With the unprecedented and unpredictable nature of the COVID-19 pandemic, restaurant operators are beyond the point of having their hands full.
Over the course of three months, they’ve dealt with sliding sales, shifts in operation, closures, layoffs, and more.
All of these factors have opened the door for new liabilities, says Crystal Jacobs, vice president and program director for Restaurant Guard Insurance.
Among those concerns are worker’s compensation claims. Jacobs explains that worker’s compensation claims rely on one key question—did the injury occur at the workplace? However, the COVID crisis throws a curveball into the mix. Is it possible to prove someone contracted the virus at work?
“Where they’re going to have significant impact is going to be on their employees—ones that have worked takeout and delivery during this entire thing,” Jacobs says. “If they contract the illness while they’re working, what are they going to do from a work comp standpoint?”
Jacobs says quite a few states have explicitly said if an employee contracts COVID-19, worker’s compensation has to apply regardless of whether the employee contracted it at work. Some have specified it to certain industries or essential workers.
There have been ongoing discussions at the federal level about whether legislation should include language that shields businesses from lawsuits related to COVID exposure.
On May 18, restaurant leaders held a meeting with President Donald Trump and his administration at the White House where they discussed a myriad of topics, including business liability insurance protection.
At the meeting, RBI CEO José Cil said he expects “frivolous” and “unfounded” lawsuits against operators that are “trying to do the right thing, trying to survive.”
Larry Kudlow, director of the U.S. National Economic Council, said the administration is working hard on liability protection. The protection is favored among Republicans, but criticized by Democrats.
“The Democrats don’t want to give you the liability provisions,” Trump said during the meeting. “They just don’t want to have that. And it’s crazy that they don’t. But the Democrats do not want to give that to people, and that’s not a good thing."
Lawsuits are already popping up across the country. On May 19, five McDonald’s employees in Chicago and four of their family members filed a lawsuit, claiming the fast-food chain didn’t provide enough safety measures to protect workers against COVID-19. The lawsuit seeks an injunction to force McDonald's to require masks for customers, mandate that employees be notified if a coworker tests positive, and prevent workers from having to reuse masks.
Jacobs also notes the increase in liquor liability amid the crisis, especially selling alcohol to-go. States like New York, Nebraska, and California have loosened restrictions on alcohol delivery with certain rules, she says.
She explains that restaurants aren’t required to ask if a drink will be shared or consumed by one person. If a person suffers alcohol poisoning from a drink purchased at a restaurant, the operator could be held liable, Jacobs says. Customers aren’t required to sign a waiver saying they’re not drinking and driving either. Jacobs points out that the to-go alcohol isn’t technically an open container, but it’s not sealed either.
“Under normal liquor liability circumstances, the biggest exposure that restaurants and bars face is over-serving,” she says. “If a customer is over-served and then jumps into a car and kills someone, that’s what liquor liability insurance generally covers. But, in some states today and perhaps for the months to come, customers are sent off in their car with a container of mixed drinks. The new areas of risk associated with that are almost too numerous to name.”
“… I don’t think people have fully thought about what the implications of allowing to-go containers are,” she adds. “But I don’t think the rules surrounding to-go containers are going away. In fact, Texas has stated that more than likely, they will continue to allow it. Which is a big deal because Texas is a blue law state. Car dealers can’t even be open on Sundays.”
In addition, Jacobs says employers should be wary of the added exposure that comes with laying off a significant amount of employees. She notes that employers need to consider what protected classes were included in the layoffs or if any worker viewed the layoff as retaliation.
The same points are true for when an employer decides who to bring back from furlough.
"You have to be very cautious and recognize and understand the demographics of who you’re bringing back, who you’re laying off,” Jacobs says. “You have to be cognizant of that. And it’s not to say that somebody gets to come back simply because they’re in a protected class, but you need to understand, has anyone had any complaints—that was in a protected class—that was claiming any kind of harassment, discrimination … The reasoning of a risk because of lack of revenue is not a get out of jail free card from any previous complaints.”
Another potential exposure includes restaurants utilizing their own delivery system, and the liability associated with an employee using his or her own vehicle for work purposes. Also, as more restaurants shift resources online, there’s added risk related to data breaches and ransomware attacks.
Jacobs says her advice for operators is to have deeper conversations with insurance agents—don’t simply go through the motions.
“There’s a whole slew of exposures that people are starting to look at as real whereas in the past, it’s always been a ‘oh, that won’t happen to me, that can’t happen to me,’” Jacobs says. “I understand that times are tough, and that insurance premiums are probably the last thing people want to pay, but the reality is, we can’t keep with that mindset that it will never happen to me, and hopefully the insurance agents you’re working with will have a true heart-to-heart and really explain the exposures. Don’t rely on auto renewals. Don’t automatically renew your policies without having a conversation of, is there more? Is there something that I’m not thinking of?”