Pub insurance - know your insurance responsibilities

The glass-topped tables in the pub looked very attractive, but were not designed to be sat upon the way you might do on a wooden table. Except of course that somebody inevitably did sit on one, then tried to sue the pub landlord after they were injured and taken to hospital when the table-top broke.

In court their lawyer claimed the pub should have had notices up warning people not to sit on the tables. Fortunately the pub landlord had good public liability insurance which paid for a good lawyer, and the court accepted his argument that the responsibility to take care in such circumstances rested with the customer, not the publican.

Becoming a pub tenant, be it with one of the big groups such as Enterprise Inns or Punch Taverns - both companies that own thousands of pubs - or with one of the surviving local breweries such as Frederic Robinson in Manchester or Shepherd Neame in Kent, can be one of the cheapest and most convenient ways for any would-be entrepreneur to start their own business. A pub tenant might need as little as £20,000 in capital, whereas to buy a franchise with a big-name fast-food outlet, for example, would cost five times as much.

Do your research

When taking this route to buying a business, it’s important to find out where additional costs and responsibilities lie - whether with the landlord or yourself as tenant. For example, some of the ancillary costs such as pub insurance cover will be the same as if you were buying the business freehold. And despite some of the burden resting with the people who actually own the pub and supply it with beer, be they pubco or brewer, ultimately this responsibility lies with you.

The typical tenancy agreement for a pub will probably say that the pub owners will insure the building and take out insurance to cover themselves for loss of income should the licence be lost. However, the premiums for the pub owner’s insurance are often recharged to the tenant in the form of an “insurance rent”. The tenant must also insure the moveable fixtures and fittings and stock as well as taking out other business insurance. It will almost certainly be part of the tenancy agreement that the tenant shows the landlord proof that this insurance is in place. Tenants will also be advised to take out insurance covering their own personal contents, particularly if you are living in the upstairs accommodation.

Read your tenant contract carefully

Not every pub owner makes the tenant pay for the owner’s insurance. Mike Clist is general manager for the tenanted department at the West London brewer Fuller, Smith & Turner, looking after 170 or so tenanted and leased pubs from central London to Hampshire. He says of his own company’s agreement with its tenants and lessees: “It’s a standard package - they have to take out insurance cover on public liability, employee liability, glass, fixtures and fittings, their own personal effects. On our side we insure the buildings and we don’t recharge the cost of that to those of our landlords who are tenants, though we do recharge the lessees.

“Our insurance covers us for loss of trade, and rebuilding the pub in case of fire or something like that, but the tenant would have to insure against their own loss of trade, and any loss of inventory - beer, spirits, food, wine and the like.

“Within a few days of a new tenant going into a pub their business development manager would be going through all the paperwork with them, making sure they had public liability insurance and staff liability insurance in place - those are the most important things to us, as without the tenant being covered, the responsibility falls back on the brewery.

“We then check on that annually, as legally there’s a duty of care on us to ensure our tenants are covered for public and staff liability.”

Don’t get caught short

Greene King, one of the country’s biggest brewers based in Suffolk, has 1,450 tenanted and leased pubs and offers a similar approach. “We have an insurance policy to cover structural elements of the premises and part of this cost is recharged to licensees,” the company said. Tenants “can also take out a licensee insurance policy through our ‘Share and Save’ scheme, which covers other areas for which they are responsible under the terms of the tenancy agreement, eg fixtures and fittings, employees, public and product liability, glass, money, business interruption and so on.”

However tenants have been warned that some pub companies appear to overcharge for the insurance costs they pass on. The Guild of Master Victuallers, a tenants’ organisation, wants more transparency on pub insurance costs, and has complained about high excesses, which it says stops licensees making smaller claims for things like minor roof damage and broken windows because it’s not worth it once the excess is taken into account.

The best advice is for would-be tenants to find out exactly what the pub owner is going to be charging them for buildings cover and so on, and then to do their own research and get quotes in order to compare. Compare and buy sites such as Simply Business enable pub owners to choose from a range of quotes and buy cover in minutes. Knowing where your responsibilities lie in relation to customer care, insurance and additional costs will ensure that a tenant can build a strong relationship with the landlord with a view to running a successful and safe public house.