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Is the proper insurance coverage on your menu?

By Bob Fiorito

he owner of a fine dining establishment hires a pretty cocktail waitress only to find out that she is nasty to her customers and displays a bad attitude to the majority of the people she serves. After receiving several complaints about the unpleasant waitress, the owner issues her a warning. Her rebellious behavior continues, and finally after two additional warnings the waitress is fired. She decides to seek the assistance of an attorney and files a law suit citing wrongful termination and sexual harassment. The owner knows that her law suit is full of false claims, but how can he prove it? He fights her in court, and the waitress walks away with a small award of roughly $7000. This seems like a win for the owner of the restaurant, however, the legal fees he just incurred have the potential to leave his restaurant bankrupt and force him to close his doors forever.

    photo of: Bob Fiorito width=

The above story, and so many others similar to it, is true. Fortunately for this California based restaurant, the owner purchased the proper insurance coverage to protect him from situations like this. He was covered by Employment Practices Liability Insurance (EPLI). EPLI is an added coverage that is designed to protect businesses from the liability of employee allegations such as sexual harassment, wrongful termination and discrimination in the workplace. Restaurants have quite a high exposure to risks of this nature, partly because the average restaurant manager is a young male while the average restaurant employee is a young female. Also, in the atmosphere of a restaurant it is normal for men and women to come in very close contact. In this day and age, it is very easy for a disgruntled employee to file a law suit that will cost tens of thousands of dollars to defend. Even though court awards in these cases are usually minimal, the cost of legal fees can be devastating.

EPLI is an often forgotten, under-rated and misunderstood coverage. Many restaurant owners opt not to purchase it, thinking that it is expensive and unnecessary. This is a misconception, as EPLI is a very affordable and valuable coverage to have. The cost varies based on the number of employees. The majority of restaurant owners that purchase EPLI have either been subjected to an incident in which they needed it and didnít have it, or they know someone that needed it and didnít have it. It is inane to sit around and wait to something to happen when situations leading to sexual harassment, discrimination and wrongful termination law suits take place everyday in the restaurant industry.

For example, in a New York City restaurant, a kitchen employee of Middle Eastern descent filed a law suit citing discrimination of religion after he was fired In this case, the employee started at the bottom of the chain, and worked his way up into a management position. His newly gained power turned him into a tyrant. After multiple warnings were issued regarding his behavior, he was fired. This restaurant was properly covered against this exposure, and despite high legal fees they were able to maintain regular operations.

In another situation, a New Jersey based company issued a $90,000 settlement to a female employee that sued for sexual harassment. This is an interesting case because the woman was not being harassed personally, but she witnessed flirtatious and offensive behavior between a married male employee and a female employee that included a remark of exchanging sexual favors for money. The behavior she was exposed to offended her so much that she took legal action. The company was covered under EPLI with a $100,000 deductible and was able to offer her a $90,000 settlement without going to trial.

These types of situations occur much more than they are reported. It is a vital part of running a restaurant, or any business, to purchase insurance and risk management products that will properly protect you against all of your exposures. One never knows when to expect a claim, and without the proper coverage the owner may have to pay out of pocket, leaving his/her business in dire financial strains.

These days there are plenty of laws that are designed to protect the employee. The Equal Employment Opportunity Commission (EEOC) has become stricter and stricter in investigating claims and filing lawsuits for sexual harassment, discrimination and wrongful termination. Basic insurance packages do not adequately cover restaurants against these claims. It is beneficial to restaurant owners to cover their assets with EPLI before discovering the hard way just how difficult employee relationships can become.

Robert Fiorito is a Vice President at HUB International Northeast, a leading insurance brokerage specializing in working with the restaurant industry. Mr. Fiorito, a former restaurateur, has over 15 years of experience in arranging insurance and risk management programs for restaurants and other food establishments. He can be reached at 212-338-2324 or

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