Can Del Taco approve insurance companies with ratings lower than "A-VIII" for a Del Taco franchisee?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
All insurance policies required hereunder of the Franchisee: (a) shall be primary and Del Taco's insurance shall be non-contributory; (b) shall be issued by an insurance company(ies) with a rating of not less than "A-VIII" in the current A.M. Best Insurance Rating Guide or approved by Del Taco; (c) shall name Del Taco and its Affiliates, and any other parties as Del Taco may request as "additional insureds," and shall contain an "Additional Insured-Designated Person or Organization" endorsement (or its equivalent), except workers' compensation insurance only, without any qualifying language; (d) shall provide that the insurance cannot be canceled, materially changed, or non-renewed, except upon thirty (30) days' advance written notice to Del Taco; and (e) shall contain a waiver of subrogation rights of the insurer(s) against Del Taco, which waiver shall be effective regardless of whether any loss is caused by the act, omission or negligence of Del Taco, and shall contain a "Waiver of Transfer of Rights of Recovery Against Others" endorsement (or its equivalent). Franchisee shall require any independent contractors to have sufficient insurance specific to the work they are performing for the Franchisee. Franchisee understands and acknowledges that the insurance requirements set forth herein are in addition to and do not modify or replace any duty of the Franchisee to defend and/or indemnify Del Taco as set forth in this Agreement.
Source: Item 22 — CONTRACTS (FDD pages 58–59)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, Del Taco franchisees are generally required to secure insurance policies from companies with a rating of "A-VIII" or higher according to A.M. Best Insurance Rating Guide. However, Del Taco retains the discretion to approve insurance companies that do not meet this minimum rating.
This provision offers Del Taco some flexibility in ensuring franchisees maintain adequate insurance coverage. It also means that a Del Taco franchisee might be able to use an insurer with a lower rating than "A-VIII" if Del Taco specifically approves it. This could be beneficial if the franchisee has an existing relationship with a particular insurer or if a lower-rated insurer offers more competitive rates.
It is important for prospective Del Taco franchisees to understand that while Del Taco can approve lower-rated insurance companies, the franchisee is still responsible for maintaining the required insurance coverages throughout the term of the agreement. Franchisees should discuss insurance options with Del Taco during their due diligence to ensure they can meet the insurance requirements without undue financial burden.