You may have noticed that demand in the food delivery industry is exploding. Even before COVID-19, more and more consumers were ordering delivery. With new health and safety guidelines, most quick service restaurants are considering adding delivery service or working with third-party delivery services such as DoorDash and Uber Eats.
But it’s important to understand some of the risks that come with offering delivery to your customers, including delivery through third-parties.
What Are the Food Delivery Risks?
Delivery work is a high-risk occupation, with 4,106 transportation-related employee deaths recorded between 2016 and 2017. Most deaths and injuries occur due to traffic accidents, which may be the fault of a delivery worker or another driver. Such accidents can also result in death or injuries to third-parties, vehicle damage or property damage.
Delivery services and restaurants may also be accused of negligence and face liability for an accident that occurs while a driver is on the clock. There are millions of traffic accidents each year, but just one incident could result in your restaurant facing a costly lawsuit by the injured parties or their insurers.
There is also a greater risk of foodborne illnesses with delivery if certain foods aren’t maintained at the proper temperature during delivery. With outside delivery services, your restaurant will have less control over the quality and professionalism of service, which may make a claim for food poisoning more likely.
What Factors Can Impact Food Delivery Risks?
The risks restaurants face can vary because of the variety of delivery options available, safety oversight and insurance factors. Similar restaurant businesses may face differing levels of risk because of how they choose to deliver to customers.
Restaurants Providing Delivery In-House
Some restaurants choose to use their own vehicles and drivers. This gives you the greatest oversight over food quality and delivery services but requires a larger upfront investment and more time management. The restaurant must take care of vehicle maintenance, driver training and monitoring, and fully insure trucks and drivers.
Employee-Drivers Using Their Own Vehicles
Hiring drivers who drive their own vehicles is another common food delivery option. Thoroughly checking driving records, accident history and insurance coverage of your drivers can reduce your liability risks. But problems often arise when drivers lack periodic training, oversight of driving performance and adequate insurance coverage.
Nearly all personal auto insurance excludes driving for deliveries, so drivers must purchase more expensive business auto coverage. Restaurants must make sure drivers have from $500,000 to $1 million or more in auto liability coverage, and often end up purchasing excess coverages to protect against their drivers’ exposures.
Restaurants Partnering with Third-Party Delivery Services
Other restaurants are taking advantage of the numerous third-party services that now offer food delivery. Your restaurant may benefit from lower costs by outsourcing vehicles and drivers, but delivery service charges can be costly for the restaurant and some risks still remain.
Even with drivers hired by the delivery service and driving the delivery service’s vehicles, your restaurant still could suffer reputational damage and be named in a costly lawsuit if a serious accident occurs.
Restaurants need to make sure that the third-party services partnered with are reputable and carry adequate levels of auto liability and delivery insurance coverages. Your restaurant should also be named as an additional insured on the delivery service’s policies and make sure you have adequate levels of coverage with your own insurer.
When Should You Partner with Your Insurer?
Food delivery is a smart choice for restaurants facing an uncertain future, but it’s important to ensure you don’t expose your business to unnecessary risk. Because the delivery services you choose to provide will depend on your budget, it’s crucial to involve your insurer early in your planning.
The premiums and types of coverages required will vary depending on whether you choose to deliver with your own drivers and vehicles, with employee-owned vehicles or through a delivery service.
If your restaurant is considering food delivery service, contact your Lockton Affinity representative to learn how you can protect your business, stay on budget and reduce your food delivery risks.