Insurance Coverage for Hotels & Resorts: Policies to Consider and Potential Pitfalls
By Dana Kravetz Managing Partner, Michelman & Robinson, LLP | May 20, 2018
For many, just the mention of the word is enough for eyes to glaze over and minds to wander. Bring it up as fodder for cocktail party conversation, and the universal response is oftentimes a collective yawn. But insurance, though much maligned and not the sexiest of topics, is a critical cog in the wheel of commerce, and one that cannot be ignored. And that is because this intangible product is an invaluable tool that allows businesses, including those in the hospitality space, to manage the risk of financial loss - catastrophic and otherwise - by transferring it to third parties (read: insurance companies).
Of course, this transfer of risk comes at a cost, in the form of insurance policy premiums, which is not insignificant. Neither is the complexity of coverages that can leave hotel and resort owners and operators scratching their heads. With that in mind, this article seeks to demystify the subject and provide practical considerations for insureds in the hospitality industry.
Why Insurance Is So Vital
For any hotelier - large or small - the import of adequate insurance protection cannot be overstated. Why? Because inherent in the hospitality business are risks to guests, employees, property and revenues that can have severe and lasting financial consequences if left uninsured.
The possibilities for loss are endless: hotel guests or employees injured on site, resort property destroyed by natural disaster, diminished revenues on account of business interruption, costly data breaches that reveal customers' private customer information, embezzlement - the potential for exposure, both legal and to the bottom line, seems to lurk around every corner. This is particularly true given the extraordinarily litigious nature of our society. Lawsuits and liability claims are an unfortunate inevitability for hotels and resorts, and without proper insurance coverage, the associated costs could be insurmountable. Hence the necessity for each and every hotelier to avail itself of a comprehensive insurance portfolio that serves as a financial safety net in the event of a damaging occurrence.
The reasons why hospitality businesses need insurance do not end there. For instance, the law in most states obligates employers to obtain certain types of coverage (e.g., workers' compensation, unemployment and disability), and the failure to carry legally required policies could result in civil or even criminal penalties, among other things.