Food Delivery Insurance - Is Your Business Really Covered?
There is increasing concern across the fast food delivery industry that businesses may be operating without adequate insurance cover with the risk that if they are involved in an accident, the business itself could be held responsible, not only in terms of compensation but also for criminal prosecution.
In this article, Craig Kitchen from ICB Group explains why some businesses may be at risk without knowing it.
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Is your cover correct?
There can be no excuse for those businesses who cut costs by allowing drivers – often young people – to work for them without providing proper insurance cover, but for many it may simply be that they are unaware that they are breaking the law.
While most operators understand the need to insure their own vehicles, many are not aware that when they use owner-drivers to work for them, the latter's insurance is likely to be invalid.
Arranging the correct motor insurance for food delivery is and has been a huge problem in the sector for many years. The main problem relates to the use of a private vehicle for deliveries, as, while insurers may allow ‘business use’ for drivers, most standard policies exclude this type of use, which is known as hire and reward.
Hire & Reward
‘Hire and reward’ use is required when something or someone is being carried from one place to another, for which a payment is being received. For example, couriers and taxis both require this cover and the same applies to any vehicle being used for food delivery, whether owned by the business or an individual.
Many food delivery businesses employ owner-drivers to carry out their deliveries and hope the employee arranges their own insurance cover by extending their private car insurance. However, unfortunately the majority of insurers are unwilling to provide such an extension to a standard motor policy due to the high risks associated with food delivery.
The employee may have requested ‘business use’ but unless the insurer has specifically noted the business of the employee as a food delivery driver, and included the correct hire & reward cover for food delivery on the policy, the reality is they are driving without insurance whenever they are carrying out a food delivery.
Responsibility as an employer
A number of business operators appear to take on the view that it is not their responsibility to ensure their drivers are covered, and that the onus is on the employee to ensure they have the correct cover arranged whilst carrying out deliveries in their own vehicles. This, however, is a misconception.
By law a business has a legal responsibility to look after its employees and if it fails to ensure that owner-drivers have adequate insurance, it may also be deemed to be failing in its duties by knowingly allowing an employee to drive for the business without valid insurance. This could result in a criminal prosecution.
Under an area of the law called “vicarious liability” an employer could also be drawn into a claim and held liable for compensation payments for third party injury or damage, which isn’t covered under the employee’s own motor insurance, if it can be shown that the employee was working for the business at the time of the incident. As well as the financial impact to the business from the resultant legal action, this sort of incident could also result in adverse publicity and in some circumstances even result in a business failure.
Businesses must also advise their Employer’s Liability insurer that they deliver food, as this is a material fact. Failure to do so could void their policy or result in the insurance company seeking a recovery from the business for any claims monies they have had to pay in compensation to an employee who has been injured whilst carrying out a delivery and for which the business is legally liable.
Correct Food Delivery Cover
The problem to date has been that unless you have a substantial business, insurers have generally been uninterested in providing this cover, or, if they do, charge substantial premiums for it. This is particularly true where the vehicle is owner-operated or is a business-owned moped or motorbike, as insurers are generally reluctant to insure even business-owned vehicles used for food delivery. Some even restrict the number of bikes they will cover on a group policy, so they have to be insured individually.
ICB Group is one of a few brokers in the UK providing food delivery insurance who have developed a scheme for food delivery vehicles to include owner-driver delivery vehicles.