There are many types of bed and breakfasts, and not every carrier that is interested in writing the class entertains every category. The smallest kind of B&B is called a homestay or host home. These are privately owned houses whose owners offer rooms to international students during a semester or year abroad. These facilities are generally insured under personal lines policies rather than commercial lines.
Another kind of B&B provides limited-stay accommodations for up to six persons in the same house where the innkeeper lives. Some carriers provide coverage under a personal lines policy with a business use endorsement attached or through a commercial policy with personal lines enhancements.
The B&Bs that tend to advertise and are a major source of the owner's income are more accurately called bed and breakfast inns or country inns. The owner may live on premises, but the property's primary purpose is to provide room and board for short-term guests.
George Cvengros, CPCU, CMIM, underwriting supervisor at Burns & Wilcox, has markets that can provide coverage on any of the B&B facilities described above, “as long as the risk meets our property and general liability underwriting guidelines.” Coverage can be written on an admitted basis through Cranbrook Insurance Company or on a non-admitted basis through USF Insurance Company.
“Philadelphia Insurance offers coverage to only commercial bed and breakfast facilities where the owner or caretaker is on site,” according to Brent Skiles, assistant vice president, underwriting at Philadelphia Insurance Company. Coverage is written on admitted paper through Philadelphia Indemnity Insurance Company.
“Markel insures owner-occupied B&Bs and those with owners living off premises in both rural and urban locations – if they have caretakers on the premises," explains Andi Silver, underwriting manager at Markel. “We target inns with five to 25 rooms but can consider smaller and larger ones. We do not insure hotels or motels under this program.”
General liability exposures create the highest frequency of loss. According to Mr. Skiles, “B&Bs have a lot of guest traffic, special event traffic, and restaurant traffic that can lead to slips, falls, and general premises-related exposures. They are generally older structures and have furniture and rugs that, while aesthetically pleased, can create trip, slip, and fall hazards.”
Mr. Cvengros considers bedbugs and dog bites as frequency-type liability exposures and, to a lesser extent, food poisoning and broken teeth from prepared food. Ms. Silver notes that B&B owners have been proactive on the bedbug issue for quite some time.
Fire is the major severity concern. According to Mr. Cvengros, “Many B&Bs are in older and/or historic buildings and may not be sprinklered. The property may have additional older buildings such as barns and storage sheds. Some B&Bs are located in areas that do not have adequate fire protection or are located far from a fire department.”
Mr. Skiles adds, “Bed and breakfast buildings are often elaborate, historic structures that will require long and costly restoration if damaged by fire. It is better to prevent fires by good housekeeping and building maintenance and updates."
It is worth noting that fire losses can also lead to liability losses because many guests would not be familiar with the property, making egress difficult. Life safety is always a serious consideration, whether there is only one guest or 25.
Other B&B exposures include inland marine aspects such as fine arts floaters for antiques and artwork and equipment floaters for items used to maintain the buildings and grounds. Automobile, crime, and workers compensation coverage may also be required.
Risk identification is the starting point for all of our experts. The particular bed and breakfast must meet the criteria for a specific program. This is an important distinction because, while programs are available for all types of B&Bs, not all programs accept the same types of B&B.
Ms. Silver says, “Strong management, a good business plan, and solid financials are critical underwriting components. In addition, it is essential that all buildings be updated and well maintained.”
Mr. Skiles adds, “We make sure that lighted exit signs are in place, proper egress is available from all floors, and other controls and features are in place to ensure the safety of guests and property.”
Mr. Cvengros considers the amenities offered, such as swimming pools, weight rooms, spas, or Jacuzzis. Is horseback riding available? Are bicycles or scooters loaned or rented to guests? Is alcohol served or are guests allowed to carry in their own alcohol? Is smoking allowed in the facility? What about privacy issues such as identity theft or sharing a bathroom with other guests?
He adds that crime protection for both the innkeeper and the client must be considered, especially if valuable items are on the premises. Another important issue for certain innkeepers is the value of the property itself and the items within it, such as antique furniture, artworks, and collectibles. Regular appraisals may be required in order to provide appropriate insurance to value.
Mr. Skiles says, “I believe every B&B should carry premises liability coverage and be aware of their liquor exposure. Some facilities may have adequate protection under their host liquor coverage, but many need a separate liquor liability policy. Property coverage should include business income. This is because most B&B facilities are not cash-rich and could not survive long without income, especially given the time it takes to restore a historic structure.”
In addition, Ms.Silver says, “Commercial auto, including hired and non-owned auto, is needed even if the business does not own any vehicles.” Although the coverage may be needed, it may not be easy to obtain because of titling issues. As an example, Markel will only write commercial automobile coverage when there is a commercial vehicle titled in the name of the business.
“Inland marine coverage for valuable antiques and artwork and crime coverage for guests’ property” are also important, according to Mr. Cvengros. “If the B&B has employees, workers compensation coverage must be obtained.”
Our experts agree that the market for bed and breakfasts is competitive but appears to be stabilizing. Insurers tend to compete more on the basis of coverage features than on price. As a result, the agent must compare coverages, especially when clients have unusual properties and furnishings. The market specialists understand the unique nature of B&B operations and can help eliminate the gaps in coverage that can occur when personal and commercial lines exposures are combined.
Coverage for bed and breakfast facilities is available from a number of reputable markets, but it is important for the agent to find the right carrier match for each client. The starting point is a complete application that reveals all aspects of the particular B&B. Some companies may decline a given risk, but the ones that accept it can provide the specific coverages your client needs. |
