Risk & Business Magazine JGS Insurance Magazine Spring 2019 | Page 7

RISK MANAGEMENT
UNIQUE RISKS OF OPERATING A HOTEL REQUIRE
COMPREHENSIVE RISK MANAGEMENT PROGRAMS
T
he hotel industry faces a
myriad of loss exposures
typical of an industry that
has daily leases, has relatively
high employee turnover,
provides many services and amenities,
has 24-hour operating exposure, and has
tenants generally unfamiliar with their
surroundings. As one hotel executive told
me, “From an insurance standpoint, we are
similar to the residential sector but with
substantially more exposure.”
In addition to exposures associated with
other real estate sectors—such as slip-and-
falls, fires, water damage, and man-made
and natural catastrophes—many hotels
also have unique or enhanced exposure to
the following:
OPERATION OF HOTEL SHUTTLE VANS
One of the largest claims I have seen was a
serious accident caused by the hotel driver’s
negligence resulting in serious injuries to
five executives. In this instance, the driver
had a suspended license.
FOODBORNE ILLNESS
Hotels that provide food service to guests
and as part of a catering operation have
increased exposure. A client of mine
served contaminated chicken at a wedding
resulting in 50 people contracting
salmonella poisoning.
LEGIONELLA AND MOLD
It is well known that one of the first cases
involving this airborne pathogen occurred
at the Bellevue Stratford Hotel, resulting
in several deaths at an American Legion
Convention in 1976. Since that time, there
have been other incidents including at the
Opera House Hotel in New York City in
2015.
Mold is also an increasing exposure. The
most significant incident impacted the
Hilton Hawaiian Village, closing the
property for one year and resulting in a $1.8
million judgment for 2,900 former guests.
and 2015, there were six high-profile hotel
companies that sustained customer data
breaches. Hotels are a target because of
their point-of-sale transactions and the
amount of customer data that is stored by
these companies.
LIQUOR LIABILITY
Many hotels provide food and beverage
service to guests and other members of the
public. This creates enhanced exposure if
an intoxicated person injures themself or
others due to a hotel’s negligence. Drinking-
and-driving incidents are particularly
hazardous and could result in a substantial
judgment.
HEALTH CLUBS, SPAS, POOLS AND
BEACHES
In my career, I have seen several serious
injuries and deaths resulting from the
operation of these amenities. The Virginia
Graham Baker case, the tragic event at a
Disney beach hotel, lesser known cases
involving diving accidents, assaults by spa
employees, injuries from defective health
club equipment and more. All cases resulted
in substantial judgments.
industry is required to exercise enhanced
vigilance to prevent the spread of diseases
caused by pandemics such as Ebola and
various strains of influenza.
The Insurance Industry has responded
to these exposures by offering insurance
products to allow for the transfer of risk
to a professional risk bearer, including
programs that offer substantial limits at
an affordable price to provide protection
against substantial judgments.
Insurance is just one part of the risk
management process that includes
identifying risks; measuring the risk;
transferring risk contractually where
possible; and developing, implementing
and monitoring a comprehensive Loss
Control and Safety Program.
While there are many risks that keep
hoteliers up at night, these exposures
can be mitigated with the proper risk
management program.
TERRORISM
Unfortunately, the hotel industry has
been a frequent target for terrorists. This
includes incidents in Aman, Islamabad, Bali
and Mumbai, all resulting in several deaths.
In the Sept 11th terrorist attacks in New
York City, the Marriott WTC was destroyed
and the Millennium Hilton, across from the
WTC, sustained significant damage and
closed for 15 months.
MASS TORTS
Unfortunately, some of the most infamous
cases involving mass torts have occurred
at hotels. This includes the Stouffers Hotel
in New York, the MGM Las Vegas, the
Hyatt Kansas City and the Hotel Dupont in
Puerto Rico. These incidents are in addition
to the aforementioned terrorist incidents
and Legionella cases.
CYBER RISK PANDEMICS
Hotels are becoming increasingly
susceptible to cyber risk, such as the most
recent attack on Marriott. Between 2014 The hotel industry is negatively impacted
by pandemics as the number of people
traveling declines during such times. The
BY: BRIAN RUANE
NATIONAL DIRECTOR OF
REAL ESTATE AND HOSPITALITY
JGS INSURANCE
Brian Ruane, CPCU has 40 years
experience in the insurance industry
as an underwriter, broker and Adjunct
Professor of Risk Management.
Before joining JGS he served in a
variety of executive positions at an
international insurance brokerage
firm, most recently as the founder
and director of its national real
estate, hotel and casino practice. He
managed a team of 100 professionals
across the nation and was responsible
for over 300 clients placing in excess
of $1 billion in premium into the
insurance market.
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