Hotel Insurance

Why do I need Hotel Insurance?

A million and one things could go wrong. Often they are completely outwith your control - storms, a flash flood or arson attack at your premises, say, could spell ruin, especially in the high season.

Sadly, too, we now live in a compensation culture. Society is becoming ever more litigious with more and more people - customers, employees and suppliers - taking out legal action against hotel owners.

A good hotel insurance package together with sound health & safety, employment and personnel practices will shield your business from financial hardship, and provide a lifeline if you need to defend yourself in court from a damaging lawsuit.

Any of the following could happen to you:

• A guest is electrocuted by a defective hairdryer
• You or one of your employees is assaulted while delivering the day's takings to the bank
• A cleaner sues you after contracting work-related dermatitis
• Your premises are flooded
• Your head cashier has been fraudulently signing cheques/using the hotel's credit card
• Your windows are smashed and you lose business until they're fixed
• Your guest house of hotel is burned to the ground or fire damaged
• There's a power cut and the refrigerated stock for your resturant is ruined
• Your computer equipment with all your business records is damaged or stolen
• Public utility works (roads, gas, electricity) means your premises are less accessible to guests, resulting in a major downturn in trade
• Guests fall ill with food poisoning after eating in your restaurant and sue you for compensation
• Your premises are burgled and you lose thousands of pounds worth of contents and fittings

These are just some of the things that you could find insurance cover for.

That's why you need an appropriate and comprehensive hotel insurance package to cover as many eventualities as possible.

Your insurer can take on the task of negotiating with third parties on your behalf, so you can fully concentrate on the running of the business.

Top Tip

• Don't lie about your claims history. Insurers pass information to the Claims and Underwriting Exchange Register, who check all the information to stop fraudulent claims

Hotel Proprietors Act 1956

Many insurers will demand that as part of their Public Liabillity cover, hotels must clearly display a Hotel Proprietors Act notice.

On correct display of the notice stipulated by the 1956 Act (not applicable in Northern Ireland) a hotel's liability for loss, damage or theft from a hotel room should be limited to £50 for one item or £100 for multiple items per guest.

The notice must be displayed prominently at or near reception or, if there's no reception, at the main entrance.

If the notice is worded incorrectly or not properly displayed then the proprietor loses the protection of limited liability and becomes fully liable for the whole amount if guests' property is lost or damaged because:

• the proprietor/staff acted negligently
• the property was lost/damaged after being deposited for safe custody
• property was refused for safe custody or a guest was unable to deposit it

Pitfalls

Case Summary

There are pitfalls for a hotel attempting to rely on the Hotel Proprietors Act.

Famous French chef Raymond Blanc's flagship restaurant and country house hotel Le Manoir aux Quat'Saisons in Oxfordshire felt the heat when the restaurant's parent company offered two guests just £100 ($185) after cash and valuables worth over $100,000 were stolen from their room.

Police later arrested the burglar but only recovered around $40,000 in valuables. The couple, from Florida in the USA, expected to be reimbursed for the outstanding $60,000.

Instead the company sought protection under the 1956 Hotel Proprietors Act to limit their liability - only to be sued for breach of contract under the very same Act!

The couple's solicitor claimed that Le Manoir had failed to meet its duty to provide for the safety and security of residents, and had failed to comply with the requirements of the Hotel Proprietors Act 1956.

An out of court settlement was reached for the full amount claimed.

The moral of the tale is you must take extreme care in the wording and placement of the notice, and regularly review these.

The Office of Public Sector Information (OPSI) details the Act on its website where you can view the wording of the notice.