As Deliveries Fuel Bottom Lines, Restaurants Must Carefully Manage Risks

Beyond the seismic trials of the pandemic are the everyday risks that businesses must still closely watch. For restaurants, that includes containing casualty losses, which often represent a sizable portion of their total cost of risk.

While some casualty risks have receded in the last year, others have become more pressing. And some, like delivery risks, will likely continue to grow post-pandemic.

Evolving Risks

Marsh’s 2020 Restaurant Loss Cost Trends Report  and 2020 Restaurant Risk Management Survey highlight the industry’s strides in limiting the effect of casualty losses. From 2015 to 2019, workers’ compensation claims fell 13% in frequency and 6% in severity, and over that five-year period, restaurants closed 91% of claims within the first year.

But it’s not all good news. The cost of lost-time claims and the average incurred cost of general liability claims are increasing. And while falls, slips, and trips remain the leading cause of employee injury by severity — and a frequent cause — delivery risks are growing.

Delivery Hazards

Even before the pandemic, delivery was growing more important. From fast food restaurants to fine dining, many companies were already offering delivery for at least one of their locations in 2019.

While most restaurants use a mix of methods, the industry clearly favors vendors. Among those restaurants that offer delivery, nearly 94% said they used a third-party delivery service.

COVID-19 has made delivery essential to revenue streams, but can present significant risk. For example, lost-time workers’ compensation claims for which the major cause of injury was a motor vehicle accident cost restaurants more than $70,000 on average from 2015 through 2019. That’s more than double the average cost for falls, slips, and trips, which can still occur when delivering to residences due to uneven walkways, poor lighting, and other hazards. Delivery drivers can also make tempting targets for assault and theft.

Then there’s the possibility of injuring customers or damaging their property. This risk can be further complicated when drivers use their own vehicles, as underinsurance can lead to coverage gaps. That’s especially worrisome as social inflation and other trends drive up jury verdicts at a rapid pace.

Rules of the Road

When the health threat of COVID-19 ultimately subsides, social distancing requirements will ease, consumer confidence will climb, and restaurant dining rooms will again be full. Consumer expectations that restaurants offer delivery services, however, will likely continue to grow. Thus, risk professionals — whether their organizations use third-party services or have employees deliver food themselves — should take steps to limit their risk.

For restaurants that use their own employees to complete deliveries, mitigating risk starts during the hiring process. Criminal background checks and a review of driving records can help restaurants better understand the risks associated with a candidate.

Creating clear rules and training specific to delivery hazards is also key, although fewer than half of restaurants surveyed reported that they provide such training. Before sending drivers on deliveries, it’s important to reinforce that they should:

• Understand and avoid delivery hazards. Parking in light when possible, shining headlights toward customers’ front doors, not cutting across yards, and scanning for security concerns can help prevent injuries and theft.
• Be mindful of distractions. Anything that takes a driver’s hands off the wheel, eyes off the road, or mind away from the task at hand can increase the likelihood of a collision.
• Emphasize safety over speed. Rushing to complete an order can result in painful injuries for employees and high costs for employers. Speed being a priority for restaurants may be implied if safety isn’t specifically called out and practiced.

Companies that use third-party delivery services must ensure that vendors are similarly diligent in screening and preparing their own employees. With an eye on the potential for shared liability, it’s also vital to work with in-house and outside counsel to carefully review contracts to ensure that vendors are properly insured and that restaurants are not assuming too much risk.

Finally, there are auto liability insurance considerations. For restaurants that rely on employees’ vehicles to complete deliveries, it’s essential that policies include coverage for nonowned vehicles; alternatively, restaurants can require drivers to maintain certain limits of liability insurance, where the restaurant’s policy sits excess of an employee’s personal auto coverage. Standalone delivery programs may also be available to help isolate delivery claims from core casualty programs. Risk professionals should work with their advisors to weigh their options and build insurance programs that best meet their specific needs.

For more information about 2020 Restaurant Loss Cost Trends Report and 2020 Restaurant Risk Management Survey, contact your Marsh representative.