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.
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.
Requirements vary by brand and by property, but a typical list includes:
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.
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:
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.
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.
In our experience reviewing hotel programs, the same gaps come up repeatedly:
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.
Occasionally, at signing or for specific circumstances. Once the agreement is in place, assume the requirements stand unless the brand agrees in writing.
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.
It varies by brand. Most agreements allow changes at any time, so it is worth checking for updates at least once a year.
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.