The Special Perils of Insurance Coverage - Checklist of Measures that can give Hotel Operators and Owners an Advantage when Dealing with Potentially Major Loss Scenarios

This article originally appeared in the September/October 2010 issue of Focus magazine (Industry News), published by the New York State Hospitality & Tourism Association

Risk management for hotels and resorts has never been easy. The perils are abundant; challenges range from protecting against employment related claims to ensuring the general safety of guests to protecting against Caribbean hurricane risk. Hotel operators and owners can do much to mitigate risk by considering factors other than price when purchasing their insurance coverage. Below is a check-list of measures that can give policyholders an advantage when dealing with potentially major loss scenarios.

1. Purchase Tailored Insurance Coverage

   Policyholders should seek to buy insurance coverage tailored to protect against risks unique to their business. For example, so-called "all-risk manuscript" property insurance policies that protect against risks to hotels and resorts. Often included within this manuscript coverage is "time element" coverage, which replaces business income when operations are interrupted. Time element coverage can protect against losses stemming from interruptions to operations due to the loss of a liquor license, infectious or contagious disease, food or drink poisoning, vermin or pests. Other provisions may cover lost income due to murder, suicide or rape on premises, or losses occasioned from the evacuation of the casino or hotel after the report or detection of an explosive device. Insurance coverage may also be available to cover costs of relocation of guests during a business interruption.

   Some manuscript policies also protect against loss of business income due to damage away from the premises at sites upon which the policyholder is reliant, such as conference centers, sports complexes, convention centers, and amusement parks.

2. Avoid Onerous Insurance Policy Terms

   While shopping for the provisions outlined above, seekout policies containing the fewest escape clauses that might enable the insurance company to avoid coverage for a large claim. What the big print gives, the fi ne print can undermine. For example, policyholders should insist upon policies that do not tie the calculation of time element coverage to the performance of other properties owned by the policyholder. Some insurance companies insert language that they argue entitles them to offset losses at one location with profi ts earned at another.

   Policyholders should also insist upon...