Finding insurance for a food truck

In the summer of 2010, Toronto deli owner Zane Caplansky dreamed up a new venture; by the summer of 2011, it was insured and operating. Thunderin’ Thelma was a food truck, but unlike the hot dog stands, chip wagons, and coffee trucks that preceded her, she was intended to cater to discerning palates. In Toronto, Thelma was the first of her kind, a fresh twist on an old staple.

Four years later, Caplansky is the founder of the 35-member Toronto Food Truck Alliance, and he sits on the city’s street food working group. For Caplansky, operating a modern gourmet food truck is “a risky business.” He points out “it’s a restaurant on wheels, it’s a lot of moving parts, it’s a lot of explosive gases.” When he needed protection from those risks and others, he turned to the brokers at KRG Insurance, which had insured his downtown deli since its opening in 2009. His insurers customized a plan for the truck—including commercial general liability, property coverage, a standard auto policy, and business interruption insurance—at a rate of around $4,500 a year.

Things didn’t go so smoothly one year earlier for two other would-be Ontario food truck owners who lacked Caplansky’s restaurateur bona fides.

“No one wanted to touch us,” says Adam Hynam-Smith, whose El Gastronomo Vagabundo has been in business in St. Catherines since 2010. “Absolutely no one.” Hynam-Smith figures that he and his co-owner and wife, Tamara Jensen, called about 20 different companies, all to no avail. Insurers were nervous about his lack of experience driving large vehicles, and many of them had never underwritten a gourmet street food operation before; although an increasingly important part of foodie culture in the United States, the food truck scene in Canada was still fledgling, and El Gastronomo Vagabundo was the first of its kind in Ontario. Unable even to pick up their own truck, HynamSmith and Jensen had it delivered to the spot where they still hoped to begin operating: the Flat Rock Cellars, a winery in nearby Jordan. The Co-operators eventually made them a cautious offer. “They threw us into the fray of facility insurance,” says Hynam-Smith. “We had to pay $8,000 up front—one payment that nearly put us out of business before we even opened.”

After that first year, Hynam-Smith and Jensen’s premiums dropped dramatically to monthly payments of about $200. And as public demand for modern food trucks—hundreds of which now drive on Canadian streets—has grown, insurance companies have learned the market by necessity. But truck owners, and some insurers too, consider that education still to be incomplete. “Some of our members have faced utterly ridiculous quotes,” says Caplansky in his role as food truck association founder. “But there are others who’ve phoned multiple insurance agents and had them say, ‘Yeah, we’re not interested in insuring you—at any price.’”

But maybe underwriters are savvy and not ignorant on the subject. “Insurance companies, they’re not taking every roach coach in town,” says Jerry Wiseblott, vice president of KRG. When the brokerage sought coverage for Thunderin’ Thelma, Caplansky’s reputation came in handy. “The insurance company knew who he was,” Wiseblott says. “They knew where the food was coming from, they knew he had an established restaurant, he’s paying his bills—we’ve insured him for many years already. This was just an add-on to what he had.”

The brokers at KRG, Wiseblott says, are restaurant specialists, and as a result, they count a couple other food trucks among their clients. But the industry’s leading insurers in Ontario are Ray Johnson and Associates, of The Co-operators. As direct writers, Johnson and his agents get their business through referrals and wordof-mouth; in the four years since they insured their first modern food truck, Hamilton’s Gorilla Cheese, their roster of similar clients has grown considerably and now numbers nearly 100. Johnson believes this experience is indispensable in a unique market. “If you’re doing a oneoff,” he says, “you may not know exactly what they need.”

About three years ago, Johnson introduced a program designed for food truck owners, and he’s critical of much of the work other insurers do for those same clients. Specifically, he has noticed that many are using standard property coverage intended for businesses with fixed locations. “We see there could be a gap there,” he says, adding that he prefers a miscellaneous property floater, which protects truck contents wherever they are, including in transit. He says insurance companies are making other mistakes, too: failing to include loss of income coverage and crime coverage and, importantly, setting liability limits too low. “You lose a truck,” Johnson says, “you might be able to replace it. But if you get sued for $5 million, you’re out of business.”

