Coffee shop business insurance

What insurance does my coffee shop need?

We are often presented with this question when customers call Suited. Whilst we can’t offer advice, we find it useful to help the customers break the question into three parts:

• Who could make a claim against the business? Customers, employees and any other third party you deal with in the course of running your business. They all create different liability exposures.
• What physical assets would you have to replace after serious damage? That could include the building, your coffee shop fit-out, equipment, furniture and stock.
• What happens financially if you can’t trade? A coffee shop typically depends on its premises, and you may start losing money if you suddenly can’t access or trade from your shop.

We also explore with our customers additional risks, such as cyber risks arising from running an online store or storing customer data.

Not every coffee shop needs every type of insurance. An owner who rents a fitted unit, for example, may have very different property responsibilities from somebody who owns the entire building. Below is our brief overview of the most common covers and risks they are designed to insure.

Liability insurance for coffee shops

Let’s start with liability insurance. This is the first part of the picture because coffee shops interact constantly with other people and businesses.

Customers visit your premises. Food and drink are supplied throughout the day. Employees may be working behind the counter, cleaning, moving stock and handling hot liquids. And then there are suppliers, landlords, HMRC, local authorities; the list goes on.

Each creates a different potential route to a claim.

Public liability insurance for a coffee shop

Public liability insurance covers claims against your business if someone is injured, or their property is damaged, because of your business activities.

For a coffee shop, the risk is easy to picture. A customer could slip on a spilt drink, trip over something in the shop or be accidentally scalded while being served. It doesn’t have to be a customer either – a delivery driver, contractor or even somebody passing the shop could potentially suffer an injury or have their property damaged.

When we last looked at the HSE figures for the wider food and drink industry, slips and trips accounted for around 35% of major injuries, with wet or contaminated floors behind the vast majority of slips. Those figures aren’t specific to coffee shops, but the relevance is obvious..

There are some risks that public liability almost always excludes. Typically, public liability insurance – including the cover available through Suited – does not cover injuries to your employees. 

Nor is Public liability designed to insure your own coffee machines (even if rented), furniture or stock, and contractual disputes.

When we speak to customers, we also try to draw their attention to the fact that public liability sits alongside their responsibility to run the shop responsibly. 

Liability policies will generally include conditions requiring businesses to take reasonable precautions, comply with relevant laws and safety requirements, maintain property properly and make sure staff are appropriately trained. 

So while the insurance is there to deal with an insured claim, the day-to-day responsibility for keeping the shop safe still sits with the business.

Products liability insurance for coffee shops

Products liability insurance covers claims arising from the food and drink you sell. For a coffee shop, that could be a customer alleging that something they ate or drank made them ill, caused an allergic reaction or otherwise injured them.

One area we pay particular attention to with coffee shops is allergens. Even a relatively simple menu can involve milk, soya, eggs, nuts, sesame and gluten across both drinks and food. Food businesses have legal responsibilities around providing allergen information and managing allergens properly during preparation.

A useful distinction here is between the product causing a claim and the product itself being a loss. If a customer says a drink or food item injured them, that may become a products liability claim. If the food is simply spoiled, unsuitable or needs refunding, that is a different issue.

We would also treat product recall as a separate risk. If you have to withdraw food or drink from sale, or recall products already supplied, the costs involved are not something you should assume ordinary products liability insurance will pick up.

The other point worth making is that insurance doesn’t sit in isolation from food safety. Typically, products liability policies – including the type of cover available through Suited – will expect the products you sell to meet relevant health, safety, labelling and legal requirements. Products known to be faulty or unsafe are also generally outside the scope of ordinary cover.

In our experience, that is where the distinction becomes important: products liability is there for an insured claim arising from something you have supplied, but the responsibility for selling food safely, managing allergens and complying with the law remains with the business.

Employers’ liability insurance

If you employ people, employers’ liability insurance is designed to cover claims if an employee is injured or becomes ill because of their work. For most UK employers, it’s also a legal requirement.

In a coffee shop, some of the risks are fairly obvious: hot water and steam, slippery floors, lifting deliveries and frequent use of cleaning products. From an insurance point of view, we’d also expect staff to be properly trained to use coffee machines and other equipment safely, with suitable PPE provided where the job requires it.

Employers’ liability insurance doesn’t replace those responsibilities. You still need to comply with health and safety requirements, maintain equipment properly and give employees the training and protection they need to do the job safely.

Commercial legal expenses

Legal problems are a different type of risk again. A coffee shop might end up chasing an unpaid invoice, in a dispute with its landlord or dealing with an employment issue. 

