How does the Cream franchisee's obligation to maintain insurance (Item 9) protect them against potential liabilities arising from employee actions or negligence?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
| Workers’ Compensation | Statutory minimum coverage amounts, with employer liability minimum limit of $1,000,000. |
|---|---|
| Umbrella Liability | Not less than $3,000,000 to be in excess of Commercial General Liability, Auto Liability, and Employer’s Liability. |
| Trade Name Restoration/Food Borne Illness | $1,000,000 to cover lost profits due to any alleged or actual contamination, supplier contamination, inoculations, and testing. Coverage must also include crisis management expense coverage. |
| Employment Practices Liability | $1,000,000 limit for coverage of any wrongful employment action and third-party coverage for harassment and discrimination of non-employees. Coverage must name us as co- defendant. |
| Cyber Liability | $1,000,000 to insure any first- or third-party claims including data breach, identity theft, phishing attacks, ransomware, bricking, crisis management expense, defense expenses, and notifications costs. |
What This Means (2025 FDD)
According to the 2025 FDD, Cream franchisees are required to maintain specific insurance policies to protect against potential liabilities, including those arising from employee actions or negligence. The required insurance coverages include Workers’ Compensation, Umbrella Liability, Trade Name Restoration/Food Borne Illness, Employment Practices Liability, and Cyber Liability. These policies provide financial protection to the franchisee in the event of various incidents.
The Workers’ Compensation coverage is mandated at the statutory minimum coverage amounts, with an employer liability minimum limit of $1,000,000. This protects the franchisee from liabilities associated with employee injuries or illnesses sustained during their employment. The Employment Practices Liability insurance, with a $1,000,000 limit, covers wrongful employment actions and third-party claims of harassment and discrimination of non-employees, with Cream named as a co-defendant. This is particularly important as it addresses potential legal issues arising from employee-related disputes.
Furthermore, the Umbrella Liability coverage, set at a minimum of $3,000,000, acts as an excess policy over Commercial General Liability, Auto Liability, and Employer’s Liability, providing an additional layer of protection against significant claims. The Trade Name Restoration/Food Borne Illness coverage, with a $1,000,000 limit, is designed to cover lost profits due to contamination, supplier issues, and related expenses, including crisis management. These insurance requirements ensure that Cream franchisees are well-protected against a range of potential liabilities, safeguarding their business and assets.