Restaurant environmental liability: The risks hiding in plain sight and how to mitigate them
By Rob Owens
Running a restaurant involves a range of hazardous substances, including cooking grease, refrigerants, cleaning chemicals, and fuel. When mechanical failures or missteps occur, these everyday materials can create environmental consequences that extend well beyond the kitchen.
In today’s litigious environment, more restaurants are seeing liability claims arising from environmental exposures. In Idaho, for example, a restaurant was sued by a local municipality after improperly cleaned grease traps clogged the sewer system. And in New York, several restaurant employees were hospitalized after a faulty rooftop heating unit leaked carbon monoxide.
To limit environmental-related risks, restaurant owners need a clear understanding of what the biggest exposures are, and how to build an effective risk management and insurance strategy.
The biggest sources of environmental liability risk
Without the right precautions, several everyday materials and activities can trigger regulatory action, third-party claims, and reputational damage that can prove difficult to undo.
- Grease and food waste: If grease enters storm drains or sanitary sewers, it can trigger
municipal enforcement actions, fines, and third-party claims. If a waste hauler you hired has a spill en route, you may still carry liability as the generator of that waste. - Carbon monoxide: Ovens, boilers, and other fuel-fired equipment produce CO. If they are not regularly inspected and properly maintained, a leak can go undetected until employees or guests experience symptoms.
- Refrigeration chemicals: Large restaurant operations may have refrigerant chemicals such as ammonia or chlorofluorocarbons (CFCs) onsite in quantities substantial enough to require environmental remediation if a line fails. Contamination can also extend to the soil, groundwater, or nearby waterways and trigger bodily injury claims.
- Cleanliness: Adequate equipment sanitation is critical. Inadequate cleaning can lead to microbial growth, including mold, which poses serious health risks to guests and staff with sensitivities or allergies. Improper handling of cleaning chemicals can also trigger reactions that produce chlorine gas or other hazardous substances.
- Fuel storage tanks: Even a modestly sized diesel fuel generator tank carries release risk, and such tanks are common in rural areas and cold-weather regions. The release of any amount of stored fuel poses a potential environmental or health hazard
- Odors: An odor nuisance claim can trigger an environmental claim, and courts have ruled differently on whether standard general liability policies apply in such situations. These claims are more common in restaurants located in mixed-use or residential areas.
Practical steps to manage environmental risks
Good environmental risk management starts with developing written response plans before you need them, so your staff has a step-by-step process to follow when something happens, such as a spill, rather than improvising under pressure. Such plans don’t need to be complex or overly detailed, but they should be clear and all employees should know where to find the documentation. Designating a risk management or safety coordinator to oversee these protocols for all locations is well worth the investment.
In the same way, an inventory management plan that documents what substances are on site, how they’re stored, and who’s responsible for them can limit both physical damage and legal exposure if an incident occurs.
Keeping equipment on a regular maintenance schedule is one of the most straightforward ways a restaurant can manage risks and minimize incidents. Ovens, boilers, refrigeration systems, and freezers
should be inspected regularly by qualified third-party technicians.
Knowing your local regulatory requirements increases your odds of compliance. Health department and environmental compliance rules can vary significantly by city and county. If you operate in multiple jurisdictions, base universal internal standards on the most stringent requirements rather than creating different standards for each location.
Check your liability policies for environmental coverage gaps
General liability policies typically exclude pollution, and exceptions often apply only to certain types of bodily injury or property damage under specific circumstances. In addition, neither general liability nor property policies usually cover environmental cleanup costs, which are often the largest pollution-related expense, leaving a key coverage gap.
A site pollution liability policy (sometimes called premises pollution liability) is built to respond to the full range of effects from a pollution incident: bodily injury, property damage, cleanup costs for your property and surrounding soil and groundwater, transportation pollution liability, defense costs, and loss of business income.
Environmental liability risks are common but manageable
Environmental liability risks stem from everyday restaurant operations, not extraordinary events. That’s why managing these risks effectively means pairing operational best practices with insurance solutions built for the exposures that restaurants face. A coordinated approach that addresses both prevention and protection will put you in the strongest possible position to limit incidents that could trigger liability claims–and weather any claims that do occur. The first step? Put these risks on your radar.
About the author
Rob Owens is the Environmental Leader for global insurance brokerage HUB International. In this role, his responsibility is to consult and advise on environmental exposures for HUB business. In addition, Rob supports HUB colleagues with structuring and placement of environmental business.
Rob holds a bachelor’s degree in Geology from Bucknell University and an MBA from Rider University.
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