Grocery stores are retail establishments that generally sell fresh and prepackaged food, beverages, and household items, such as toiletries and cleaning supplies. These businesses may be small, independent shops that focus primarily on selling food, or part of larger supermarket chains that sell various products in bulk and offer additional merchandise, including clothing and appliances. Grocery stores typically operate from properties equipped with a series of shopping aisles, food preparation areas for specialty departments (e.g., deli and bakery counters), storage spaces, administrative offices and loading docks for deliveries.
Common tasks among these businesses include hiring, training and managing cashiers, customer service representatives, sales associates, product stockers and baggers, shopping cart attendants, and department specialists; working with suppliers to keep an adequate product inventory; purchasing and maintaining certain food preparation tools and equipment; determining daily production quantities for fresh goods; coordinating grocery pickup and delivery orders; addressing any complaints regarding product quality; and upholding compliance with applicable food preparation and storage laws.
Grocery stores face a number of risks, including property concerns, employee-related issues and liability exposures. As such, it’s crucial that they protect both themselves and their operations against possible losses by securing proper insurance. Keep reading for an outline of common exposures within the grocery industry and associated coverage considerations.
Common Exposures
Here’s a breakdown of key exposures grocery stores may face in their operations:
- Property—Grocery stores tend to operate out of owned or leased commercial buildings. In addition to storing a large inventory of food, beverages and household items on-site, these businesses often use a variety of tools and equipment (e.g., commercial ovens and fryers, mixers, bread and meat slicers, walk-in coolers and freezers, specialized display cases and merchandise racks, and shopping carts and baskets) to prepare fresh goods, maintain product quality and ensure a positive shopping experience for their customers. They also usually keep other valuable items (e.g., computers, sensitive workplace records, and cleaning and disinfecting agents) in their administrative offices and storage areas. Unfortunately, unexpected events—including fires, inclement weather and equipment breakdowns—may result in this property becoming damaged, stolen or destroyed, leaving grocery stores with significant recovery expenses. Apart from recovering their affected property, these businesses may experience business interruptions (e.g., temporary closures and delayed or canceled services), compounding related losses.
- Auto—Grocery stores are increasingly using vehicles to deliver orders to customers. Whether it’s a few small vans or a large fleet, owning and operating vehicles can carry considerable exposures, with even a single accident on the road capable of causing major losses. Following auto accidents, grocery stores may incur substantial costs for vehicle repairs and bodily injuries.
- Occupational safety—Even if grocery stores take precautions to protect their employees at work, job-related injuries and illnesses can still happen. Common occupational ailments in the grocery sector include musculoskeletal disorders due to performing repetitive tasks or lifting heavy merchandise; cuts, scrapes and puncture wounds stemming from the use of sharp food preparation tools; slips and falls caused by hazardous walking surfaces; eye or skin irritation from the splashing of cooking oils, cleaning agents and other potentially dangerous liquids; struck-by injuries from fallen inventory; burns and scalds from contact with hot objects and surfaces; and bodily trauma due to incidents with violent customers or vehicle-related accidents. If their employees get injured or become ill on the job, grocery stores could be held responsible for their workers’ subsequent hospital bills, treatment expenses and lost wages.
- Employment practices—Grocery stores must provide their employees with a fair and supportive workplace with equal opportunities to succeed, free from the risk of retaliation for voicing any employment concerns. If these businesses contribute to a hostile work environment by participating in or permitting discrimination and harassment or taking adverse employment actions (e.g., discipline, lack of promotion or termination) against employees without reasonable cause, they could face costly legal action from disgruntled employees and potential regulatory penalties from employment agencies.
- General liability—If any third parties (e.g., customers, suppliers or passersby) experience injuries or damage on grocery stores’ properties or due to their operations, these businesses could be held liable for the associated losses. For example, a supplier may file a lawsuit against a grocery store if they slip and fall on the store’s property while delivering inventory.