Commercial legal expenses insurance can help with the cost of certain business legal disputes, depending on the cover provided by the policy. Typically, it would give cover for contract disputes, debt recovery over a certain amount, employment matters and certain tenancy/property disputes.

One limitation we always draw attention to is reasonable prospects of success. Legal expenses insurers will generally only fund a civil case where there is a better than even chance of succeeding; that generally means at least 51%, and that prospect has to remain throughout the claim.

It’s also important not to assume that every dispute within a broad category is covered. Each section has its own exclusions and conditions – for example, not every landlord or debt dispute will qualify – so the policy wording needs to be read carefully before relying on the cover.

What about the coffee shop premises?

Once liability is dealt with, the next consideration is the physical business itself: the building, anything you have added to it, and the equipment and stock inside.

Exactly how these are insured can vary, particularly where the premises are rented, so it is important to check both the policy wording and, where relevant, the lease.

Buildings insurance

If you own the building, buildings insurance is designed to cover the structure against specified causes of physical damage.

If you rent the premises, the building itself will often be insured by the landlord, although this does not necessarily mean everything inside or attached to it is covered by the landlord’s policy.

Tenants’ improvements, fixtures and fittings

A coffee shop tenant may have invested substantially in fitting out the premises, perhaps adding counters, flooring, lighting, plumbing or electrical installations.

Depending on the policy and the nature of the item, fixtures and fittings may fall within buildings, tenants’ improvements or contents cover. This is one of the areas where the exact definitions matter, so it is worth checking how the policy treats anything you have installed or paid for.

Contents and equipment

Contents insurance is designed to cover the movable property belonging to the business, such as coffee machines, grinders, refrigeration, furniture, display units, tills and other equipment, against specified causes of loss or damage.

Stock

Coffee beans, milk, syrups, cakes, pastries and other supplies can also be insured as stock.

The important point is to make sure the sums insured reflect what the business actually has at risk and to check whether any special treatment applies to perishable or refrigerated stock.

Premises insurance isn’t currently available online, but Suited can assist you. Please contact us if you are interested.

What happens if my coffee shop can’t trade?

Now we get to the part that is sometimes harder to see because it isn’t a physical asset.

You can insure the building. You can replace a damaged espresso machine. You can replace tables, chairs and stock. But what happens to the business while you are waiting for all of that to happen?

A coffee shop is usually heavily dependent on its premises. If you suddenly can’t open, the sales can stop immediately while rent, wages and other costs continue.

That financial loss is separate from the cost of repairing the shop.

Business interruption insurance

Business interruption insurance is designed to cover certain financial losses when an insured event prevents the business from trading normally. It commonly sits alongside property insurance because the interruption is often triggered by insured damage to the premises or equipment.

A fire is the easiest way to explain it.

The property insurer may pay to repair the shop and replace damaged equipment. But if the coffee shop is closed for three months while the work is completed, there is also three months of disrupted trading to think about.

In our conversations with businesses, this is often the part that requires a little more thought. Physical assets have obvious values – you know roughly what an espresso machine costs. Lost trading can be much harder to estimate, particularly if the interruption lasts far longer than expected.

Increased cost of working

Closing completely isn’t always the only option.

Sometimes a business can continue trading, but only by spending additional money – perhaps hiring replacement equipment, using temporary facilities or putting another short-term arrangement in place.

Depending on the policy, business interruption insurance can include increased costs of working incurred because of the insured event.

The principle is fairly simple: it can sometimes make financial sense to spend additional money to keep some of the business running rather than lose all of the income while the premises are being restored.

Does my coffee shop need cyber insurance?

That depends much more on how you run the business.

One coffee shop might use little more than a card terminal and a basic website. Another could take online orders, run a customer loyalty scheme, hold customer details and depend on several cloud-based systems to trade.

So rather than asking whether a coffee shop “uses technology” – almost all businesses do – we find the more useful question is: what happens to the business if its systems or data suddenly become unavailable or compromised?

Cyber insurance is designed to deal with certain losses, liabilities and response costs arising from cyber incidents, depending on the policy.

If you sell food online, the cyber exposure sits alongside rather than replaces the ordinary liability exposure. You are still supplying a food or drink product, but you now also have a website, customer information or digital systems to think about.

Whilst cyber insurance isn’t currently available online, Suited can assist you. Please contact us if you are interested.

What do I need to be able to insure my coffee shop?

Insurers don’t expect a coffee shop to be risk-free. They do expect it to be a properly run business.

At a basic level, that means operating legally, meeting food hygiene and allergen requirements, maintaining the premises and equipment properly and providing appropriate staff training.

The same principle runs through liability insurance more generally. Policies commonly require businesses to take reasonable precautions and comply with the laws and safety requirements relevant to what they do.