Indemnity, Insurance and Hold Harmless Clauses Every Restaurant Should Use with Suppliers

Restaurants face outsized third-party risk from suppliers — contaminated ingredients, delivery accidents, equipment failures and subcontractor mistakes can generate costly claims. For restaurants operating in the USA (especially high-risk markets such as New York City, Los Angeles and Miami), strong contract language combined with clear insurance requirements is essential to transfer and manage that risk.

This article covers practical, enforceable clauses and minimum coverage benchmarks restaurants should require from suppliers, sample language, and commercial examples (including market pricing and real insurers) to help operators draft vendor agreements that protect revenue, reputation and balance sheets.

Why these clauses matter for restaurants in the USA

• Restaurants are highly exposed to product liability, foodborne illness claims, and bodily injury on premises or during delivery.
• Laws and insurance costs vary by state (e.g., workers’ comp rates differ significantly between California, New York and Florida).
• Without contractual risk transfer, restaurants can be named in third-party suits and forced to litigate for recovery.

U.S. small businesses are advised to maintain commercial insurance and contractual protections—see the SBA’s guidance on business insurance for small businesses. (https://www.sba.gov/business-guide/manage-your-business/insurance)

Core clauses every restaurant contract with suppliers should include

1. Indemnity Clause (Scope and Triggering Events)

   • Who indemnifies whom: Prefer supplier-to-restaurant indemnity for supplier-caused claims (product contamination, negligent delivery, faulty equipment).
   • Scope: Cover bodily injury, property damage, product recall, foodborne illness, third-party claims, attorney fees, and defense costs.
   • Types: Broad-form (supplier indemnifies for all claims), Intermediate, or Limited (only supplier negligence). Aim for broad-form when suppliers control the product.

   Sample clause language (adapt to local counsel review):

   "Supplier shall defend, indemnify and hold harmless Restaurant, its owners, managers and affiliates from and against any and all claims, damages, losses and expenses, including reasonable attorneys’ fees, arising out of or resulting from Supplier’s performance or products, including but not limited to claims of bodily injury, illness, property damage or product contamination."

2. Hold Harmless Clause

   • Often combined with indemnity. Explicitly state that the supplier will hold harmless the restaurant for covered claims.

3. Insurance Requirements (Minimum Coverages & Limits)
   Require suppliers to carry and maintain, at minimum:

   • Commercial General Liability (CGL): $1,000,000 per occurrence / $2,000,000 aggregate (common commercial baseline). For large-volume food distributors or higher-risk vendors, require $2M/$4M.
   • Product Liability / Food Contamination: $1,000,000–$3,000,000 depending on size and risk.
   • Commercial Auto Liability: $1,000,000 Combined Single Limit for delivery providers.
   • Workers’ Compensation: Statutory limits per state (California, New York, Florida).
   • Umbrella/Excess Liability: $1,000,000–$5,000,000 when suppliers make deliveries or perform on-site work.
   • Cyber/Privacy: $500,000–$2,000,000 if suppliers handle POS data or customer payment data.

   Require these endorsements:

   • Additional Insured (GL & Auto) on a primary and noncontributory basis.
   • Waiver of Subrogation in favor of the restaurant.
   • 30–60 day Notice of Cancellation.

   Practical pricing examples (approximate, market-sourced):

   • Next Insurance advertises tailored restaurant liability policies with GL starting around $25–$50/month for very small operations; more comprehensive packages (including general liability, property, and workers’ comp) commonly run $500–$2,500/year for a single-location independent restaurant depending on location and payroll. Source: Next Insurance restaurant insurance information (https://www.nextinsurance.com/restaurant-insurance/).
   • Hiscox lists small-business general liability starting around $30–$50/month for low-risk profiles; actual premium varies by state and exposure. Source: Hiscox small business insurance (https://www.hiscox.com/small-business-insurance/general-liability-insurance).

   Note: premiums vary widely based on location (NYC and Los Angeles tend to be higher), payroll and claims history. Always request ACORD Certificates for verification.

