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Does Business Insurance Cover Spoiled Food?

Updated: November 2019

If you run a restaurant, grocery store or wholesale food business, losing perishable food inventory can be costly. Likewise, getting shut down by a governmental body because of tainted food distribution can hurt your business's financials — and its reputation. Having food spoilage coverage and food contamination coverage in your business insurance policy can help in those types of situations.

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Food Spoilage Coverage

Food spoilage coverage can help reimburse you for the cost of your lost food and beverages, up to your coverage limits. This coverage helps protect your business against certain risks, which may include:

  • Prolonged power outage.
    A power outage that's beyond your control can shut down your refrigerator or freezer units if you don't have a backup generator. This can potentially expose perishable stock to unsafe temperatures and humidity levels.
  • Equipment breakdown or failure.
    If your walk-in freezer were to break down, for example, food spoilage coverage could help pay to replace spoiled or contaminated food. Keep in mind, however, that your policy may require you to have equipment service contracts in place that include regular maintenance and repair schedules.
  • Mechanical breakdown coverage
    Food spoilage coverage might also be helpful during an equipment breakdown, according to the Insurance Information Institute. This coverage may help reimburse you for repairs or replacement costs for food-storage-related equipment, such as refrigeration systems, piping and mechanical and electrical machines.
You may need to pay a deductible before getting reimbursed for a food spoilage claim — read your policy or check with your agent to be sure.

Food Contamination Coverage

Food-related losses aren't limited to power or equipment failures. Food could be mishandled or improperly stored. Food may arrive at your facility carrying bacteria like E. coli and make your customers ill. Employees could even unknowingly transmit a virus or bacteria during food preparation.

If a health board shuts down your business after a food-borne illness outbreak, food contamination coverage can help. This coverage may help reimburse you for expenses such as:

  • Replacing contaminated food
  • Required cleaning of equipment
  • Loss of income due to the shutdown
  • Medical tests or vaccinations for affected employees
  • Advertising to help your business restore its reputation
Your policy may have limits on the maximum amount it will pay for contamination-related loss. Read your policy carefully to understand what coverage limits apply.

Food-spoilage and food-contamination coverages are a smart backup in case the unexpected happens. For more information on adding extra coverage to your business owners policy, contact a local business insurance agent.

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This content is for informational purposes only and may not be applicable to all situations.

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