What Insurance Do Grocery Stores Need?
As a grocery store owner or manager, you have probably seen it all when it comes to insurance claims. Fake slip and falls, theft, refrigerators breaking down on the hottest days of the year—it is all part of the business.
The variety and frequency of these incidents is largely why grocery store owners use insurance products more than most other businesses owners—claims happen more when you have lots of perishable food products, in combination with hundreds of customers visiting your premises daily.
In my experience, this holds true. LandesBlosch’s grocery store clients file more claims than almost any other business type. What’s interesting is that a large portion of the claims appear to be fraudulent (or exaggerated) in one way or another, but that doesn't stop personal injury attorneys from sending demand letters and filing lawsuits against our grocery store clients.
The good news is that the core coverages included in commercial insurance can typically protect grocery stores against these claims. The actual risks align very well with what the insurance policies are designed to cover, meaning it is incredibly rare for an insurance claim to get denied if the grocery store purchased all the necessary policies.
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Why do grocery stores need insurance?
Before we get into the types of insurance policies grocery stores need, here are the typical reasons why you should purchase insurance in the first place:
Landlords require insurance.
If you don't own the building that your store is located in, the landlord or property management company will probably require you to have some sort of liability insurance and add them as an additional insured on the policy.
Landlords require this because, as the property owners, they bear significant liability. If any injuries or accidents were to occur on your business premises, your policy would defend them and cover any lawsuit expenses.
Franchise partners require insurance.
Similar to landlords, a grocery store franchise chain will frequently get wrapped up in any lawsuits involving one of its stores. For that reason, we see insurance requirements from the franchisor that require the franchisee to carry specific insurance policies with certain limits of insurance.
Grocery stores have a high claims frequency.
Grocery stores simply have more claims than other types of businesses. The claims usually don’t involve a huge amount of money, but there are a lot of them, primarily relating to slip and falls or injuries that happen on the premises. And frequent claims, even with small or medium levels of financial liability, start to add up quickly.
Frivolous lawsuits plague grocery stores.
The higher claims frequency naturally includes more fake claims. Grocery stores face more frivolous and fraudulent claims than many other types of businesses.
For example, when reviewing the 5-year loss history with one of our grocery store clients, we saw that 14 claims were filed, but 10 were closed with no payment. That is 10 incidents where the insurance company handled all the lawyers and claimants on behalf of the store owner, and made it go away. The store owner forgets the claim was even filed since LandesBlosch and the insurance company did all the work on the back end.
What insurance coverages do grocery stores need?
General Liability
One of the core coverages that grocery stores need to protect their business is a general liability insurance policy. This insurance policy covers property damage and bodily injury that happen either on your premises or as a result of a product you sold (e.g. food poisoning injury).
The vast majority of claims that grocery stores file (which are typically related to slip and falls) will be covered under the general liability policy. These types of claims usually involve small financial amounts, but can be large if the claimant sustained a significant or long-lasting injury.
Commercial Property
Grocery stores have a lot of valuable inventory . Between the aisles of food and the computer systems, to even the refrigeration equipment, you could have millions of dollars in inventory. A commercial property insurance policy insures your physical assets from losses such as fires, theft, natural catastrophes, and much more.
Workers Compensation
Grocery store employees restock shelves, work the registers, and manage the store. Because these are often physical, in-person jobs, there is significant liability. Most states have laws in place requiring grocery stores to purchase a workers compensation policy that covers certain medical benefits for employees who are injured while working for your company.
Cyber Liability
As a business that has a lot of payment transactions and is reliant upon the up-time of the computer systems, a cyber liability policy is becoming more important for grocery stores every year.
When ransomware attacks modern point-of-sale (POS) systems, it locks you and your team out and typically causes you to lose all sales for the period of time it took to recover your systems.
Not only that, cyber-attacks require a forensic investigation to determine what data was lost and if any of that data contained personal information about your customers.
A cyber liability policy covers these risks and pays for your lost income while you are recovering from an attack.
Employment Practices Liability
Grocery stores often have a larger number of employees and a higher turnover rate than many other industries. This puts stores at increased risk because each time an employee is hired, not hired, or terminated, there is the chance of an employment-related lawsuit, such as discrimination, wrongful firing, retaliation, and many other things.
Due to certain Equal Employment Opportunity Commission (EEOC) regulations, even being accused of these discriminatory or retaliatory actions can lead to spending a significant amount of time fighting the allegation, and money in legal defense costs and potential settlements.
Employment practices liability insurance (EPLI) covers these employment-related accusations or events that occur while you and your team are operating your business.
Grocery Store Claims Examples
Fraudulent Slip & Fall
Let’s say a customer spills a beverage from a store shelf on the floor and does not alert the staff, simply moving on to another area of the store.
Shortly after that, the customer returns to the aisle and slips and falls on the liquid they spilled a few minutes prior. They allege that the store should have cleaned up the mess, and the slippery floor caused them to sustain significant injury, resulting in them being unable to work. The customer files a claim demanding that the store pay for their medical bills and lost wages.