- Product and liquor liability—Grocery stores have a responsibility to ensure the food, beverages and other products they sell to customers are safe and free of potential hazards. If they sell beer, wine or spirits, these businesses must also comply with dram shop laws and avoid overserving customers, especially minors or those who are already visibly intoxicated. As it pertains to food, unsanitary practices and improper storage or handling of certain ingredients and allergens could lead to spoilage or cross-contamination, increasing the likelihood that customers will fall ill after consuming affected goods. Regarding alcohol, overserved customers could hurt themselves or others while intoxicated, causing widespread damage (e.g., drunk driving incidents). As for other merchandise, any items subject to product recalls that aren’t disposed of immediately could still end up in customers’ orders, posing serious health and safety risks. In any of these instances, grocery stores may be held liable by affected customers and third parties for their associated losses, prompting costly lawsuits and regulatory penalties. These events could also result in business disruptions if grocery stores must pause operations to address related hazards, dispose of items affected by product recalls, or work with industry regulators to ensure safe food preparation, storage and serving practices.
- Crime—Because grocery stores often keep valuable inventory, equipment and cash on-site, they may face elevated crime exposures, particularly theft and vandalism. These crimes could stem from both external and internal threats. For instance, perpetrators could be passersby committing a crime of opportunity, or dishonest employees seeking to abuse store resources for personal gain. In any case, these incidents could leave grocery stores to recoup missing goods, lost funds or damaged equipment.
- Cyber—Many grocery stores are increasingly relying on digital systems and software to store sensitive workplace records, process customer orders and payments, manage inventory, and schedule equipment repairs and maintenance. Yet, amid growing cyberthreats, using such technology could make these businesses more vulnerable to data breaches, ransomware incidents and other digital attacks. Following such events, grocery stores could experience prolonged business interruptions and incur significant costs related to notifying affected individuals, recovering lost or damaged data and systems, handling associated legal ramifications and reputational losses, and implementing additional cybersecurity measures to prevent future incidents.
Coverage Considerations
To help address their exposures and stay protected amid potential losses, grocery stores should consider the following forms of coverage:
- Commercial property coverage—This coverage can help pay the resulting repair or replacement costs if a grocery store’s commercial property—such as its physical building, food preparation tools or equipment—gets damaged, stolen or destroyed due to a covered event.
- Commercial auto insurance—Such coverage can help reimburse costs stemming from a grocery store’s employees getting involved in an accident while operating company vehicles and, where applicable, hired and non-owned vehicles.
- Business interruption coverage—Such coverage can help compensate a grocery store’s typical operating costs if it must temporarily close its doors due to direct physical damage caused by a covered event.
- Equipment breakdown insurance—If a grocery store’s equipment stops working due to an unexpected electrical or mechanical breakdown or other uncontrollable circumstances, this coverage can help reimburse the cost of repairing or replacing the affected equipment.
- Food spoilage coverage—Typically available as an endorsement to commercial property insurance, this coverage can help pay for the cost of recouping a grocery store’s lost inventory due to food spoilage from covered events, such as power outages, mechanical failures or contaminated refrigeration incidents.
- Workers’ compensation insurance—If a grocery store’s employees get injured or become ill on the job, this coverage can help pay those workers’ hospital bills, treatment costs and lost wages.
- General liability coverage—This coverage can assist if a grocery store is held liable for injuries, harm or damage to another party or their property.
- Product liability insurance—Such coverage can help pay for costs related to a grocery store being held liable for serving spoiled, contaminated, defective or otherwise unsafe products. For smaller grocery stores, this coverage is often included within general liability insurance or available as an endorsement. On the other hand, larger grocery stores and supermarket chains may need standalone policies.
- Liquor liability coverage—Such coverage can help pay for costs stemming from bodily injuries and property damage due to an intoxicated customer’s actions, including fights and drunk driving accidents.
- Commercial crime insurance—This coverage can help reimburse a grocery store for losses caused by employee dishonesty and other business-related crimes.
- Cyber coverage—Such coverage can assist with certain first- and third-party expenses that may result from a grocery store experiencing a data breach, ransomware attack or other cyber incident.
- Employment practices liability (EPL) insurance—In the event that a grocery store is faced with employee lawsuits alleging workplace discrimination or harassment, wrongful termination or discipline, or failure to employ or promote, EPL coverage can assist with the associated defense costs.
- Umbrella and excess coverage—If a grocery store’s claim costs exceed the limits for its primary liability policies, this coverage can increase those limits. In some cases, umbrella policies can also help broaden underlying policy coverage.
We Can Help
We would be happy to have one of our trusted advisors take a look at your insurance portfolio and check for vulnerabilities in your coverage. For additional risk management guidance and insurance solutions, contact us today.