What Insurance Does Your Hotel Franchise Agreement Require?

Your franchise agreement almost certainly dictates more of your insurance program than your own preferences do. Brands set minimum coverages and limits, require specific additional insured wording, restrict which carriers you can use, and reserve the right to raise those requirements through their brand standards. If your coverage falls short, it is a default under the franchise agreement, not just an insurance problem.

Here is what hotel brands typically require, where owners most often fall out of compliance, and how to stay ahead of it.

Where do hotel franchise insurance requirements come from?

They come from three places: the franchise agreement itself, the brand's standards manual, and the franchise disclosure document you received before signing. The franchise agreement usually says you must carry the insurance described in the standards, and that the brand may change those standards over time. That second part matters. A requirement can increase mid-term, and you are still expected to meet it.

What types of insurance do hotel brands require?

Requirements vary by brand and by property, but a typical list includes:

• Property insurance, often including business interruption, flood, windstorm, and sometimes terrorism
• Commercial general liability on an occurrence form
• Umbrella or excess liability
• Workers' compensation and employers' liability
• Liquor liability, if alcohol is served
• Business auto liability, including hired and non-owned auto for shuttles and employee errands
• Employment practices liability
• Cyber liability
• Crime or fidelity coverage

Limits are not one size fits all. Some brands scale umbrella requirements to the size of the hotel. One major brand's published standard ties the umbrella limit to the number of stories in the building and requires employment practices liability of at least $1 million. Larger or higher-risk properties can be required to carry more.

What does "additional insured" wording require?

Most brands require that the franchisor, its affiliates, and their employees be named as additional insureds on your liability policies, and they are specific about how. Common requirements include:

• Unrestricted additional insured status. Many standard additional insured endorsements limit coverage to liability caused by your acts. Brands often want broader wording than that.
• Primary and non-contributory. Your policy pays first, and the brand's own insurance does not contribute.
• Waiver of subrogation. Your carrier gives up the right to recover from the brand after paying a claim.
• Umbrella follow-through. Additional insured status on your general liability policy does not automatically carry up to your umbrella. Brands frequently require it on both, by endorsement.

A certificate of insurance shows the brand what you say you have. It does not create coverage. If the endorsements are not actually attached to the policy, the certificate will not protect you or the brand when a claim comes in.

Do brands care which insurance company I use?

Yes. Franchise standards commonly require carriers that are acceptable to the brand, often expressed as a minimum A.M. Best financial rating and size. Some brands accept surplus lines carriers for certain coverages, such as umbrella, while requiring admitted carriers elsewhere. If your agent moves you to a cheaper market at renewal, confirm the new carrier still meets the standard.

Where do hotel owners most often fall out of compliance?

In our experience reviewing hotel programs, the same gaps come up repeatedly:

• Umbrella limits that did not keep up. The brand raised its requirement, and the renewal did not.
• Wrong additional insured form. The policy has a basic additional insured endorsement, not the wording the brand requires.
• Missing coverages. Employment practices liability and cyber are the most common omissions on older programs.
• Deductibles above the brand cap. Some standards limit how large a property deductible you can carry, which can conflict with the percentage wind and hail deductibles common in Texas.
• Workers' compensation. Texas lets employers opt out of workers' comp, but most franchise agreements require it. Opting out can put you in default with the brand.
• Late certificates. Brands track renewals. A certificate that does not arrive on time can trigger a notice even when the coverage is in place.

What happens if my insurance does not meet brand standards?

Consequences depend on the agreement, but they can include a notice of default, a deadline to cure, and in some cases the right for the brand to buy the coverage itself and charge you for it. Beyond the contract, the bigger risk is a claim. If a guest injury suit names both you and the brand and your policy does not respond the way the agreement promised, you may end up owing the brand for defense costs your insurance should have covered.

How do I keep my hotel's insurance compliant?

• Keep a current copy of your brand's insurance standard and give it to your agent every renewal.
• Ask your agent for a line-by-line comparison of the standard against your actual policies, including endorsement form numbers.
• Confirm additional insured, primary and non-contributory, and waiver of subrogation wording on both the general liability and umbrella policies.
• Calendar certificate deadlines and send them early.
• Review any brand standard updates the year they are issued, not at the next renewal.

Frequently asked questions

Are franchise insurance requirements negotiable?

Occasionally, at signing or for specific circumstances. Once the agreement is in place, assume the requirements stand unless the brand agrees in writing.

Does a management company's insurance satisfy the brand?

Not automatically. Brands typically require coverage for the hotel itself, and the owner, management company, and brand all need to be properly insured or named. Each agreement should be reviewed together.

How often do brands change their insurance standards?

It varies by brand. Most agreements allow changes at any time, so it is worth checking for updates at least once a year.

Have your program checked against your brand standard

If you own a franchised hotel in Guadalupe, Comal, or the surrounding counties, send us your brand's insurance requirements and your current policies. We will compare them line by line and tell you exactly where you stand. Call 830-303-8300 or visit our hotel insurance page.