Workers' Compensation Ramifications of Adding Delivery Services to your Restaurant

If you are considering adding delivery as a direct service of your fast food franchise, do realize that this will have a direct impact on your workers compensation. First it will change your premium calculations but you will also have to consider the operational changes and the loss exposures it will create.

In this blog entry we will first discuss how it will effect your premium calculations. First, the carrier that your insurance is placed with has certain criteria regarding the type of risks it wants to write at certain rates. So for instance, you may have access to a carrier with a lower rate due to a combination of your experience mod, your use of certain safety measures, your hours of operation, and your number of years in business. By contrast you may not have access to a lower rated carrier if you take on direct delivery.

In addition, having a delivery program will add a new workers compensation class code as the 9083 class code does not include drivers. So you will be adding payroll or moving payroll (if using existing workers) to the 7380 class code. As an example in FL the 9083 rate for one carrier is $2.74 but for 7380 $6.42 making the worker more than twice as expensive.

As far as losses are concerned, with a good driver verification program you should not see an increase in frequency of losses. However, down the line, when the loss occurs it is more likely that it will be more severe than the losses typical of the fast food industry. However, again, if the driver was safe and if you are in a state which permits subrogation where there is any responsibility of the other driver, you should see some subrogration or decrease in the severity of the loss.

If you hire or create a company just to manage the delivery aspect of your products you will either eliminate or decrease the impact on your current policy premiums. As such you can still offer delivery without the added workers' compensation cost. If you need help verifying that you have effectively transferred this risk exposure to another business entity, contact Insurance Design & Placement, Inc.