Restaurants are turning to their insurers for reasons other than hurricanes

The water-damage season is fast approaching for restaurants. | Photo: Shutterstock

A particularly brutal hurricane season for restaurants will officially end next month—just in time for operators to shift their worries to plumbing catastrophes or excessive runoff from melting snow.

December through February is the height of water-damage season for the business, according to an analysis by Next Insurance of the claims it’s processed from restaurants since 2021. The data revealed that wintertime is generally a risk-prone time for the industry weatherwise, with nearly half of operators (48%) suffering damage from Mother Nature during the chillier months.

“Frozen pipes can crack or burst in sub-zero temperatures, resulting in significant leaks once thawed,” Next Alon Shiran, VP of product and design for Next.  “Additionally, heat from the attic can melt snow on roofs, causing water to back up, while heavy snowfall followed by rapid thawing can overwhelm drainage systems and saturate the ground, leading to potential flooding, especially in poorly sealed areas.”

Yearlong, water damage is the fourth most common reason restaurants file for at least $100,000 in compensation from their insurers, behind fire, slips and falls and the assault of someone on the property, according to Next. 

Payouts of that scale are the exceptions; the average total loss claimed by a restaurant from 2021 through June of 2024 was $9,000, the insurer found.  But plenty of variation goes into that mean. The damages sought by fine-dining restaurants were about double on average.

Repayments for water damage can be high, but they don’t compare in number to other mishaps that can prompt a claim from restaurants, accounting for 9.5% of compensation requests. 

The No. 1 reason by far, according to Next, is the breakdown of restaurant equipment, with a 17% share of claims. The insurer attributes the prevalence to the wide array of factors that can cripple a kitchen or leave counter workers taking orders with pen and pencil. It cites the triple whammy of poor maintenance, human error and the equipment simply breaking. 

Next encourages its customers to counter the risk by scheduling routine maintenance sessions, maintaining service logs to flag emerging problems and ensuring the staff is trained to use the equipment properly. 

Rounding out the Top 5 reasons for claims under $100,000 are minor employee injuries like burns, slips and cuts (accounting for 12.9% of all compensation requests),customer slips and falls (12.8%), theft (12.4%) and vandalism (12%). 

Water damage claims are sixth in the ranking by incidence rate (9.5%).

Next noted in its analysis that claims vary considerably by region. Equipment failure is particularly prevalent in Pennsylvania, while Florida leads the other 49 states in employee mishaps. California operators incur more vandalism, while New Jersey and Tennessee have the highest incidence of fire damage.

The study comes as operators in Florida and the Carolinas assess the damage they suffered from Hurricanes Helene and Milton, which struck the Southeast in rapid succession. In July, a number of restaurants in the greater Houston area were affected by Hurricane Beryl.

The Next report was compiled before Helene and Milton. The insurer did not reveal how many claims it’s received to date from any of the areas impacted by the hurricanes.

The most likely time for hurricanes to develop is from June 1 through Nov. 30, according to the National Oceanic and Atmospheric Administration.

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