Why every Peninsula restaurant needs more than a BOP

I insured a gentleman who had five restaurant locations in San Francisco. Good operator, successful business, took care of his people. His West Portal location was a neighborhood staple.

In the middle of the night, that location caught fire.

What Actually Happened

The San Francisco Fire Department broke through the front doors — which fire departments do — and nothing was on fire inside the restaurant. Smoke was coming between the wall, between our insured's premises and the building next door, which was being remodeled for a wine bar.

When SFFD axed open the wall over the stove with gas pilot lights, they broke through into the neighboring space. It was just like that movie, Backdraft. The two firemen got shot across the room by the back draft and now the restaurant is engulfed.

Our insured had cameras in every location. He could watch each restaurant from his office — how customers were interacting with employees, what was going on at any given time. Those cameras came into play. The footage showed: no fire inside the restaurant. Then fire. The camera proved the timeline.

But the San Francisco Fire Department wrote their report saying the fire started in our restaurant. Go fight city hall.

Five Businesses, One Lawsuit

The building to the right caught fire. The building to the left caught fire. In San Francisco, buildings are two inches apart. Suddenly there are five businesses involved in a massive lawsuit.

Luckily we had — I want to say — a million dollars of liability and a couple million dollar umbrella. Travelers was the carrier. They were wonderful. They exhausted policy limits and paid everybody.

The Part Where Insurance Changed His Life

Here's where I came in. The restaurant is being rebuilt, and the building owner — who was living in France — has insurance on the shell. Our insurance is paying for all the interior improvements and betterments.

I told our insured: "Play the general." If you have two different general contractors — one for the building and one for the restaurant — they're going to butt heads over who does what first. Framing, electrical, plumbing — it all has to tie together.

I convinced the landlord to let our insured run the whole job, working within the parameters of what each insurance was paying for. He did it. It went smashingly well.

This was a one-story restaurant with a high ceiling. The city let him add a whole mezzanine second floor and an elevator. He did improvements at his own additional cost. The landlord was so impressed he gave him an option to buy the building.

He bought it. Got it for a smoke and a deal. He still owns the building today.

What Restaurant Owners Need Beyond a BOP

This story covers just one type of claim. Here's what I see Peninsula restaurant owners missing:

General liability and umbrella — Our insured had both, and they exhausted every dollar. A BOP alone wouldn't have covered a multi-party lawsuit like this. You need standalone GL with adequate limits and an umbrella on top.

Business personal property — Kitchen equipment, furniture, fixtures, POS systems. If your BOP limits are too low, you're rebuilding your restaurant interior out of pocket.

Business income / loss of rents — This restaurant was closed for months during the rebuild. If you're a tenant, lost income can be the thing that actually kills your business.

Liquor liability — If you serve alcohol, your BOP's GL coverage may not be enough. A separate liquor liability endorsement or standalone policy is standard for any restaurant with a bar.

Workers' compensation — Kitchen injuries are common. Burns, cuts, slips. If you have employees, you need workers' comp in California. Period.

Employment practices liability (EPLI) — Most restaurant owners skip this entirely. I've seen a business with 40-50 employees pay $80,000 out of pocket because they had no EPLI when a terminated employee filed suit.

The Bottom Line

A BOP is a starting point. It packages some basic coverages together at a reasonable price. But it is not a full commercial insurance program.

If you own a restaurant on the Peninsula, you need someone looking at your specific operation — your lease requirements, your headcount, your liquor exposure, your equipment values — and building a coverage plan around that.

Not around a template. Around your business.

Paul Nadler has been a licensed insurance broker in California since 1976. He is the third-generation owner of Nadler Insurance in San Carlos.