Two fryers and a flat top

The man who built both Thunderin’ Thelma and El Gastronomo Vagabundo works out of a shop in a small Ontario town a few kilometres from the Quebec border. Terry Sauve is a truck operator in his own right, albeit an old-fashioned one; Alexandria is home to one of Sauve’s three Gaetan’s Chip Stands. A suggestion by his wife—that he sell one and build another to replace it—led to a small truck-refurbishing business operating out of his driveway. The truck sold in a week, and Sauve’s modest enterprise quickly gathered steam. “We just started getting phone calls every day,” he says. “One truck turned into 10 and then 10 turned into 20.” In 2014, Sauve and his 21 employees—now known as Kitchens on Wheels Canada—produced 98 customized food trucks.

In that time, Sauve has seen an increasing level of sophistication in the cooking equipment he’s being asked to install. “My first truck was two fryers and a flat-top,” he says. “Now we’re getting into rotisserie chicken cookers, pressure cookers, panini presses.” The cost has also gone up accordingly. Ten years ago, he charged $30,000 for a truck. Today, $100,000 is not uncommon.

The output of the Kitchens on Wheels Canada shop reflects how the street food revival has spread itself unevenly across the country. Sauve figures his team sends more trucks to Ontario than to any other province, with Nova Scotia a close second and Alberta not far behind in third. In Bathurst, New Brunswick, Joel Aubie runs Jobie’s Mobile Kitchen out of one of Sauve’s trucks. But although he has enjoyed the full support of both city officials and the community during his more than two years in business, he has yet to inspire imitators. “As far as modern, gourmet food trucks, I’m the only one in Bathurst,” he says. “I don’t think St. John has any, and I know Fredericton doesn’t have any, and I think Moncton just has one so far.”

This is not a total surprise; the market for gourmet street food has grown, but catering to that market remains uniquely challenging. Pushback from cautious restaurant associations and municipal offices is common. In Toronto, Caplansky has for years been locked in a well-documented struggle with the city. “Up until last April, food trucks were essentially not allowed,” he says, “except in three or four permanent assigned spots.” But he has been making progress; a recent city council vote granted truck owners the freedom to operate on city streets, provided they’re not parked within 30 metres of a restaurant.

But there are other difficulties to cope with. “Logistically, food trucks are a nightmare,” Aubie says. “If you can’t run a restaurant kitchen in an organized, proper way, you have no business trying to open a food truck.” Mistakes are magnified; running out of water or gas or leaving something behind in the commissary kitchen becomes disastrous. And many customers expect what they order to be prepared faster and cost less than restaurant food.

To protect himself against less predictable problems, Aubie carries $2 million in general liability coverage. Although that number was once standard, many municipalities and event organizers now require more. Johnson recommends $5 million to his clients. The reason for this growing caution is not only the risks inherent to large roaming food trucks and their various elaborate cooking arrangements, it’s also an increasing litigiousness among ordinary Canadians.

That, combined with media coverage of instances of tainted food—like the maple bacon jam atop cronut burgers at the 2013 CNE—has municipalities and festivals living in fear of the class-action lawsuit. “It’s getting to be like the United States now,” Wiseblott says, “where anybody can sue anybody in Canada.”

So far, no major street food lawsuit has been filed in this country, and Caplansky says the Toronto Food Truck Alliance is doing what it can to keep it that way. “We make sure that our members are trained in food handling and fuel handling, and that we don’t suffer any kinds of incidents, that people only eat well and enjoy the experience.” The TFTA is young (in late February, it was performing such perfunctory administrative tasks as adopting an organizational charter and formally electing a leader) but it’s ambitious; members are looking into the creation of a standard food truck insurance package—part of a broader effort to regulate local businesses operating within the industry.

“There’s an opportunity for us to do some group buying if we can find one insurer who’s interested in taking us on as a group,” says Caplansky. “We’ve talked to The Co-operators, and I’ve talked to Jerry at KRG. We’re going to see who’s going to come up with the best deal. Today it’s 35; next year, it may be 75 different food trucks. There’s an incentive for these guys to sharpen their pencils and do better for us.”

__________________________________________________________________________

Copyright 2015 Rogers Publishing Ltd. This article first appeared in the May 2015 edition of Canadian Insurance Top Broker magazine

This story was originally published by Canadian Insurance Top Broker.