If you offer delivery in-house, insurance is a necessity. You should have both general liability and auto insurance coverage in place, even if you don’t provide your drivers with company vehicles.
General Liability Coverage
On average, restaurant delivery businesses in the US spend between $450 - $1,000 per year for $1 million in general liability coverage.
This covers risks such as:
- Bodily injury
- Property damage
- Medical payments
- Legal defense and judgment
- Personal and advertising injury
While it isn’t a legal requirement to have general liability insurance in many states, operating without it is risky. If your restaurant is sued, you could end up paying hundreds of thousands of dollars. General liability coverage will give you peace of mind, and protect your restaurant from a lawsuit that could devastate your business.
“We carry our own liability insurance, specifically just for delivery. The drivers themselves have to carry their own insurance. Under our insurance, if [a driver] gets in an accident, that's still going to be on them. Our insurance is unlikely to cover that. Our insurance is just there on the chance that someone wants to go up the ladder and start suing people.” - Bill Siwicki, Owner of Pizza Works
Commercial Auto Insurance
(If you provide company vehicles)
Pizza delivery can be a profitable and exciting business, but it can also be one of the riskiest. Delivery drivers are usually young and in a hurry to deliver pizzas hot. In a U.S. Bureau of Labor Statistics study, of the top 10 most dangerous occupations, pizza delivery and other driver-sales jobs ranked 5th. All it takes is one bad night for one of your delivery drivers to damage your reputation and your profits. In the case of restaurant delivery, personal auto policies aren’t enough. If you provide company vehicles for your employees to drive, commercial auto insurance coverage is a must to protect your vehicles, drivers, and others on the road in the event of an accident.
Commercial auto insurance will:
- protect you from damages if your employee has an accident on the job using one of your vehicles.
- provide protection if a driver files a claim against you for a car accident-related injury.
- cover accident-related vehicle repair costs and medical treatment for anyone hurt.
Making sure your company and the parties involved are protected in the event of an accident should be among your highest priorities.
Commercial vehicle insurance is often included as part of a Business Owner Package or Business Owner Policy (BOP). A BOP is any custom, commercial insurance package that uses some combination of liability coverage and property insurance.
Non-Owned Auto Insurance
(If you don’t provide company vehicles)
Even if you’re running a successful pizza delivery business without a single commercial vehicle in your fleet, you still need auto insurance coverage. Non-owned auto insurance should be obtained as soon as you decide to send your delivery drivers out for deliveries using their own car.
Non-owned auto insurance protects you from liability for one million dollars or more in damages or injuries caused by an employee’s on-the-job car accident. Under this policy, even if the accident happened while they were delivering pizza for your restaurant, your employee’s personal insurance company is responsible for covering the accident claim.
“We make every driver sign off that they've told their insurance company that they're delivering, because they like to skirt around that type of stuff. We do everything we can to minimize our risk when it comes to delivery.” - Bill Siwicki, Owner of Pizza Works
If one of your drivers gets into an accident in their own car while delivering, and you haven’t placed them on a non-owned auto insurance policy, responsibility for the damages could become yours. Even if your delivery driver’s personal insurance pays their claim, they could still sue you for not having insurance as a business owner. Since it is your responsibility to have this coverage in place, they would be within their rights to do so. The amount needed to defend yourself against a lawsuit will probably be more than any money you saved by not insuring your delivery driver.
“Our [auto insurance] was cancelled a couple of years ago and it took us 6 months to get it replaced. We could get instant coverage for 100k a year or wait and get it for 30k. Being that we never had a claim, we rolled the dice and waited. Sure enough we had a driver use his mom’s car, get in an accident and his insurance denied his claim. The other guy sued me and I had to settle it out myself. All in all it cost me the same, but it did make for some sleepless nights as the attorney was trying to shake me down for 250k. I’m at the point where I’ll pay for the insurance and sleep at night.” - PMQ Think Tank user
Worker's Compensation
Any injuries your delivery driver sustains should be covered by your worker’s compensation insurance. In most states, it’s a requirement for businesses to carry this kind of insurance. It protects your employees if they are injured at work or become sick after a work-related incident. Not only does it cover an employee’s medical bills and lost wages during recovery, but it also includes any disability or death benefits related to a work-related accident.
Autoinsurance.org is an informative resource to help you equip yourself with the right insurance to protect your restaurant business.
Note: In the face of the COVID-19 pandemic, some state regulators in the US have been pushing insurers to assist restaurants that are offering delivery services to customers during the pandemic. In Wisconsin, insurers have been ordered to cover delivery services for restaurants on personal auto insurance policies, as well as offer coverage for hired drivers and non-owned automobiles as a rider on a restaurant’s general liability insurance if it is requested — without extra cost to the policyholders. Look into if some of these temporary changes might pertain to you.
