Must the Del Taco franchisee's insurance policies be primary?
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, the franchisee's insurance policies must be primary, and Del Taco's insurance should be non-contributory. This means that in the event of a claim, the franchisee's insurance coverage will be the first to respond and pay out, before any contribution from Del Taco's own insurance policies. This requirement is standard in franchising, as it ensures that the franchisee bears the initial responsibility for risks associated with their specific location and operations.
In addition to being primary, the franchisee's insurance policies must be issued by an insurance company with a rating of "A-VIII" or better in the A.M. Best Insurance Rating Guide, or otherwise approved by Del Taco. The policies must also name Del Taco and its affiliates as "additional insureds" and include an "Additional Insured-Designated Person or Organization" endorsement, except for workers' compensation insurance. This protects Del Taco from liabilities arising from the franchisee's operations.
The insurance policies must provide Del Taco with at least thirty days' advance written notice before cancellation, material change, or non-renewal. Furthermore, the policies must contain a waiver of subrogation rights against Del Taco, regardless of whether any loss is caused by Del Taco's act, omission, or negligence, and include a "Waiver of Transfer of Rights of Recovery Against Others" endorsement. These requirements ensure that Del Taco is protected from potential claims and liabilities arising from the franchisee's business operations and that Del Taco receives ample notice of any changes to the franchisee's insurance coverage.