And this little detail can get a restaurant owner with a company car and a personal boat in a lot of trouble. 

You wouldn’t want to be involved in an accident that is your fault that involves this uninsured trailer being towed by your company vehicle.  Doing so could lead to an uninsured loss that might be large enough to wipe out your restaurant completely.  And that would be awful after you had worked so hard to always keep your insurance policies current  and in force.  This is a great example of what I call an unknown unknown. 

Clinard Insurance Group is a full service, independent insurance agency located in Winston Salem, NC.  We insure over 100 restaurants all across North Carolina and South Carolina.  We speak your language and understand your business.  We want to work with you to help you find those unknown unknowns for your business.  One of our partners has even owned 4 restaurants over the years.  We know that the insurance business is one business where you can save money by hiring experts and specialists over generalists and those with less experience.  If you would like our help with your restaurant insurance program, please feel free to call us directly at 877-687-7557 or visit us on the web at www.TheRestaurantInsuranceStore.com.

NC House Bill 709 is now being discussed in the NC General Assembly.   The bill is being pushed forward by republican lawmakers and proposes changes to the NC workers compensation insurance laws.  These changes, if passed, could have an impact on your restaurant workers compensation insurance rates so it behooves you to understand in advance what is being proposed, why, and how it will impact your restaurant business.

Let’s start with why republican lawmakers are pushing for these changes.  Their basic argument is that the current workers compensation system is flawed in that it creates situations where a workplace injury can turn into a lifetime income for the injured worker and that this kind of approach has a negative impact on businesses who are deciding if they want to locate in North Carolina.   In my research, I have been unable to find empirical evidence that this is true.  Let’s face it; there are many different factors that go into the decision of where to locate a business.  This may be one of them, but how impactful it is seems to be only a point of argument, but not a measured fact.

So what are the major changes in this bill?  There are many but the most controversial is the change that would limit the payout for a temporary total disability from lifetime benefits to 9 and ½ years.  It seems to me that if the injured worker has lost the ability to earn a living due to injuries caused by his or her employer, then the injured worker must be taken care of by that worker’s employer – read workers compensation insurer – for the rest of his or her working life.  That’s a fairness issue. The other very controversial part of the bill is the provision that would allow employers, their attorneys and their insurance companies to have access to the medical records and the physician of an injured worker who is seeking compensation.  This provision is aimed at limiting fraudulent claims.  Opponents argue that this will impact the medical care that the injured worker receives but that seems like a hollow argument to me.  If the injury is legitimate, there should be no harm in sharing the medical information with those that are footing the bill for the care.  In the end, the NC Industrial Commission will have the final say in what gets paid and what doesn’t.

So, how will the passage of this bill impact you, the restaurant owner?  I would have to believe that with a lower payout, over time, you should see lower workers compensation insurance rates in North Carolina.  But most of those reductions will be aggregate in nature as opposed to affecting your current policy rates.  That’s because most of the savings will apply to the larger, long term claims and after your 3 year experience period is over, additional claims payouts won’t affect your experience modification factor and thus your specific rates on your policy.  But, if the insurance industry pays less money for claims, then over time you should see a slight reduction in your rates.  There is an argument that the taxpayers will have to pick up the burden of supporting these injured workers whose benefits will run out now after 9 and ½ years.  I think that is a valid point but I think the impact will be more on the federal taxpayer than the state taxpayer.  And since North Carolina is one of the last states to have a lifetime benefit for disabled workers, we are currently subsidizing all other states who don’t have this benefit now.  Perhaps it is time for us to get on board the shift the burden to others train.

All in all, I suspect that most restaurant owners will not notice the impact of these proposed changes should they become law.  There are other, more effective things that you can and should do now to reduce your workers compensation costs, from loss control and safety programs to simply making sure that you use an insurance agent who knows the restaurant industry and understands it in a way that allows them to offer you better rates on your restaurant insurance program.  Clinard Insurance Group is just such an agent.  We want all of our clients to be informed consumers.  We know that not every restaurant is the same and that is why we have created 5 distinct restaurant insurance programs for you to choose from.  We have a fine dining restaurant insurance package, a casual dining restaurant insurance package, a program for fast food and franchise restaurants as well as a bar and grill and tavern insurance program and even a program designed just for catering insurance.  If you have any questions about our restaurant insurance programs, or if we can help you with a restaurant insurance quote, please feel free to call us, toll free, at 877-687-7557 or visit us on the web at www.TheRestaurantInsuranceStore.com.