What constitutes a material breach of the Bhc Franchise Agreement regarding insurance coverage?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
- (g) Franchisee's failure, for any reason, to procure and maintain the insurance coverage required under this Agreement, will be deemed a material breach of this Agreement.
- (h) Franchisee must be fully covered in all areas of operating a business. If Franchisee does not procure and maintain the required insurance coverage Franchisor may, but are not required to, procure insurance coverage on Franchisee's behalf and to charge the costs to Franchisee together with a reasonable fee for the expenses Franchisor incurs.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, a material breach of the Franchise Agreement occurs if the franchisee fails to procure and maintain the required insurance coverage. This means that if a Bhc franchisee does not obtain and keep the insurance policies mandated by the agreement, it will be considered a significant violation of the agreement.
Bhc requires franchisees to maintain comprehensive general liability insurance, automobile insurance, and any other legally required insurance, such as workers' compensation. The specific coverage requirements, limitations, and terms are detailed in the Operations Manual. The insurance must be placed with insurers having an A.M. Best's rating of no less than A: VII and authorized to do business in the state where the franchise is located, unless Bhc approves otherwise in writing.
Furthermore, all insurance policies must include a separate endorsement naming Bhc, the Owner of the Marks, and their respective shareholders, members, managers, directors, officers, employees, and agents as additional insureds. The franchisee's insurance coverage must be primary concerning Bhc and related parties. The insurance certificate must also state that the policy cannot be canceled without 30 days prior written notice to both the franchisee and Bhc. The franchisee is obligated to notify Bhc immediately in writing of any cancellation, non-renewal, or reduction in coverage or limits.
Failure to comply with these insurance requirements gives Bhc the right, but not the obligation, to procure insurance on the franchisee's behalf and charge the costs, along with a reasonable fee, to the franchisee. This underscores the importance of maintaining continuous and adequate insurance coverage to avoid being in material breach of the Franchise Agreement and potentially incurring additional costs.