The policy used to be a tough sell to the agency community, according to Ms. Ritz and Dave Hanley, president of PLIS. However, with recent media attention to hepatitis outbreaks and other food-borne illnesses, the product is selling itself to agents and their clients, the pair contend.

“We would actually have to fight with agents all the time,” Ms. Ritz recalled, noting that agents believed the income losses from a business interruption stemming from a food-borne illness situation were covered under typical property-liability packages they were selling to restaurant industry customers.

It is true that “if somebody eats at your restaurant and gets sick, your general liability policy will pay for the medical expenses from the lawsuit,” she said. However, the business interruption “will trigger for fire or hail. Its not set up to trigger for food-borne illness or media [exposure].” Without physical damage to the restaurant, the business interruption coverage “remains asleep,” she said.

When a restaurant insured asks an agent, “Am I covered for a food-borne illness event, the agents answer is yes. But what the agent is thinking [of] is [coverage] for the person that gets hurt. It never occurs to an agent that the loss of income may be more problematic,” she said. “But what do you do when theres no one coming into a restaurant?” she asked, highlighting a “real and unique exposure for restaurants” that media power and 24-hour news reports exacerbate.

According to Mr. Hanley, with news of outbreaks related to E.coli, listeria, salmonella and hepatitis calling attention to the product, many “major clients” are going to their agents to find out how much it costs.

“Big clients buy the product not so much for the actual loss of income but to be able to tell their stockholders that in the event of a major outbreak, [they can] put income back into the bottom line,” stabilizing the stock price, he said.

Its not necessarily a large-company product, he said, noting that the book runs from “small Mom-and-Pop restaurants to top food-service organizations” costing anywhere from $600 to $1 million for policy limits up to $40 million.

Small restaurants, in fact, may be “more vulnerable to people not coming in the door when they are well known in a small city,” Ms. Ritz said.

The Trade Name policy, developed in 1997, not only covers for a loss of business income, but it has the national crisis management component which comes into play immediately. Mr. Hanley explained that clients can call a 24-hour, seven-day-a-week hotline serviced by Ms. Ritz and a team of risk managers to help them through health department problems, dealings with the Center for Disease Control and Food and Drug Administration, and media events. “Their job is to get the client back up and running,” she said.

While anyone can buy the crisis services independent of the policy, Ms. Ritz said, noting that 50 percent of her business is private consulting, “insureds get the benefit of what we learn from private-client business and they get the same service.”

While the policy trigger is a food-borne illness and a media event, services are covered for actual and potential events. “We ask people to call us even before theres an event,” Ms. Ritz said, giving the example of a situation when “an employee calls in and says, Im sick and have a disease that could be communicable via food.”

“We actually rate our services by whether or not we can prevent or mitigate the larger media event,” she added.

Asked about coverage for a situation like a recent one at a Chi-Chis restaurant where a Hepatitis A outbreak was traced to a supplier of green onions, Ms. Ritz said that accidental contamination associated with suppliers is generally covered under the policy.

The policy, which provides six months of business income coverage under a standard program, and 18 months under an enhanced one, also has other special features. For example, if inoculating a group of people exposed to hepatitis is the best way to prevent its spread, “general liability wont pick that up because no one is sick yet,” but this policy will.

Mr. Hanley noted that the policy excludes events related to Mad Cow disease, explaining that a very large event in Europe in the early 1990s scared off reinsurance markets. Still, SRM publishes newsletters to address related crisis management.

The policy also doesnt cover backing-up of drains or media events associated with unsanitary conditions uncovered on a health department inspection. If you have a food-borne illness, the policy comes to life, he said.

Noting that the policy does cover events related to both accidental and malicious contamination, Mr. Ritz said that crisis management services related to an individual patron finding a rat in a bowl of chili, for example, would fall under the program.

“We have had live salamanders in hot spaghetti, in addition to rats that have been deep fried,” Mr. Hanley said.

As for underwriting factors, he said, PLIS looks to see if a restaurant is financially sound, reviews cooking and procedure manuals, and checks out the type of food being served.

“As long as you put a steak on a flame, cooking it quickly on each side kills any food-borne illness,” but thats not the case with a hamburger, he said, for which, according to Ms. Ritz, the bacteria on the outside is mixed throughout the ground meat.

Beyond that, the underwriter reviews typical business interruption criteria related to debt obligations, costs and income.

For additional premium, the program can be written to include business interruption related to workplace violence.

Restaurants in the Headlines

Outback Steakhouse: In a civil liquor liability case in Indiana state court against Outback, a jury awarded $39 million to two plaintiffs injured by a drunk driver, the Tampa-based company announced last June.

Chi-Chis: A Hepatitis A outbreak linked to green onions served at a Chi-Chis restaurant in a mall in Beaver County, Pa., sickened more than 500 people, including 13 Chi-Chis employees, the company reported in November. Chi-Chis is under bankruptcy protection.

OCharleys: A Hepatitis A incident involving 77 people, most of whom were linked to a Knoxville, Tenn., location of OCharleys Restaurants, prompted at least 12 lawsuits alleging fear of, or injuries from the incident, according to a company statement.

Rhode Island Nightclub: A fire at the Station nightclub in West Warwick, R.I., killed 100 people and injured some 300 patrons on Feb. 20, 2003, giving rise to lawsuits naming the club and others, including Shell Oil Company, named for actively promoting an event at the club. (See NU Online News Service, May 30, 2003.)

Dennys: On May 24, 1994, Dennys announced the $54 million settlement of two public accommodations class actions alleging racially discriminatory practices, according to a 1994 filing with the Securities and Exchange Commission.

Reproduced from National Underwriter Edition, January 16, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.