4. Defense and Settlement Control

   • Specify who controls defense and settlement. Restaurants should insist suppliers cannot settle claims that implicate restaurant liability without consent.
   • Require supplier to provide defense even if restaurant is alleged to be partially at fault (expressly state "to the extent caused by Supplier").

5. Additional Provisions

   • Right to Audit Certificates: Vendor must provide COIs and insurer contact; restaurant reserves right to audit coverage. See best practices in Auditing Vendor Insurance Certificates and Enforcing Minimum Coverage Requirements.
   • Waiver of Subrogation: Prevents insurer from pursuing the restaurant after paying supplier’s claim.
   • Recalls & Product Withdrawal: Allocation of recall costs and notification timelines.
   • Indemnity Caps & Carve-Outs: If supplier pushes back, negotiate caps but exclude gross negligence and willful misconduct from any cap.
   • Insurance Premium Payment & Evidence: Supplier pays premiums and provides proof annually or on request.
   • Subcontractor Flow-Down: Supplier must require subcontractors to carry same coverage — see Vendor Onboarding Checklist: Due Diligence to Prevent Liability from Suppliers and Contractors.

Table — Quick comparison: clause types and recommended use

Negotiation tips by supplier type and location

• Food & Ingredient Suppliers (NYC, Los Angeles, Chicago): Demand product contamination coverage, recall cost coverage and $2M umbrella for high-volume suppliers. NYC litigation environment makes higher limits prudent.
• Third-Party Delivery Platforms & Local Couriers (Miami, LA): Require Commercial Auto $1M CSL and Additional Insured status; verify independent drivers’ coverage. Delivery platform contracts may be standardized — insist on flow-down indemnities.
• Equipment Vendors & Kitchen Contractors: Require General Liability with products/completed operations coverage and Waiver of Subrogation if they install equipment.
• Caterers & Event Vendors: Confirm liquor liability (if applicable), event-specific GL limits, and temporary event endorsements.

Practical enforcement & due diligence checklist

• Require ACORD 25 COI and additional insured endorsement forms prior to onboarding.
• Cross-check insurer contact and policy numbers; call insurer to verify coverage.
• Reserve right to suspend vendor services if certificates lapse.
• Maintain a vendor insurance register and re-check annually.
• For complex deals, require insurer to sign an endorsement naming restaurant as additional insured (some insurers will issue ISO CG 20 10/20 26 forms).

For more on structuring indemnity and defense obligations, see How to Structure Indemnity and Defense Obligations in Hospitality Contracts.

Common pitfalls and how to avoid them

• Vague language: Use precise triggers (e.g., "arising out of Supplier’s acts, omissions or products").
• No defense language: Defense costs often exceed indemnity; require defense and indemnity.
• Relying on weak COIs: A COI only shows coverage at time of issue; request policy endorsements for longer-term projects.
• Assuming platform coverage: Many delivery apps define drivers as independent contractors—verify who is covered.

When to get counsel and insurance broker involvement

• Get local counsel for state-specific enforceability (NY, CA have unique consumer protection and indemnity rules).
• Use a broker experienced in hospitality to set realistic minimums and to price umbrella coverage. For price benchmarking, Next Insurance and Hiscox offer quick online quotes for small restaurants; for multisite operators, commercial brokers (e.g., Marsh, HUB International) provide tailored programs.

Further reading on drafting protective vendor agreements: Contracts, Vendors and Third-Party Liability: How to Draft Agreements That Protect Hospitality Operators.

Strong indemnity, hold harmless provisions and well-enforced insurance requirements are not just legal formalities — they are practical, revenue-protecting tools for restaurants operating in high-exposure U.S. markets. Use precise language, demand appropriate limits (and endorsements), verify coverage regularly, and escalate to counsel or broker for high-value supplier relationships. For implementation best practices, audit checklists and standard clause templates, consult the linked resources above and your hospitality insurance advisor.