As a result, reinsurers and actuaries now look unfavorably at this class, he said, adding that when they do secure coverage, fast food restaurants are seeing premiums that are two and three times higher than they were two or three years ago.

“Historically, fast food chains have been underpriced,” agreed Jim Drummond, vice president of underwriting for Specialty Insurance Agency in Neptune, N.J. “If we get a single one that is a franchise, and it has a good local producer, we might entertain that. Normally, [however], they come in as 10 or 15 risks [and the] franchise locations could be all over the place. They could be in some undesirable locations.”

“So its different exposures and its always a commodity-priced product. Theyre always looking for the lowest rate that they can find,” he said.

But its not just the pricing situation that makes fast food restaurants unattractive to insurers and specialty agents.

Early last year, Jay Fishman, then chief executive of The St. Paul Companies, referred to them as “locations for mayhem that just happen to serve food” to explain why his company stopped writing the class.

While Mr. Imbus and Mr. Drummond didnt go quite that far, they both did point out that many fast food restaurants have playgrounds–attractive nuisances that introduce the possibility of potentially serious claims involving children.

“You also have much higher foot traffic,” Mr. Imbus said. “The more people that come in, the more likely you are to have a claim.”

He added that the introduction of self-serve beverage areas, where customers can go and produce their own soft drinks, has increased slip and fall hazards. “It can be very difficult to keep those areas clean” as children spill drinks and ice on the floor, he said.

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.