Six Common Insurance Gaps for Restaurants and How to Avoid Them
Restaurant insurance is often treated as a formality. But missing or incomplete coverage can lead to devastating financial losses, regulatory penalties, or business interruption. Whether you operate in New York City, Westchester, Connecticut, or New Jersey, the risks are consistent and preventable.
This guide outlines the most common insurance gaps in restaurant policies and how to close them. It’s written for owners, operators, and managers who want to protect what they’ve built.
Mistake #1 Buying Basic General Liability to Meet Lease Requirements
The Gap: Many restaurant owners assume that general liability insurance covers all types of incidents. It doesn’t. General liability only addresses third-party injuries (like slip-and-falls) and basic property damage.
What’s Missing:
- Food contamination or spoilage
- Employee injuries
- Liquor-related claims
- Business interruption
How to Fix It: Ensure your insurance program includes property coverage, workers’ compensation, business income protection, and liquor liability if applicable.
Real Example: A Westchester restaurant had general liability only. When a refrigeration failure spoiled $30,000 in food, their insurer denied the claim. Proper spoilage coverage would have reimbursed the full amount.
Mistake #2 Skipping on Workers’ Compensation
The Gap: Employers in NY, NJ, and CT are required to carry workers’ compensation for every employee regardless of hours or family relationship. This includes part-time staff, dishwashers, or weekend-only hosts.
What’s Missing: Misclassified workers or cash-paid employees may not be covered, opening the door to lawsuits and fines.
How to Fix It: Audit your payroll. Classify employees properly. Make sure workers’ compensation is in place for everyone on your team.
What You Risk:
- State-imposed penalties
- Personal liability for injuries
- Higher future premiums
Mistake #3 Skipping Liquor Liability for BYOB Restaurants
The Gap: Many BYOB restaurants assume they have no alcohol exposure. But if a guest becomes intoxicated and causes harm, your restaurant can still be held liable—even if you didn’t serve the drinks.
How to Fix It: Add liquor liability coverage, tailored to your model (BYOB, beer/wine, or full bar). Make sure the policy language doesn’t exclude BYOB risks.
What to Know:
- Some landlords require proof of liquor liability
- Coverage can be inexpensive if structured correctly
Real Example: A New Jersey BYOB restaurant was sued after a patron left intoxicated and caused a crash. Their standard general liability did not respond. A properly written liquor liability endorsement would have covered defense and settlement costs.
Mistake #4 Missing Property and Spoilage Protection
The Gap: Standard property policies may not include spoilage, equipment breakdown, or utility service failure each of which can shut down a kitchen.
What to Fix:
- Add spoilage coverage to reimburse for lost inventory
- Include equipment breakdown for HVAC, refrigeration, and kitchen systems
- Consider foodborne illness protection
When It Matters:
- Power outage on a summer weekend
- Walk-in freezer failure overnight
- Grease trap backup and smoke damage
Mistake #5 Thinking POS Companies Will Cover You in Case of a Breach
The Gap: Cloud-based POS systems, online reservations, and digital ordering platforms expose your business to cyber risks. Data breaches can trigger legal obligations under state privacy laws.
What’s Missing:
- Coverage for ransomware events
- Costs of customer notification and credit monitoring
- Legal defense for data privacy violations
How to Fix It: Add cyber liability coverage to your BOP or commercial policy. Make sure it covers third-party vendors and software you rely on.
Real Example: A Fairfield County restaurant had its online ordering system hacked. Customer credit cards were exposed. Cyber insurance paid for notification, response, and legal defense.
Mistake #6 Not Buying Enough Insurance
The Gap: Many restaurants operate close to the liability limits of their core policies. A major injury, fire, or alcohol-related incident can exceed coverage, putting personal and business assets at risk.
What’s Missing:
- Excess liability over general, auto, and liquor policies
- Peace of mind for growing or high-foot-traffic restaurants
How to Fix It: Add an umbrella policy that adds $1M or more in extra protection across multiple policies.
Tri-State Area Restaurants Should Consider…
New York City: Older buildings, dense foot traffic, and landlord requirements demand tailored coverage and higher limits.
Westchester: Family-owned restaurants face unique challenges. Landlord leases often require liquor and umbrella coverage.
Fairfield County: Digital systems and hybrid dining experiences mean higher cyber exposure. Equipment breakdowns are common.
New Jersey: Many seasonal, food truck, and BYOB concepts skip proper coverage. This increases legal and personal risk.
How Refine Risk Helps Restaurant Owners
Refine Risk works with restaurant owners across the Tri-State area to:
- Audit current insurance and lease requirements
- Identify exposure gaps
- Structure coverage for real-world operations
- Maintain compliance with local and state regulations
We specialize in protection plans that adapt to growth, staffing, and operational change.
Insurance gaps don’t just show up in a policy, they show up when you have a claim and need it he most. At Refine Risk, we help restaurant owners avoid blind spots and structure coverage that stands up to real-life events.
Get a Restaurant Insurance Review
If you operate a restaurant in New York, New Jersey, or Connecticut, we can help. Request a policy review and let’s make sure your coverage matches your operation.