Claim Chronicles of the Mishap Family – The Restaurant

Claim Chronicles of the Mishap Family - The Restaurant

Meet the Mishaps: Liability Larry and Catastrophe Cathy are married with two kids, Deductible Dudley and Peril Polly, and a dog, Risk. As their name would imply, they are often faced with very unfortunate circumstances. What’s worse, everyone around them seems to get caught up in their bad luck, too! 

Join us each month as we dive into some of the adversity that comes their way, all from the insurance perspective!

The Story

Catastrophe Cathy Mishap had always loved to cook and owning a restaurant was her dream since childhood. Opening La Grande Malchance afforded Cathy the opportunity to demonstrate her flair for French cuisine to a packed house nightly. From coq au vin to pain au chocolat, the menu had all the classics and nightly specials to keep patrons coming back for more.

Saturday nights were always busy at La Grande Malchance and, most weekends, tables were fully reserved. Cathy always had the finest ingredients on hand in plentiful supply to accommodate the crowds.

The Loss

One Friday night, after the restaurant had closed and the staff had headed home, the building next door caught fire. The fire department responded immediately and, thankfully, stopped the fire from spreading to La Grande Malchance. Cathy’s building although unscathed by the fire, suffered considerable water damage as the fire department worked to contain the fire. Unfortunately, they also had to use civil authority to block off the area around the building while they investigated the fire and the severity of the damage. Cathy was barred from entering her building for two full weeks and, as a result, much of the food inside had spoiled by the time she could get back in the restaurant.

The loss was considerable. In addition to the spoiled food inventory, the menus, furniture, décor, linens and other items would all need to be cleaned or replaced before the restaurant could reopen. Because the restaurant was left unattended during the period of civil authority, the water damage was not immediately attended to and required professional remediation.

The Investigation

Cathy immediately called her insurance agent to report the damage to her restaurant. She knew she was adequately covered for the food and the business property because she had just recently conducted her annual insurance review and gone through the policies. Cathy was most concerned that, while the restaurant was closed, she would lose revenue that she needed to keep the business afloat.

The Outcome

What Cathy forgot about was that her business insurance package included business interruption insurance, also known as business income insurance. Because the original cause of loss, a fire, was a covered peril on her commercial property insurance, the business interruption insurance endorsement was activated. This endorsement covered revenue that La Grande Malchance would have normally received had it remained open. The policy also covered the business’ extra expenses such as the mortgage, insurance premiums, employee salaries, and other fixed costs.

If Cathy could have operated her business out of a temporary location, the business interruption coverage would have paid those expenses as well.

The Lesson

While the temporary shutdown of the restaurant was an unfortunate experience, Cathy was well-covered. As a result, once the civil authority was lifted and the building repairs were made, Cathy was able to reopen the restaurant within a few months.

Cathy had taken the necessary steps to document her business income to the satisfaction of the insurance company. Had she not kept careful records, she might have only received a portion of her typical revenue, thus creating a deficit in her funds. In addition, Cathy also had kept a careful inventory of items within the restaurant as well as details of her food orders. When it came time to make a claim, the value of the damaged items was clear and up to date.

Claims Chronicles of the Mishaps is a fictional series based on actual claims. The Mishaps are an imaginary family and any resemblance to any person is purely coincidental. Claim details and circumstances have been changed to protect the privacy of individuals. All insurance policies are different and each separate policy will dictate the coverage in each unique scenario. Nothing in this post is meant to suggest a guarantee of coverage.