Professionally Speaking
Posted by estiator at 10 July, at 03 : 46 AM Print
BY MICHAEL GORAS
ABOUT INSURANCE
HOW TO MAKE DELIVERY WORK FOR YOU
Invariably when first meeting with my restaurant clients I ask the question “do you provide delivery service?”
Most of the time the answer goes something like, “eh a little” or “only for regular customers”. Upon further examination of their insurance policies, I often find no coverage for delivery operations.
Providing delivery service can boost sales and increase the bottom line. Many casual dining and even some premium casual and family-style restaurants are getting in on the act. However, with the reward comes a significant amount of risk. As a responsible business owner, you need to manage that risk and transfer as much as possible to a third party. That’s where your insurance company comes in to save the day.
One option available is to purchase a company-owned vehicle and hire a driver to operate and make deliveries. The cost is somewhat significant with the expense of purchasing a vehicle, maintenance and insurance to consider, you can see how the adventure of offering delivery can quickly cut into your profit margin.
Another option is finding an employee who is willing to use their own vehicle to make deliveries. With an hourly wage, a per delivery remuneration and tips, the driver can usually do well during busy shifts.
The hidden risk to this seemingly cost-effective strategy is an auto liability lawsuit.
What most restaurant owners don’t realize is when that employee is operating their vehicle for your business you become responsible for their actions. So, if there is an accident with bodily injury or property damage, not only will the driver be sued, but it is very likely that you, as his employer, will find yourself as a defendant in a lawsuit.
But beware: Your General Liability policy excludes any motor vehicle claims. The only coverage that will protect you in this situation is Hired & Non-Owned Auto Liability.
Insurance companies know this is a significant risk and most policies do not provide this coverage unless the agent specifically requests the coverage. Unfortunately, many times the cost can be somewhat expensive but, in the event that your well-meaning delivery person is involved in an accident and you are enjoined in the suit, it will be the best money you ever spent. Break through your fear of paying too much for insurance and ask your agent if your policy provides coverage for Hired and Non-owned Vehicles. Of course, with the advent of Uber Eats, Door Dash and Grub Hub there are many more options these days, all of which come with their costs and unique challenges (most take 25-35% of the delivery order’s check for their fee).
But this is a discussion for another day.
Michael Goras is the Vice President of Sales at Eastern Insurors LLC in Midland Park, NJ, licensed to serve the insurance needs of businesses in all 50 states. He is a 30-year risk management veteran specializing in restaurant insurance with access to restaurant programs not available to most local independent agents. Questions can be addressed to Michael at mgoras@insurance-nj.com
Editor’s Note: This subject has been addressed in several articles of Estiator throughout the last year as the delivery segment continues to be a growth engine for the industry. Some restaurant owners try to skirt the system by paying their drivers as “third party” or “independent” contractors, paying them through a 1099 rather than as an employee with an hourly wage. This approach, however, provides no protection as the IRS and Labor Department apply a rigorous test to determine if an employee is, indeed, independent. In that test the agencies look to see if: 1. the “contractor” is directed to work by the restaurant (hours that they work, where to drive for the delivery, etc); 2. the “contractor” is an established business entity, filing with the state and paying taxes; and 3. the orders and payment come through the “contractor” to the restaurant, and not the opposite.
