What minimum insurance policies are required for liabilities caused by or occurring in connection with the development or operation of a Carls Franchised Restaurant?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
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Franchisee promptly shall inform CJR in writing as to any infringement of the Proprietary Marks of which it has knowledge. Franchisee shall not make any demand or serve any notice, orally or in writing, or institute any legal action or negotiate, compromise or settle any controversy with respect to any such infringement without first obtaining CJR's written approval. CJR shall have the right, but not the obligation, to bring such action or take such steps as it may deem advisable to prevent any such infringement and to join Franchisee as a party to any action in which CJR or CJR Affiliates are or may be a party and as to which Franchisee is or would be a necessary or proper party. Franchisee also shall promptly notify CJR of any litigation (including administrative or arbitration proceedings) of which Franchisee is aware instituted against CJR, CJR Affiliates or Franchisee relating to the Proprietary Marks. Franchisee shall execute any and all instruments and documents, render such other assistance and do any acts and things as may, in the opinion of counsel for CJR or CJR Affiliates, be necessary or advisable to protect and maintain the interests of CJR and CJR Affiliates in the Proprietary Marks, including without limitation their interests in litigation or proceedings before the U.S. Patent and Trademark Office or other tribunal relating to the Proprietary Marks.
15. INSURANCE
- A. Franchisee shall be responsible for all loss or damage arising from or related to Franchisee's development and operation of the Franchised Restaurant, and for all demands or claims with respect to any loss, liability, personal injury, death, property damage, or expense whatsoever occurring upon the premises of, or in connection with the development or operation of, the Franchised Restaurant. Franchisee shall, at its sole expense, maintain in full force and effect throughout the term of this Agreement that insurance which Franchisee determines is necessary or appropriate for liabilities caused by or occurring in connection with the development or operation of the Franchised Restaurant which shall include, at a minimum, insurance policies of the kinds, and in the amounts, required by Section 15.B. CJR, and any entity with an insurable interest designated by CJR, shall be an additional insured in such liability policies, except for workers' compensation/employer's liability, and loss payee for property to the extent each has an insurable interest.
- B. All insurance policies shall be written by an insurance company or companies satisfactory to CJR, in compliance with the standards, specifications, coverages and limits set forth in the OPM or otherwise provided to Franchisee in writing. These policies shall include, at a minimum, the following:
- (1) Commercial General Liability insurance with policy limits not less than $5,000,000 per occurrence and in the aggregate. Coverage shall apply per location, including coverage for contractual liability, broad form property damage, personal and advertising injury, product liability and
completed operations, not to exclude food-borne illness, as well as Damage to Rented Premises coverage with limits not less than $100,000.
- (2) Automobile Liability coverage, including owned, leased, non-owned and hired vehicles, with a combined single limit not less than $1,000,000 per accident and additional liability coverage as needed for delivery services. This may be included as part of a package policy.
- (3) Workers' Compensation, statutory as required by law, and Employer's Liability insurance with limits not less than $500,000, and such other insurance as may be required by the state or locality in which the Franchised Restaurant is operated. This coverage shall also be in effect for all of Franchisee's employees who participate in any of the training programs described in Section 13.
The required limits set forth in 15.B.(1)-(3) may be satisfied through a combination of Primary and Umbrella/Excess Liability coverage. If satisfied through an Umbrella/Excess Liability coverage, the Umbrella/Excess Liability must be "following form" of the underlying Commercial General Liability, Automobile Liability, and Employer's Liability coverages.
- (4) Commercial Property insurance that extends coverage on a replacement cost basis for the Franchised Restaurant, business personal property (including electronic equipment, tenant improvements & betterments), and business income and extra expense for a minimum of 12 months or actual loss sustained to cover loss of profits, continuing expenses and loss of rents. Covered causes of loss should be "Special Form" or "All Risk" with coinsurance conditions not less than 80%.
Source: Item 22 — CONTRACTS (FDD page 80)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, franchisees must maintain insurance coverage for liabilities related to the development and operation of their franchised restaurant. The specific types and amounts of coverage must align with the standards and specifications outlined in Carls's OPM (Operations Procedures Manual) or as otherwise provided in writing.
The minimum insurance policies required include Commercial General Liability insurance with a limit of not less than $5,000,000 per occurrence and in the aggregate. This coverage must apply per location and include contractual liability, broad form property damage, personal and advertising injury, product liability, completed operations (not excluding food-borne illness), and Damage to Rented Premises coverage with limits not less than $100,000. Franchisees also need Automobile Liability coverage, including owned, leased, non-owned, and hired vehicles, with a combined single limit of not less than $1,000,000 per accident, with additional liability coverage as needed for delivery services. Additionally, Workers' Compensation, statutory as required by law, and Employer's Liability insurance with limits not less than $500,000 is required, along with any other insurance mandated by the state or locality. Cyber Liability (network security/data privacy) with policy limits not less than $1,000,000 per occurrence is also required.
Furthermore, franchisees must maintain Commercial Property insurance that covers the Franchised Restaurant, business personal property, tenant improvements, and business income and extra expenses for a minimum of 12 months to cover loss of profits, continuing expenses, and loss of rents. The covered causes of loss should be "Special Form" or "All Risk" with coinsurance conditions not less than 80%. Flood insurance is required for locations in FEMA Flood Zones beginning with the letters "A" or "V," and earthquake insurance is required for locations in FEMA Seismic Design Categories "E" or "D." During any construction, leasehold improvements, renovation, refurbishment, or remodeling of the Franchised Restaurant, the franchisee's general contractor must maintain Commercial General Liability insurance, Automobile Liability coverage, and Builder's Risk with limits no less than $1,000,000, as well as Workers' Compensation and Employer's Liability as required by state law.
Carls has the right to modify the required insurance coverage, and franchisees will receive written notice of any such changes. Franchisees must provide evidence of satisfactory insurance and proof of payment to Carls no later than 30 days before the scheduled opening date, the date they take possession of the location, or the date construction begins. Failure to maintain the required insurance allows Carls the right, but not the obligation, to procure insurance and charge the cost to the franchisee.