Why does my property policy pay for the broken cooler but not the food inside it?

A standard commercial property policy covers direct physical loss from a named or open peril such as fire, wind, or theft, and mechanical breakdown of your own equipment is not one of those perils. So the compressor failure itself is often excluded, and the spoiled inventory that resulted from it is excluded along with it.

The fix is equipment breakdown coverage, which used to be called boiler and machinery. It responds to the sudden mechanical or electrical failure of covered equipment, including refrigeration, and it is the piece that makes spoilage coverage work.

Spoilage coverage almost always attaches to an equipment breakdown or specified peril trigger, so it pays for food only when the cause of loss is one the policy recognizes. Product that simply went bad or was mishandled by a cook is inventory shrink, not an insurable loss.

• Confirm your policy actually includes equipment breakdown; it is an add-on, not automatic
• Check that refrigeration and HVAC are listed as covered equipment, not just boilers
• Ask whether spoilage carries its own limit or shares the equipment breakdown limit
• Verify the spoilage deductible, often $500 to $2,500 rather than your property deductible

What does spoilage coverage actually pay for, and how much should I carry?

Spoilage coverage pays the value of perishable stock ruined by a covered event, and it typically covers your cost of the goods rather than the menu price you would have charged. Most policies also pay reasonable expenses to preserve product, such as renting a refrigerated trailer or buying dry ice while you repair the unit.

Sizing the limit is straightforward. Take the highest value of perishable inventory you hold at any point in a normal week, add your busiest holiday build, and buy at least that. A single location full service restaurant commonly needs $10,000 to $25,000, a high volume steakhouse or seafood house $25,000 to $75,000, and a small processor or distributor $100,000 or more.

Underinsuring is common because owners picture an average day rather than the catering weekend when their exposure triples for seventy-two hours.

• Value perishable stock at peak, not average, when you set the limit
• Confirm preservation expenses, such as a rented refrigerated trailer, are included
• Keep invoices and temperature logs, since carriers ask for both at claim time

Does my insurance cover a power outage caused by the utility company?

Usually not without an off-premises power failure endorsement, because most property policies exclude loss caused by the failure of power that occurs away from your building. The utility transformer that blew three blocks over is off premises, and the base policy treats that as an uncovered cause.

The endorsement adds it back, but read the distance condition. Many forms only respond when the interruption originates within a stated distance of your premises, commonly 1,000 feet or one mile, and some require the damage to the utility equipment to be caused by a peril the policy already covers. A rolling blackout ordered by the utility for load management often fails both tests.

Many carriers also apply a waiting period of two to twenty-four hours before power failure spoilage is covered. A four hour outage under a twelve hour waiting period pays nothing.

• Ask whether off-premises power failure is on your policy or excluded
• Find the distance condition and the waiting period, then write both down
• Confirm whether load shedding and public safety power shutoffs qualify
• Consider a generator or temperature alarm, which some carriers credit at renewal

What is food contamination coverage, and what does it pay beyond the food?

Food contamination coverage responds when a health department orders you to close or to destroy product because of actual or suspected contamination, and it pays for far more than the discarded inventory. It is usually the most useful endorsement on a restaurant policy and the one owners have never heard of.

A typical form pays to clean and sanitize the premises and equipment, replace destroyed food, cover employee medical tests and vaccinations the health department requires, and reimburse lost business income during the closure. Many forms also fund a public relations response, commonly $5,000 to $25,000, for press and customer messaging.

The trigger matters. Most forms require an order from a governmental authority, so a voluntary closure may not qualify. If you close on your own before the inspector arrives, call your broker the same day.

• Look for the government order requirement and understand what triggers it
• Confirm business income during closure is included, not just cleanup cost
• Check whether employee testing and vaccination costs are covered
• Ask about the public relations sublimit, often $5,000 to $25,000

Am I covered if an employee gets sick and infects customers?

Communicable disease and employee illness are covered under most food contamination forms when the health department acts, and excluded almost everywhere else. The path to coverage runs through the closure order, not through the illness itself.

If an employee tests positive for a reportable illness such as hepatitis A or norovirus and the health department orders you closed, contamination coverage generally responds to cleanup, destroyed product, required testing, and lost income. If no order issues and three customers simply get sick, you have a general liability bodily injury claim instead, which is a different policy with different limits.

Be careful with policies written after 2020. Many now carry a broad communicable disease exclusion that can override the contamination endorsement. Ask your broker to confirm the two provisions do not conflict.

What is product withdrawal coverage, and do I need it if I package food?

Product withdrawal, often called recall expense, pays the cost of getting your product back out of the market, and you need it as soon as your food leaves your own premises in packaging. General liability pays for injury your product causes; it does not pay to find, retrieve, notify, transport, or destroy the product itself.

Those costs move fast. A modest withdrawal for a small sauce producer commonly runs $50,000 to $250,000 once you add notification, freight, warehousing, and destruction. Contract manufacturers and private label producers should also look at third party recall, which responds when your ingredient forces your customer's recall.

Retail buyers increasingly require it. Grocery and club channel vendor agreements frequently mandate recall coverage of $1,000,000 to $5,000,000 before they will place an order.

• Buy product withdrawal before your first retail or wholesale account, not after
• Ask whether lost gross profit during a recall is covered or only the physical expenses
• Check for third party recall if you supply ingredients or co-pack for others
• Review your vendor agreements for the recall limit your buyer already requires

How does ingredient traceability affect a contamination claim?

Traceability decides how large your loss is and whether you can shift it to the supplier who caused it. If you can identify which lot of which ingredient went into which batch on which day, you destroy one production run. If you cannot, you destroy everything you have.

Carriers underwrite this directly. A processor with lot coding, first in first out rotation, and receiving records that tie to production logs sees better terms than one working from memory. Insist on certificates of insurance from every supplier, so their policy can respond when their ingredient is the problem.

Restaurants face the same principle at a smaller scale. Date-label prepped items, keep delivery invoices for a year, and log cooler temperatures daily. Those records separate a paid claim from a denied one.

• Keep supplier certificates of insurance current and name your business as additional insured
• Log receiving by lot number so a single supplier problem does not condemn all inventory
• Retain temperature logs and delivery invoices for at least twelve months