After seeing a substantial uptick in new delivery and carry-out services since the onset of the COVID-19 pandemic, this has been a lifeline for many restaurants to continue serving customers, keep employees working, and perpetuate a revenue stream.
As such, the introduction of third-party delivery services to a restaurant’s business model has been especially enticing in recent times. However, while the convenience factor has been increasingly beneficial, there are important liability considerations associated with third-party delivery such as exposures to foodborne illnesses, cyber risks, and auto accidents.
Generally, if an employee is in a motor vehicle accident in their owned vehicle while on the job, the employee’s personal auto insurance will first respond to and pay for damages. After the limits of liability on the employee’s personal auto policy are exhausted, the injured third-party may look to the restaurant to pay damages. However, if the employee is in a motor vehicle accident in their owned vehicle while on the job delivering food, the restaurant’s non-owned auto liability policy will most likely respond primary because most personal automobile policies exclude coverage while a vehicle is being used to deliver food or any other product for compensation.
Even though a restaurant’s only option may be to have non-owned auto coverage, instead of operating their own fleet, there are ways to control the risks involved.
- Personal auto use should be restricted where possible. Employers should have a written program in place detailing their driver policies and procedures. Policies should require employees follow all laws, require the use of seat belts, restrict the use of communication devices in all but emergency situations and prohibit the use of alcohol and both legal and illegal drugs that may impair their ability to drive safely.
- Drivers should be qualified as if they are operating company owned vehicles.
- Ensure proper driver training and document that each driver has been trained on company policy in regard to distracted driving. Training should be used to address both auto and workers’ compensation risks.
- Employees using a personal vehicle for business use should be asked to provide proof of insurance and confirmation that there are no exclusions regarding business use. The employer should retain on file a current copy of the employee’s declarations page for their personal auto insurance policy. Instead of accepting state minimum limits, many companies and commercial auto carriers require higher limits be maintained on employee personal auto policies to further reduce their exposure. Transferring more of the risk by requiring higher limits is a very useful practice that should be strongly considered.
- A non-owned Auto Use Agreement should be implemented to document expectations of drivers of non-owned vehicles and to document that these drivers are aware of what’s expected of them.
Delivery workers also have an increased risk to injury for multiple reasons. Statistically, individuals who drive while on the job are at a higher risk to be injured or killed in a motor vehicle accident. The uncontrolled environment associated with delivering goods makes delivery workers at greater risk of slips, trips and falls. There is also a risk of injury due to robbery of goods or money. Any time an employee is injured on company time, the claim will be included in the experience modification calculation and will negatively impact claims history, increasing premiums.
When utilizing the third-party delivery service providers, there is a plethora of additional exposures and best practices to be aware of. To minimize the risks, restaurants should:
- Include strong indemnification terms in your contract which shift the responsibility to the third-party delivery service for any claims arising from a consumer’s use of the services.
- Require third-party delivery services to carry insurance coverage that names your restaurant(s) as additional insured.
- Require proof of insurance, including the requirement of clear vehicle ownership by the driver or service.
- Require compliance with industry standards for safe food handling; Create a comprehensive cyber risk management strategy as your risk for a data breach is enhanced by third party exposures.
There are many benefits to adding delivery service options for your restaurant, however, a review of insurance coverages and risk controls needs to be included on the menu. Addressing risks and exposures upfront with appropriate insurance and loss control measures will free up more time to devote to other issues facing the restaurant, while providing peace of mind that your financial exposures are kept to a minimum.
