Can the required insurance limits for a Carls Jr. franchise be satisfied through a combination of Primary and Umbrella/Excess Liability coverage?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
The required limits in (1) – (3) above 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 Commerical 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.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 37–41)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, the required insurance limits for Commercial General Liability, Automobile Liability and Employer's Liability can be satisfied through a combination of Primary and Umbrella/Excess Liability coverage. If a franchisee chooses to meet the insurance requirements through an Umbrella/Excess Liability coverage, the Umbrella/Excess Liability must follow the form of the underlying Commercial General Liability, Automobile Liability, and Employer's Liability coverages.
Carls Jr. requires franchisees to maintain certain minimum insurance policies, including Commercial General Liability insurance with policy limits not less than $5,000,000 per occurrence and in the aggregate, Automobile Liability coverage with a combined single limit not less than $1,000,000 per accident, and Employer's Liability insurance with limits not less than $500,000.
This provision offers franchisees flexibility in structuring their insurance coverage to meet Carls Jr.'s requirements. By using a combination of primary and umbrella policies, franchisees may be able to obtain the necessary coverage at a more cost-effective rate. However, it is crucial to ensure that the Umbrella/Excess Liability coverage follows the form of the underlying primary policies to avoid any gaps in coverage. Franchisees should consult with their insurance advisors to determine the most appropriate and cost-effective insurance strategy for their specific circumstances.