How to Protect Your Hotel Against Liability Claims

Castleacre Associate Director, Judy Ryan, Looks at Why Planning and Protecting against Liability Claims is so Important for Hotels

When it comes to hotel insurance, the COVID pandemic highlighted how vulnerable the hospitality industry is to business interruption. Not surprisingly, most hotel owners would still consider prolonged business interruption as their main fear, but liability claims can be just as damaging.

Prior to 2020, many hoteliers would have considered business interruption in the form of a sudden event affecting the building itself, such as a fire, loss of power, or a major water leak. Insurance plays a crucial role in protecting owners against this type of catastrophe, but thankfully, these are relatively rare events.

On the other hand, liability claims are an increasingly insidious issue for hotel owners. Liability claims are more common in Ireland now with the breadth of potential claims expanding from personal injury into the less familiar territory of data breaches, cybersecurity and defamatory claims.

Personal Liability Claims

In July 2023 there were some significant changes to the Law on Occupiers’ Liability. The principal drive behind this was to reduce the liability burden on occupiers. From an insurance perspective, occupiers/owners can now assume that visitors or recreational users will take reasonable care regarding their own safety on the occupier’s premises. We are however, living in an era when personal claims across the board are on the rise and it is essential that hospitality businesses are properly protected against liability claims.

Hoteliers generally have robust health and safety procedures in place to ensure guests and visitors are safe on site.  Any responsible owner understands that mistakes in this area can be very costly. The value of a relationship with an insurance broker is that they will help their client assess the risks and plan their insurance accordingly.

A liability claim resulting from a guest being injured on site, suffering loss or damage to their personal belongings or illness as a result of consuming food or drink sold on the premises, has the potential to be hugely damaging to your business’s reputation, and this in turn can have long-term financial impacts.

The safety of employees must be considered equally seriously because a hotelier is exposed to similar personal liability claims.

Liability Claims Resulting from Data Breaches and Poor Cybersecurity

What is understood much less are the short and long-term risks to your business linked to data protection and cybersecurity. As we have seen with many high-profile organisations, such as Marks and Spencer and the Bank of Ireland, the risks and costs of lapses in online security can be underestimated.

Globally targeted security attacks are mushrooming because they are lucrative for criminals and a powerful weapon for rogue states.

Hotels, like governments, banks and shops, will frequently handle sensitive data such as personal addresses and payment information. In 2020 the Marriott hotel chain was fined £18.4m for a data breach that impacted up to 339 million guests worldwide. The initial cyber-attack happened in 2014 to Starwood, a hotel group which was later acquired by Marriott. The security breach following the merger continued unnoticed and the attacker had unimpeded access to names, email addresses, passports, etc for four years.  The ongoing reputational impact of this high-profile breach is hard to measure.

Failings in in-house processes, as opposed to external attacks, can also lead to problems. In March this year, the Bank of Ireland was asked to pay a settlement to a client after accidentally releasing her personal details to her estranged father – a single data breach resulted in a settlement of €320,000.

Smaller businesses are particularly vulnerable to cybersecurity attacks because they may not benefit from IT support, which can ensure that online processes are protected and can provide more in-depth cybersecurity training to staff.

Defamation Claims

Defamation claims have also become an increasing issue in Ireland. Looking at this cynically, you might argue these claims have increased due to the potentially high rewards of a favourable settlement. It is worth adding that these cases may be on the rise because they are not limited to in-person and verbal incidents but extend to printed and digital platforms. Whichever way you look at it, defending against this type of claim can be extremely time-consuming, burdening the business with high costs, particularly if they result in a lengthy court case.

A defamatory claim could arise if a hotel manager publicly accused a guest or employee of misconduct without substantiating their accusation. A liability claim for damage to someone’s reputation is taken seriously if the accusation is made in front of other people or in a public forum and for this reason hotels need to be very careful about how they respond to online reviews, particularly to criticism. Another concern for hoteliers is they can be held liable for any defamatory statements made by their employees, known as vicarious liability; this is why it is so important to ensure that everyone on the team understands the potential risks and that any misconduct accusations must be evidenced.

Prevention is the Best Option

Prevention and preparation are always the best defence against liability claims. As a broker we spend time with our hotel clients reviewing their risk management. We also advise them to bring in specialists where necessary – that might be a legal specialist to review employee documents or activity waivers, a building surveyor to examine the building, specialist security advisors or IT consultants to review online security. Training to help staff ensure they always respond in a professional manner to guests and team members, in often pressured circumstances, can help mitigate problems.

The long and short-term financial impact of a liability claim is one of the reasons why we suggest having at least €6.5 million liability in place. This essential cover is generally not a costly addition to insurance – inadequate liability cover has the potential to be much more costly.