Chris Smith, Assistant Vice President of Workers’ Compensation Specialty Products, was interviewed by Pizza Today magazine this month as a leading subject matter expert regarding WC insurance & restaurant delivery liability.
Food delivery is here to stay. We are a nation in love with instant gratification.
Pizzerias have a long tradition of delivering hot, fresh, custom gratification to the doors of America. However, delivery exposes operators to significant financial risk if they don’t take insurance and liability seriously. Consider this sobering statistic: driving jobs (including trucking) were the seventh most deadly category in the United States in 2017, according to the Bureau of Labor Statistics.
Be scrupulous about insurance to protect both your business and your employees from costly liability or lawsuits. We consulted two experts on the topic: Christopher B. Smith, Assistant Vice President of Workers' Comp Specialty Products at All Risks, Ltd., an independently owned insurance brokerage, and Keith Stachowiak, a personal injury attorney at Wisconsin firm Murphy & Prachthauser, weighed in with recommendations from their respective specialties.
Both experts agree the first step is getting educated about the law, especially those specific to your state, and finding a qualified insurance professional you can trust. There are many factors to consider when evaluating your insurance coverage, and asking the right questions is crucial.
Company-owned versus employee owned determines type of policy.
The primary factor regards ownership of the delivery car, because that dictates the type of policy you need.
When the delivery auto is business-owned, a commercial policy is required, which covers all authorized drivers. “For a large franchise, the best bet from a liability standpoint is to own the vehicles,” according to Smith. “Then they own the service record, they know how many miles are on them, when the brakes were last checked.”
Smaller shops can seldom afford to own a vehicle, and rely on employees with their own cars. When the delivery car is driver-owned, Smith explains, the business must buy a Hired and Non-Owned Policy, which covers property damage and injury inflicted on a third party. However, it does not cover damages to the employee’s automobile. Drivers and inexperienced restaurant operators may assume that the driver’s personal policy will cover damage to the employee’s car, but insurance companies reject such claims, because they are providing personal, not commercial coverage. While employees could theoretically purchase a commercial policy, they are generally too expensive.
This leaves drivers to pay for all repairs to their own vehicles. Their injuries will be covered by Workers' Comp.
Unscrupulous operators may try to push the risk onto employees, pressuring them to claim they were engaged in personal, not job-related, driving. That’s risky, fraudulent, unethical and poor practice as an employer, as it generates staff ill will. “It’s the owner’s responsibility,” says Stachowiak. “They are making the money, they need to take the risk.” Additionally, should drivers succeed in concealing the fact that they were on the job when they were injured, they forfeit access to Workers' Comp for their injuries.
“This is a constant theme in my practice,” says Stachowiak. “I get calls on this from drivers all over the country. They are involved in a crash, they have private insurance on the vehicle, it’s totaled or damaged. The owner of the company won’t pay for it, and their own coverage doesn’t apply. Now they’re out of work because they’ve got no car. Employers are negligent in not making sure their employees know they’ll be liable. They mislead their employees. These owners ought to know that a private policy isn’t going to cover accidents during delivery.” In such a scenario, the third-party victim is likely to win compensation for property damage or injury from the pizza operator, but drivers will recover no compensation for repairs to their automobiles.
Transparent communication with your insurance company is essential.
Next, think through the multiple scenarios in which you and your drivers require protection. The main considerations are property damage and injury. Property damage could include damage to the company vehicle, the driver’s vehicle or a third party’s vehicle. It could also include damage to private property such as buildings or landscaping. Injuries could impact your employee, another driver, a passenger in another car or a pedestrian. Lastly, the question will arise of who is at fault in the case of an accident—your driver or another party. Do you offer bicycle delivery? Talk to your insurance company and Workers' Comp provider about this special circumstance.
These possibilities add up to many potential equations, so inquire thoroughly when you are insurance shopping and make sure you are getting the coverage your business needs, and that you understand the limitations. Strictly follow agreements with the insurance company, and communicate and enforce the rules with your employees. For example, a passenger in the delivery car will not be covered for injury, so do not allow drivers to take a non-employee passenger under any circumstances.
“Go to a reputable commercial insurance broker, and disclose your situation fully and accurately,” advises Stachowiak. “The drivers you have, the miles they will drive. Report changes if someone is fired or hired. Make sure they are doing background checks. Talk to the agency, see if they come up with any red flags about any employees.”
Smith from All Risks explains the protocol in the case of an accident. “The standard is reporting immediately within 24 hours of the accident. If there is a police report, submit it as well. All information is taken from the third party that’s injured or suffered property damage, and relayed to the carrier on a claims form. The carrier then investigates the accident and determines culpability. If the driver is held culpable, they’ll request estimates for the property damage. If there is physical injury, they’ll get copies of the medical records and bills, and then reimburse for the property damage and/or the physical bodily injury.”
Will claims have an effect on insurance costs? Smith says that most policies are on a year-long cycle, so about 90 days prior to renewal, the carrier will look at the losses and discern whether the account is still profitable. They’ll consider both severity and frequency: frequency is more likely to jeopardize renewal than a single severe event. If the account isn’t profitable, they will non-renew or they will increase their rates to cover potential exposures. Significant losses may increase rates by 25 percent.
“Unfortunately in this business you can get penalized for not knowing something,” warns Smith. “So it’s always best to consult with an industry expert to help with your insurance needs.”
Annelise Kelly is a Portland, Oregon-based freelance writer.
Annelise Kelly (2019, June 1). Delivery Liability – Protecting your business and employees. Pizza Today, Retrieved from https://www.pizzatoday.com/departments/features/delivery-liability-protecting-your-business-and-employees/