A Restaurant Owner's Guide To Navigating Aggregate Liability Limits

A post brought to you by Gallagher

Navigating insurance can feel like deciphering a complex menu—perhaps even one in a foreign language you haven't spoken since grade school. Some terms may seem familiar, but do you truly understand what you might be committing to?  One crucial aspect often overlooked is the aggregate limits in your General Liability policy. These represent the maximum amount an insurer will pay for all claims within a policy period for certain types of claims.

Why does it matter? Over the course of the year, restaurants are exposed to various risks that may lead to claims.  Consider a busy holiday season week when one customer slips and falls, another alleges food poisoning, and another alleges they were overserved liquor subsequently injured themself. Each incident triggers a claim against your general liability policy, and the sum off these claims counts against your General Aggregate limit. Suppose you have $5million liability policy with a $5million General Aggregate, and these three incidents result in total claims of $2million. This would leave you with $3 milion of coverage for the balance of the policy term.

Although this example is unlikely (noting many liability claims are…), it is important you understand aggregate limits in a liability policy are like a bottle of wine – the more you pour, the less you have available!  Reduced limits in your General Liability policy may also put you  in breach of contracts, such as lease agreements, which require you maintain certain minimum limits. It's crucial to carefully review your contractual obligations and ensure your insurance limits align.

Remedies are neither complicated nor necessarily expensive. Reviewing your needs with an experienced risk advisor and insurance broker is paramount. This should include up-front consultation to understand your risks and ensure they are addressed by appropriate insurance coverage. Don't wait for a crisis to realize the importance of your aggregate liability limits. Proactive management is the recipe for long-term success and peace of mind.

David Murray

Account Executive & Specialty Risk Broker
Gallagher

403.850.4031
david_murray@ajg.com