Alec Johnson, CISR May 18, 2016 4 min read

The Hospitality Industry’s Professional Liability Problem

See, you know how to take the reservation, you just don’t know how to *hold* the reservation and that’s really the most important part of the reservation, the holding. Anybody can just take them. – Jerry Seinfeld

In 2017, the U.S. hotel industry produced a total revenue of $208 billion. If businesses want to stand out in the hyper-competitive hospitality industry, they need to deliver the highest quality customer service possible. What these businesses may not know is that consistently meeting these high standards opens them up to a professional liability exposure.

With respect to an insurance policy, a professional is a person who provides a service in accordance with an established set of standards within their industry. Traditionally, professional liability was reserved for occupations which required a high level of education or training and industry specific licenses, such as medical professionals, lawyers, and architects. However, an increasing number of non-traditional industries are becoming specialized enough to create a professional liability exposure.

So what exactly would a hotel’s professional liability exposure look like, and why is the existing commercial general liability (GL) policy not sufficient?

Let’s say a wedding party reserved a ballroom, multiple guest rooms, and a number of other services at a hotel during one of the busiest holiday weekends of the year. Once the guests start to arrive, the hotel finds out that the majority of rooms and services were double-booked with another wedding party. The guests now need to scramble to find similar accommodations, someone to provide similar services, and relocate all their guests and property on short notice. The wedding party could pay thousands of dollars in additional costs, even after the hotel refunds their initial deposits.

These guests could easily claim that they are owed compensation from the original hotel because it failed to meet the basic standards expected from a business in the hospitality industry. In order to be covered by a commercial GL policy there would have to be a loss caused by bodily injury or property damage, but the wedding party’s loss is purely monetary. The hotel would need a professional liability policy to pay for the costs to reimburse the guests’ losses and any resulting legal fees.

This is just one example of a professional liability exposure that every hotel faces. The number of exposures can increase if a hotel hires specialized employees who provide services to the guests. Some common examples of these additional exposures are:

Salon or Barbershop
Spa Services
Personal Trainers
Event Coordinators

The Commercial Insurance Consultants at Hausmann-Johnson insurance can help you identify the professional liability exposures unique to the hospitality industry, and make sure you have the proper liability coverage in place.

Alec Johnson, CISR

Alec has been with Hausmann Group since 2013 and was promoted to Commercial Operations Manager in 2022. He takes pride in educating clients on the effects that insurance and risk management can have on their businesses. Over the past several years, he has also had the pleasure of coaching his team of Commercial Lines Associates through their own professional development. He feels passionate about improving the lives of the people around him. Alec graduated from the University of Wisconsin-Madison with a bachelor’s degree in History. He enjoys volunteering alongside his Hausmann Group coworkers with various community organizations. Outside of work, you can find him trying out new restaurants with his wife or spending time walking their dog.