Food Liability: How Hospitality Businesses Can Manage the Risks

There are almost 1 million people employed in the hospitality sector in Australia. The vast majority of people work in either cafes, restaurants or takeaway businesses (696,600 employees), followed by pubs, taverns and bars (106,400 employees).

With so many businesses preparing and serving food every day, understanding food liability is an important part of managing risk.

What is food liability?

Food liability is the legal responsibility a food business has if its products or business activities cause injury, illness or property damage to somebody else. Managing that risk includes following food safety practices, maintaining hygienic premises and ensuring equipment is properly maintained.

Food liability isn’t limited to one type of business. All hospitality businesses have a responsibility to take reasonable care when preparing, handling and serving food, as well as maintaining a safe environment for customers and visitors.

While many businesses take extensive steps to reduce risks through food safety practices and workplace procedures, accidents and unexpected incidents can still happen.

That said, understanding how and where liability events could potentially arise is an important part of mitigating and managing risk in any food business.

Common food liability risks

Food businesses can face a range of situations that may lead to liability claims, including:

• Food poisoning caused by contaminated food.
• Allergic reactions due to undeclared ingredients or cross-contamination.
• Foreign objects found in food, such as glass or plastic.
• Burns caused by hot food or beverages.
• Incorrect use of food preparation equipment causing injury or illness.

Depending on the circumstances, incidents like these can result in compensation claims, legal disputes or other financial costs for a business.

Is there such a thing as food liability insurance?

If you’ve specifically searched for “food liability insurance”, you might be surprised to learn that it isn’t actually a standalone insurance product in Australia. Instead, it’s a broad term sometimes used to describe the types of insurance that can help protect food businesses against liability claims.

The type of insurance policies a hospitality business may have depend on the nature of the business, its location, hours of operation, the products it sells and other factors.

The types of insurance that can help protect food businesses

Food businesses often consider a combination of different insurance products to help manage different types of risks.

Public Liability insurance

Public Liability insurance provides protection for you and your business in the event a customer, supplier or a member of the public brings a claim against you due to their being injured or sustaining property damage as a result of your negligent business activities.

In most cases, hospitality businesses – from food trucks to fine dining restaurants – are not required by law to hold Public Liability insurance. However, some commercial leases, local councils, landlords or event organisers may require businesses to have Public Liability insurance as a condition of operating from a venue or participating in an event.

Hospitality Public Liability insurance claim example

When you think “food liability,” this is the kind of scenario that probably springs to mind:

A customer was eating their meal at a cafe when they bit down on a hard object. There was a loud crunch, and the customer pulled an irregularly shaped piece of hard plastic from their mouth, roughly the size of a fifty-cent coin.

Shocked, the customer immediately notified the cafe staff, but did not observe any damage at the time.

However, later on, the customer’s gum began to throb so painfully that they booked an appointment with their dentist to investigate further. The dentist confirmed that the customer had sustained an incisal edge fracture extending into the dentin, which required restoration and repair of the tooth.

The customer made a claim against the cafe for the damage caused, and, as the cafe held Public Liability insurance, their insurer agreed to pay the claim ($564.00).

Machinery Breakdown insurance

Machinery Breakdown insurance covers the cost to repair or replace specified machinery following a breakdown or unexpected failure.

Hospitality Machinery Breakdown insurance claim example

Not every food liability risk involves a customer making a claim.

A butcher arrived to work one day and realised that the open display fridge was not working and could not keep produce cold.

A refrigeration technician inspected the unit and confirmed that the compressor needed to be replaced before the display cabinet could be used again.

The insurer paid $2,740.00 for of replacing the compressor, helping the business get its display fridge back up and running.

Management Liability insurance

Management Liability insurance protects directors, officers, and the insured business from many risks relating to the management of a business. Owners and those responsible for the management of a company have specific responsibilities which can result in personal liability for alleged or actual wrongdoing.

Hospitality Management Liability insurance claim example

Insurance exists to help safeguard businesses when the unexpected happens. And while the two above claim stories may not necessarily bankrupt a business, they could still have created serious disruptions if the business owners had not held adequate insurance.

However, one restaurant incurred a significantly higher cost all because of a disgruntled employee.

The employee in question secretly added dishwashing liquid to many of the restaurant’s dinner guests one evening, and the patrons fell seriously ill. Not long after, the story of the dishwashing liquid disaster hit the papers.

The owner of the restaurant ended up retaining the services of an external crisis management company to help ensure that any damage to the company’s reputation was minimal.

As the owner of the business held Management Liability insurance, the incident was covered by their policy and their insurer reimbursed the restaurant $37,000 for crisis management costs.

How much does food liability insurance cost?

While there is no single product known as “food liability insurance,” BizCover has found that the average cost of business insurance for hospitality businesses is $149 per month.* However, the amount you pay will depend on factors such as your business location and size, as well as the cover options you select.

If you’re looking for cover for your hospitality business, make sure you compare insurance quotes to find a policy suited to your needs.

*Customer Average Monthly Payment Report is based on 1 July 2024 to 30 June 2025 and presented as a guide only. It may not reflect pricing for your particular business, as individual criteria will apply.