Risking It All Without Restaurant Spoilage Insurance?

Running a restaurant can be rewarding. But ask any restaurant owner and they’ll also tell you the job comes with a roller coaster of emotions and stress. The risks are always present, and profits can turn to losses overnight. While you can’t avoid every type of restaurant disaster, you can take proper precautions to protect yourself and your investment. One avenue of protection to explore is restaurant spoilage insurance.

A profitable restaurant shouldn’t be above 35% in food cost. This means that a restaurant bringing in $250,000 a year will have, on any given week, $1,600 worth of food coming in.

Whether you lose all of it or a small percentage of it, the domino effect of spoiled food can make the problem more serious than it initially seems. At first, you just might have a few hundred dollars’ worth of spoiled produce. But now you can’t correctly make about half of your dishes. You try to operate with a limited menu, but customers aren’t happy.

They take to social media to express their disappointment and the damage to your reputation is unavoidable. Employees are upset, morale decreases, and you see the harsh effects in your bottom line. As you can see, there’s more at risk than dairy and produce.

Unfortunately, many restaurants fail to take the need for this type of coverage seriously until they find themselves in a situation where it is sorely needed. By then, it’s too late. The costs of food spoilage are much bigger than the average restaurant owner understands. There are the obvious expenses:

  • Loss of food
  • Loss of profits
  • Potential legal fees
  • Liability damages

But then there are those that are hard to pinpoint, such as the loss of reputation if customers become ill as a result of consuming spoiled food or you have to shut down operations for a few days because of low inventory.

What Can Cause Food Spoilage?

In March of 2018, two nor’easters blew through the New Jersey and New York areas. Residents were left with plenty of snow and no power. In some areas, homes remained in the dark for days.

While some were able to keep the basics of their home operational with the use of generators, others had to either seek shelter elsewhere or work with what they had. For some, this meant the loss of food and medicine that required specific temperature storage. Orange and Rockland, a utility company that services western New York and northern New Jersey, offered to reimburse customers for their losses. But as you can imagine, there were stipulations.

First, customers had to be without power for three or more consecutive days. The limit on reimbursement was $225, or $515 with receipts. Businesses were able to seek reimbursement for up to $10,200 if they were able to provide receipts for lost food. This was incredibly gracious of the company, as other local companies were not offering the same benefits, but for some businesses, the band-aid was too small for the wound.

Imagine if every item in your freezer or walk-in cooler was suddenly gone. Even worse, imagine if both storage facilities were damaged. While double nor’easters don’t happen every month, there are plenty of reasons behind restaurant food spoilage.


It’s a battle you fight everyday in the restaurant industry. Most days, you win. But some days, contamination rears its ugly head and the consequences can be dangerous, even deadly. Food can become contaminated for several reasons. It may be delivered already contaminated or an employee error could lead to dangerous bacteria levels in food. No matter the reason, there’s never a safe way to try and salvage contaminated food. It’s already a loss. Should you have contamination coverage within your restaurant spoilage coverage, you can be reimbursed for lost income, cost of food replacement, and even cleaning of your restaurant if needed.

Faulty Equipment

Equipment rarely gives you ample warning that it’s about to malfunction. Imagine coming into your restaurant after a holiday break only to find your freezer went out and everything in it has defrosted and started to breakdown. With restaurants spoilage coverage, you can rest a bit easier knowing that you’ll be reimbursed for lost food. However, repairing the equipment isn’t part of coverage (though there is coverage available for equipment).

Power Outage

Whether it’s a nor’easter, severe thunderstorm, or a blackout, power outages can cause devastation quickly. While you can pray power comes back on quickly or utilize back-up power sources temporarily, a prolonged period without power will almost certainly lead to food spoilage. With spoilage coverage, you’ll be reimbursed for not just your lost food but also the loss of business due to a covered power outage.

Who Should Consider Restaurant Spoilage Insurance?

The simple truth is that all restaurants need it. But it goes beyond what the average person considers a restaurant to include the following:

  • Ice Cream parlors
  • Yogurt shops
  • Bakeries
  • Convenience stores with delis
  • Butcher shops
  • Sandwich shops
  • Food trucks
  • Specialty cheese shops
  • Wineries
  • Salad bars
  • Concession vendors

Each of these types of food service businesses needs spoilage insurance coverage, but they are far from the only restaurants and businesses that need this important coverage — just some that may not immediately come to mind.

Limitations of Spoilage Insurance Coverage

Just as with any type of insurance coverage, there is some fine print you should understand. First, let’s start with what spoilage coverage is. It’s an endorsement added to your commercial property insurance policy. It only applies to perishable stock, such as:

  • Dairy
  • Produce
  • Meat
  • Frozen goods

Canned items that are improperly stored or boxes of pasta that become contaminated would not be covered. Simply summarized, spoilage coverage is for products that need to be maintained under controlled conditions and can deteriorate if those conditions change.

There are some exclusions to be aware of. For example, disconnecting a refrigerated unit from a working power source would void coverage. Deactivating electrical power would do the same.

There are some less common stipulations as well. If your utility company is unable to provide power due to a governmental order or national fuel shortage, coverage would be denied. Finally, don’t rely on spoilage insurance to cover lawsuits or medical bills should your business serve contaminated food.

How to Prevent Food Spoilage and Claims

You probably know by now that prevention is the best cure when it comes to food spoilage. The efforts you take to reduce the risks of food waste and spoiling, can save your restaurant a lot of money and prevent the loss of the faith of the public when it comes to dining in your establishment.

These are a few things you can do to reduce the risks of spoilage in your restaurant.

  • Keep steam tables at appropriate temperatures.
  • Keep things that need to be refrigerated in the refrigerator or freezer, if applicable, until it is necessary to remove it.
  • Wash cutting boards, knives, and hands to avoid cross contamination.
  • Inspect temperatures inside refrigerators and freezers at the beginning and end of every shift to look for signs of potential problems.
  • Conduct routine maintenance of equipment.
  • Rotate food properly to avoid serving old or out of date food to customers.

Small steps like these can go a long way towards preventing food spoilage, but they cannot eliminate all possibilities.

No restaurant is immune to the problem of spoilage. It doesn’t matter how many backup systems or safety protocols you have in place. There are always risks of spoilage when dealing with food and the potential for mechanical failures and simple human errors.

Unfortunately, in the restaurant business, something as simple as a power outage or refrigeration unit breakdown can result in the loss of an entire day’s worth of food, if not more. Even worse, if you didn’t know about the power failure or the equipment breakdown until people had eaten contaminated and/or potentially spoiled food, the liability could prove catastrophic without the aid of solid spoilage coverage to protect your restaurant.

Insurance is all about planning for the unexpected and mitigating risk. Prolonged power outages are often unexpected, with the exception of those caused by ice storms and hurricanes. Since you can’t plan ahead for many of these things, it’s important to have insurance protection to protect the interests of your restaurant.

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