From terrorism liability, which is increasingly required by U.S.-based chains, to specific requirements for those who have shuttle services or spas, it’s important to deal with an insurance broker who knows the hotel industry. CLN asked Gordon Wells and James Asaad of Arthur J. Gallagher Insurance, what hoteliers should know about real estate insurance.
1. What are some of the pitfalls for hotel insurance?
Insurance brokers’ clients tend to focus on the premium cost, not the product itself. If they get a low price, they are not realizing the shortfalls of such a policy.
2. What information do hotels need to provide to the insurer?
Insurers require a plethora of information, including the value of the asset, revenue numbers and a hotel chain’s history. The driver of all premiums is the actual physical cost of protection — whether they have firehall hydrant protection (in a city) or not; whether they have sprinklers, concrete block construction, etc.
3. What are the different kinds of insurance a hotelier might need?
Usually, the brand dictates what types of insurance are required. If the property is not branded, they will need insurance for the building contents, computers. Shuttle buses and valet service or spa services add different exposures to risk requiring insurance. Then there’s cyber insurance and post-liquor liability, which is very important.
4. What insurance do you need in order to secure hotel financing?
The lender or independent shareholder lender needs evidence of business insurance to the replacement value of the property. Some require evidence of business interruption insurance as well.
5. What can you tell me about terrorism insurance?
Terrorism insurance is mandatory for some of the life insurance companies as well. Lenders in the U.S. are requiring this, but many hotel companies headquartered in the U.S., are requiring this for Canadian hotels as well. Terrorism that cuses damage to the actual business, as in a blast, is almost always excluded from the regular policy. Terrorism insurance is usually obtained through select brokers such as Lloyds of London.
6. What are some of the different insurance requirements requested by the brands?
Both Hilton and Marriott usually require terrorism insurance. The most unusual is Best Western, which has no exclusions for “abuse” or “molestation” thanks to a case years ago where general liability insurance didn’t cover a case of assault in a guestroom. Others require employment practice liability to cover lawsuits by employees. Most buyers don’t think of these unusual things.
7. How do you choose an insurance professional?
It’s best to choose an insurer who has specific knowledge of your defined space — i.e., an insurer with a lot of experience in the hotel space.
8. What kinds of questions should you ask an insurer?
As brokers, we make sure the insurer is involved and that they have a program for customers that specializes in hotels. In Ontario, The Innkeeper’s Act is important — and insurers should know about it.
9. How do insurers match coverage with the client’s needs?
This is developed from the information obtained from the insurer in the interview process. It’s our responsibility to make sure that the coverage meets the brand’s requirements and the hotel owner’s requirements.
10. What are the benefits of a good insurance program?
It’s important to look at the existing wording of the insurance policy and broaden it to apply to the hotel opportunity. Most coverage is general and needs to be adapted.
For example, the insurance should take into account the property improvement plans (PIPs), when they are scheduled, and whether a claim should require repairs to the existing standards or the PIP standards.
The No. 1 advantage of companies such as Arthur J. Gallagher is the provision of free risk management and loss seminars that are all about hotels.
Ideal for groups of 25 to 30 hoteliers, these consist a one-hour Q&A covering questions related to slip and fall accidents, the Innkeepers Act, occupier’s liability, valet parking and shuttle-bus liability.