A commercial general liability policy would respond to incidents such as this by investigating the claim, speaking with the injured customer (or their lawyer), and resolving the matter in the best way possible. All of this is handled for you.
Equipment (Refrigerator) Break Down – Lightning Strike
Imagine that a grocery store owner walks into the building one morning to find that an aisle of refrigerators is not working. Upon further inspection, there appears to be fire damage to the refrigerator.
The store owner calls the insurance company to file a claim. Upon looking at the photos, it is determined that a lightning strike caused the refrigerators to break down.
The insurance company would cover this instance under the “business personal property” and "equipment breakdown" portion of the commercial property insurance policy, paying for the costs to repair the equipment and replace the spoiled food.
Employee Injury While Lifting Products
While lifting a case of bottled water from a shelf, an employee sustains a lower back injury. The employee’s physician determines it’s a minor injury, but requires physical therapy.
A workers compensation policy would cover the medical treatment and lost wages the employee sustained as a result of the injury.
LandesBlosch Insurance Tips For Grocery Stores
1) Consider Excluding Medical Payments Coverage
Included in most commercial general liability insurance policies is "medical payments" coverage. This usually has a no-fault limit of $5,000 or $10,000 that covers various medical bills for injuries that happen on your premises. This coverage often comes into play with slip and falls, which are by far the most common type of claim for grocery stores.
Standard liability insurance usually requires proof of negligence before a claim is paid, meaning it has been legally determined that something you did played a part in causing the injury (the fall).
Medical payments coverage does not require a determination of negligence or fault on your part. It is no-questions-asked coverage that is paid out, primarily to make the claim go away with the least amount of effort.
The problem for grocery store owners is that fraudulent slip-and-fall claims become more common when people know it’s guaranteed they’ll get $5,000 or $10,000 from your store. These small claims pile up, which raises your insurance costs significantly more than normal because you’re paying $25,000 per year in fraudulent slip-and-fall claims.
In essence, what is normally a "goodwill" coverage can often be abused, resulting in higher costs for you.
We see a dramatic drop in claims frequency and costs when this coverage is excluded for our grocery store clients. The claimant must prove you were somewhat culpable in causing the injury in order to file a lawsuit.
2) Purchase Equipment Breakdown Coverage
Equipment breakdown is the second most common type of grocery store claim.
Equipment breakdown insures equipment such as computers, security systems, and telecommunication equipment, but the main reason grocery stores purchase this coverage is to protect their fridges and HVAC units from electrical shock or sudden breakdowns. The high value of the equipment itself and the products it houses creates an above-average exposure for grocery store owners.
Between purchasing new equipment, paying for installation, and replacing lost product, it can cost a small fortune if your refrigerators go on the blink.
This coverage is surprisingly inexpensive for what you get; for a grocery store, it is absolutely worth the small expense.
3) Get High-Quality Security Cameras
Having a lot of high-quality (preferably 4k) cameras allows the insurance company to fight fraudulent claims much better. For example, it’s much easier to dismiss a case when you have video evidence of a person creating a spill on an aisle and then circling back around to intentionally slip on it, versus relying on written testimony. And with the high frequency of claims that grocery store owners inevitably face, the cameras are worth the investment.
4) Have a slip & fall incident report ready and train your employees on how to file an incident.
Store owners aren't always going to be on-site. Make sure one manager or employee per shift at the store knows how to handle an incident, which includes filling out a comprehensive report and pulling the video files in the event that a lawsuit is filed.
Having a report signed by the claimant can keep the story from changing over time and warping into something it wasn't.
5) Consider Liability Deductibles If You Have A Claims Frequency Issue
The purpose of insurance is not to “trade dollars”—to take your premium dollars and give them back to you in small increments throughout the year. The purpose of insurance is to protect your business from financial harm caused by infrequent and large events.
If you are seeing a high frequency of small claims that is driving up your insurance costs, set your liability deductible so that most of your frequent claims will fall under it. If you are paying out of pocket for these small and frequent claims, your insurance costs won't be inflated, and you will most likely pay less in the long term.
With this philosophy, you will still receive the benefit of your insurance policy helping you defend against legal actions, and your policy will be there for the large, unexpected events that could occur.
In addition to saving money, the insurance company will see you as a more valued partner who uses insurance as it was intended to be used, resulting in more favorable rates and coverages over the long term.
Note that changing your liability deductible might be unnecessary if you are a smaller grocery store that doesn’t file many claims. This advice is primarily for stores that file at least three claims per year and can accurately predict the average cost of a claim.
Summary
Grocery store owners have to deal with more claims than most other business owners—it’s simply a part of their day-to-day. You need insurance to cover the various liability claims that happen in your store and protect the large investment you have in inventory.
If you are looking for an insurance agency that has experience insuring grocery stores and addressing with the relevant issues of the industry, let us know. We can help.
If you are a small grocery store, you might qualify for an online quote. If you are a larger grocery store with more complex risk, schedule a meeting with one of our advisors to get a custom quote for your business.
About The Author: Austin Landes, CIC
Austin is an experienced Commercial Risk Advisor specializing in property & casualty risk management for religious institutions, real estate, construction, and manufacturing.