Opening a new restaurant or renovating an existing location involves significant construction activity. During this build-out phase, you face risks different from normal restaurant operations. Understanding how general liability coverage applies during construction - and what additional coverage you might need - protects your investment before you even open your doors.
Risks During Restaurant Construction
Construction and renovation create several categories of risk:
- Contractor operations: Injuries to contractor employees, property damage from construction activities
- Premises liability: Injuries to visitors, inspectors, or delivery personnel at the construction site
- Property damage: Damage to the building, installed equipment, or neighboring properties
- Completed operations: Claims after construction is finished (defective work causes injury later)
Who Carries Insurance During Construction?
Multiple parties may have insurance obligations during restaurant build-out:
General Contractor
Your GC should carry:
- General liability insurance (typically $1-2 million)
- Workers' compensation for their employees
- Commercial auto for construction vehicles
- Builder's risk or installation floater (sometimes)
Subcontractors
Each sub (electrical, plumbing, HVAC) should carry their own:
- General liability insurance
- Workers' compensation
- Professional liability for design work (if applicable)
You (the Restaurant Owner)
As the property owner or tenant, you may need:
- Premises liability for the construction site
- Builder's risk to protect materials and installed equipment
- GL coverage for your own activities
Builder's Risk Insurance
Builder's risk (also called 'course of construction' coverage) protects the building and installed materials during construction:
- Damage from fire, vandalism, theft, weather
- Materials on site and in transit
- Installed equipment (kitchen equipment, HVAC)
- Soft costs (delay-related expenses)
Who buys it? This varies. Check your construction contract - it may require the GC to carry it, or it may be your responsibility. If you own the building, you usually need it. If you're a tenant doing build-out, check with your landlord.
Certificate and Contract Requirements
Protect yourself by requiring proper documentation from contractors:
From Your General Contractor
- Certificate of insurance showing adequate GL and workers' comp limits
- Your company named as additional insured on their GL policy
- Waiver of subrogation so their insurer can't sue you
- Copy of their policy (not just the certificate)
From Subcontractors
- Same documentation as GC
- Verify coverage is active before they start work
- Your GC should manage this, but verify they're doing it
Contract Language
- Indemnification: GC agrees to indemnify you for claims arising from their work
- Insurance requirements: Specific coverage types and minimum limits spelled out
- Certificate requirements: Certificates due before work begins
- Notice requirements: You're notified if coverage lapses
Transitioning to Restaurant Operations
When construction ends and you open for business, your insurance needs change:
- Builder's risk terminates (work is complete)
- Restaurant general liability begins
- Commercial property insurance covers your finished improvements
- Business income coverage becomes relevant
Timing is critical: Make sure there's no gap between construction coverage ending and operations coverage beginning. Coordinate this transition with your broker.
Frequently Asked Questions
What if my contractor doesn't have insurance?
Don't hire them. Uninsured contractors put your entire investment at risk. If a worker is injured and they don't have workers' comp, you could be liable. If their work causes property damage and they have no GL, you're paying out of pocket. It's not worth the risk.
Does my lease require specific construction insurance?
Usually, yes. Commercial leases typically have detailed insurance requirements for tenant build-outs. Review your lease carefully before starting construction. Your landlord may need to be added as additional insured, and they may have minimum limit requirements.
When should I get restaurant GL in place?
Get your restaurant GL policy bound before your soft opening or any activities where guests will be present. Even 'friends and family' nights need coverage. The transition from construction to operations should be seamless.