Top 5 Insurance Claims Facing Pub & Restaurant Owners
Pub and restaurant claims? Surely these are jolly fun palaces, full of happy, shiny people, unsullied by claims? It was probably never thus, but anyone who thinks that of the last 19 months must have been living under a beer mat.
January 12th, 2022
Claims from staff are common and costly. Employment conditions are highly legislated in the UK and expected standards are high. Almost 3 decades after the introduction of the “6 pack regulations”, it’s still easy to fall foul of the rules, and although by no means every workplace accident becomes a claim, those that do are not easily defended.
Slips & Trips
Slips & trips are common in most environments, but in pubs & restaurants, there is a greater risk of spillages of drinks or food. During lockdown, when social distancing measures were in force, only table service was permitted, which meant much more moving about for staff.
In these circumstances, with literally more ground to cover, staff may tend to try to rush to keep customers – and managers – happy. They may be under pressure from personnel shortages due to “normal” reasons for absence, exacerbated by Covid illness or self-isolation. Fewer staff doing more work is far from ideal.
Hospitality venues are particularly at risk whilst so many temporary measures are in force to allow continued operation. Outdoor seating on what were previously pavements, gardens or car parks increases not only slip & trip risks, but potentially opens the way for liability arguments. If a pre-existing footpath defect is now within a café outdoor space, who is responsible? The café or the council?
Temporary shelters such as marquees or gazebos, with uneven or no flooring, and space heaters or air conditioning may present accident pitfalls, which, in the rush to stay open, may not have been adequately risk assessed.
Customers or visitors to the premises may be less likely to be rushing, but may be more likely to have consumed alcohol. Claims from customers may be less frequent and often of lower potential value, but they can also be easier to defend, as the duties owed to staff are much higher than to customers.
Slips & trips are at least as likely in kitchens as elsewhere. In addition, claims for knife injuries and hot water or fat injuries are common. Training, adequate PPE (personal protective equipment) and procedures & equipment for clean-up are essential.
During lockdown, many venues became solely reliant on takeaway food and increased existing kitchen operations. The busier the operation, the more likely accidents are to occur. Spillages are more likely and clean-up less likely. More haste, less speed.
Spillages of drinks, hot liquids or foods by serving staff are common occurrences. A drinks spillage will probably result in only a dry-cleaning bill that the venue will settle out of petty cash, but if it involves glass breakage there’s potential for injury to employees or patrons. Similarly, if hot drinks or foods are spilled by serving staff or customers, there’s potential for scalding claims.
Most people have heard of the “infamous” McDonald’s coffee case, and it is usually mentioned to mock US law and Americans’ propensity for frivolous claims. However, the court found against McDonald’s because the coffee was excessively hot, and because McDonald’s knew of hundreds of previous cases of patrons having scalded themselves. Ms Liebeck, originally from Norwich incidentally, admitted she had spilt the coffee on her legs & groin whilst trying to remove the lid to add milk & sugar. For her contributory negligence the court reduced her award by 20%, to $160,000. Under the US system of punitive damages the jury awarded $2.7 million against McDonald’s, but this was reduced to $480,000, or 3 times the injury award, by a judge. The case ultimately settled out of court for an undisclosed sum. Ms Liebeck was 79 and suffered a serious injury, requiring skin grafts and 2 years of medical treatment. Ironically, she had initially claimed only $20,000 to cover her medical bills.
Thanks indirectly to the EU Package Travel Directive, it has become harder to succeed with a claim for food poisoning. When travel companies became liable for their suppliers and providers, many travellers to all-inclusive foreign resorts thought it would be a wizard wheeze to buy a diarrhoea treatment from a pharmacy in the resort and, on their return home, present the pharmacy receipt, claiming that their holiday had been “ruined” by food poisoning. Tens of thousands of such claims were made. According to figures from the travel industry, there were 5,000 claims in 2013, sky-rocketing to 35,000 in 2016. Initially, many were settled to avoid court costs, but inevitably a fightback began, and insurers now examine food poisoning claims in great detail. There have been many headlines about holidaymakers being fined or even jailed for these fraudulent claims, and cases continue to come before the courts. TUI recently won a landmark victory in the Court of Appeal.
However, food poisoning is a real risk and, if it occurs, there will likely be multiple claimants. In addition to any settlements, there could be a period of closure for deep-cleaning. This may be covered by Business Interruption (BI) insurance, but reputational damage after such an outbreak could be devastating to a business.
Pre-pandemic, business interruption probably wouldn’t have made Top 20 Claims list, but it’s big news, due to the stance adopted by several insurers to decline these claims. Like the McDonald’s coffee case, there’s a perception that insurers were relying on “small print” to avoid legitimate claims, and there’s the fact that many policies had only very basic cover or the unforeseen circumstances challenged policy wordings.
On behalf of thousands of disgruntled policyholders the Financial Conduct Authority (FCA) brought a series of test cases, covering 14 different policy types issued by 6 insurers. The test cases were progressed quickly through the courts and in January 2021 the Supreme Court ruled largely in favour of the policyholders, enabling insurers to begin working through the backlog of disputed claims.
In the same way that the Great Flood of 1953 led to storm & flood insurance becoming commonplace, so the Great Covid Pandemic may lead to much more widespread take-up of BI cover and a better understanding of the intentions and limitations of different types of policy.
However, the flood of pandemic-related claims is likely to affect market capacity. Some reinsurers have already renewed contracts with Covid exclusions. Rates will almost certainly increase sharply. In an area fraught with potential for misunderstanding, the advice of a good broker could be worth its weight in gold.