Risks Affecting Restaurants – Chapter 4

'Search continues for owner of missing digit Wendy's fast-food restaurant patron found finger in bowl of chili.' Everyone remembers the woman who found a finger in her chili at Wendy’s, and for the rest of their lives, Wendy’s chili will be tainted by the memory.

Wendy’s fast-food restaurant patron found finger in bowl of chili

*A woman bit into a partial finger served in a bowl of chili at a Wendy’s restaurant, leading authorities to a fingerprint database Thursday to determine who lost the digit.  The incident occurred Tuesday night at a…

*(source: nbcnews.com)

Everyone remembers the woman who found a finger in her chili at Wendy’s, and for the rest of their lives, Wendy’s chili will be tainted by the memory.

However, not everyone knows or recalls the outcome of the story — the finger was a hoax, a criminal act of fraud committed by the woman and her husband who were looking for a payday. The problem is, it took two months before the authorities were able to trace the finger, and complete testing.

Because of the crisis, the total Wendy’s lost amounted to approximately twenty million dollars. Specifically, the regional Wendy’s surrounding the site of the incident lost 2.5 million dollars in sales over the following year.  The fraudulent couple owes Wendy’s $170,000 in restitution for lost wages from employees who could not work while an investigation occurred, and Wendy’s as a nationwide chain lost another 18 million dollars in sales that year.

Interestingly enough, most general liability policies do not have crisis management coverage to begin with, or do so only by endorsement. This means that the policy will not help with the costs of mitigating damage to your reputation, only reimburse the monetary injury itself which you are forced to pay. If Wendy’s did not have crisis response in its policy, it would have been forced to pay hundreds of thousands of dollars out of pocket for the firms which set up hotlines, handled press releases, and handled its crisis.

HOWEVER, a good restaurant umbrella will included crisis response for no additional cost, AND it will begin paying out crisis response costs from the FIRST DOLLAR. McGowan Program Administrators ensures that every restaurant umbrella it offers in program has this valuable enhancement. Crisis Response from McGowan offers immediate access to funds, professional crisis responders, and public relations firms. The difference between having these funds right away in a catastrophic event and waiting even a week can make the difference between remaining open and shutting your doors.

Coverage Features (Varies by Program)*

  • Up to $250,000 for crisis management costs, including medical care, retention of experts to review food safety procedures, coordination with local health departments and psychological counseling for distressed employees.
  • $50,000 for public relations expenses, such as coordinating communications with the media and  regulatory bodies to preserve a restaurant’s brand and reputation.
  • Policyholders can access an extensive network of public relations and crisis management firms, including experts in food-borne illnesses and leading E. Coli liability consultants.
  • An optional product recall enhancement that amends the definition of crisis response costs to include expenses incurred by the recall, inspection or disposal of an unsafe or contaminated product in connection with a crisis event.
  • First-dollar coverage; no retentions or deductibles apply
  • A 24-hour, toll-free crisis hotline
  • Immediate access to claims specialists to triage the crisis situation

*source: www.chartisinsurance.com ‘CrisisResponse for Restaurants’ 102209 LS 6/10

The following demonstrates how coverage has responded to real life situations:

Restaurant A received a report that an employee has tested positive for Hepatitis. As required, authorities were notified and a health alert issued. As news spread, more calls and emails and claims began to flood in. The insured called and activated the coverage.

  1. A toll-free hotline was established to field calls and provide information
  2. A public relations firm was hired to monitor, respond to, and shape media coverage
  3. All screening and testing costs were reimbursed.

The quick response and PR control helped keep the media from bringing nationwide coverage to the incident and helped restore the local reputation of the store

Restaurant B had several locations, and received notice that several customers had become ill after eating at one of the locations. The restaurant notified our company, and the crisis response kicked in.

  1. All health reporting requirements were complied with
  2. An investigation was performed into the supply chain for the restaurants
  3. A PR firm was hired to handle the media coverage
  4. All customers on record were contacted regarding the incident

The crisis response coverage covered all of these costs. It was determined that a flu strain had infected the patrons, independent of the food. No media coverage occurred as a result of the “quick response.”

If you have any restaurant insurance questions, please do not hesitate to contact an underwriter or your regional manager at the McGowan Companies, who will be more than happy to discuss the ins and out of our specialty coverages with you.

Neil Patrick McGowan Esq, M.B.A. • Regional Manager

800.545.1538 x3651 • npmcgowan@mcgowanins.com

Alison Gates • National Program Manager

800.545.1538 x2254 • agates@mcgowanins.com


Share this post