What constitutes a material breach of the Bhc Master Franchise Agreement regarding insurance coverage?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
8.9 Insurance.
(a) Master Franchisee must have in effect on the Opening Date and maintain during the term of this Agreement comprehensive general liability insurance, automobile insurance, and other insurance that is legally required for Master Franchisee to operate Master Franchisee's business (i.e., workers' compensation insurance) or that is reasonably prudent for Master Franchisee's type of business. Policy coverage requirements and limitations and other terms relating to insurance will be set forth in the Operations Manual. Insurance is to be placed with insurers with a current A.M. Best's rating of no less than A: VII which are authorized to do business in the state where Master Franchised BHC Restaurant is located, unless otherwise approved in writing by Franchisor. Any policies of insurance that Master Franchisee maintains must contain a separate endorsement naming Franchisor and the Owner of the Marks (and Franchisor's other affiliated companies identified by Franchisor in writing), and their respective shareholders, members, managers, directors, officers, employees, and agents as additional insureds to the full extent of coverage provided under the insurance policies. Master Franchisee's insurance coverage will be primary as respects Franchisor, the Owner of the Marks, and other affiliated companies identified by Franchisor in writing, and their respective shareholders, members, managers, directors, officers, employees, and agents. Any insurance or self- insurance maintained by Franchisor, the Owner of the Marks, and other affiliated companies identified by Franchisor in writing, and their respective shareholders, members, managers, directors, officers, employees, and agents will be excess of Master Franchisee's insurance and will not contribute with it. Master Franchisee must provide Franchisor a copy of the policy and endorsement upon issuance and upon every renewal. Master Franchisee hereby grants Franchisor a waiver of any right of subrogation which any insurer of Master Franchisee may acquire against Franchisor by virtue of payment of any loss under such insurance. This provision applies regardless of whether Franchisor has received a waiver of subrogation endorsement from the insurer. Master Franchisee's obligation to obtain and maintain the foregoing policies of insurance in the amount specified will not be limited in any way by reason of any insurance that may be maintained by Franchisor, nor will Master Franchisee's procurement of required insurance relieve it of liability under the indemnity provisions set forth in section 16.2 of this Agreement. Master Franchisee's insurance procurement obligations under this section 8.9 are separate and independent of Master Franchisee's indemnity obligations under section 16.2 of this Agreement.
- (b) Within 30 days after the Opening Date and promptly after each succeeding anniversary of the Opening Date, Master Franchisee must promptly notify Franchisor of any and all claims against Master Franchisee and/or Franchisor under said policies of insurance and deliver to Franchisor a certificate evidencing such insurance is in full force and effect. Such insurance certificate must contain a statement to the effect the certificate cannot be canceled without 30 days prior written notice to Master Franchisee and to Franchisor. Master Franchisee must notify Franchisor in writing immediately regarding any cancellation, non-renewal or reduction in coverage or limits.
- (c) Master 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.
- (d) Master Franchisee must be fully covered in all areas of operating a business. If Master Franchisee does not procure and maintain the required insurance coverage Franchisor may, but are not required to, procure insurance coverage on Master Franchisee's behalf and to charge the costs to Master 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 Master Franchise Agreement occurs if the franchisee fails to procure and maintain the required insurance coverage. Bhc requires franchisees to have comprehensive general liability insurance, automobile insurance, and any other legally required or reasonably prudent insurance, such as workers' compensation. The specific policy coverage requirements, limitations, and terms are detailed in the Operations Manual.
Bhc mandates that insurance policies be placed with insurers having an A.M. Best's rating of no less than A: VII and authorized to conduct business in the state where the franchised restaurant is located, unless Bhc provides written approval otherwise. The franchisee's insurance policies must include a separate endorsement naming Bhc, the Owner of the Marks, and their affiliates as additional insureds. The franchisee's insurance coverage must be primary, and any insurance maintained by Bhc will be excess.
Furthermore, the franchisee must provide Bhc with a copy of the policy and endorsement upon issuance and renewal. The franchisee also grants Bhc a waiver of subrogation rights. Within 30 days after the opening date and each anniversary, the franchisee must notify Bhc of any claims against them or Bhc under the insurance policies and provide a certificate proving the insurance is in full force. This certificate must state that the policy cannot be canceled without 30 days' prior written notice to both the franchisee and Bhc. The franchisee must also immediately inform Bhc in writing of any cancellation, non-renewal, or reduction in coverage or limits.
If a franchisee fails to maintain the required insurance, Bhc has the option to procure insurance on the franchisee's behalf and charge the franchisee for the costs, along with a reasonable fee for expenses incurred. This underscores the importance of maintaining continuous and adequate insurance coverage to avoid being in material breach of the agreement and potentially incurring additional costs.