Hotel Insurance: Lessons Learned from the State of Georgia
By Josh Cavallin

Hotel insurance is a crucial component of risk management in the hospitality industry. From natural disasters to liability claims, hotels face a wide range of potential risks that can significantly impact operations. The state of Georgia, with its unique blend of urban centers, coastal areas, and seasonal weather threats, has provided valuable lessons in how hotel insurance can protect businesses and support long-term resilience.
One of the key takeaways from Georgia’s hospitality industry is the importance of comprehensive coverage. In recent years, Georgia has experienced a number of extreme weather events, including hurricanes impacting the coastal region and tornadoes in inland areas. Hotels that invested in robust property and business interruption insurance were able to recover faster, minimizing downtime and revenue loss. These events underscored the need for hotel owners to go beyond basic property insurance and consider coverage for flooding, wind damage, and other regional risks.
Liability insurance has also proven essential. Georgia’s hotels have faced legal challenges ranging from guest injuries to employee disputes. For example, slip-and-fall claims are common, especially during wet or stormy weather. Those with adequate general liability insurance avoided significant financial strain, while others found themselves embroiled in costly litigation. Employment practices liability insurance (EPLI) is also increasingly vital, as it protects against claims of discrimination, wrongful termination, and harassment — areas of growing concern in the hospitality workforce.
Another lesson from Georgia’s experience is the value of risk assessments and preventive maintenance. Insurers often reward hotels that proactively manage risk with lower premiums and better coverage terms. In Georgia, hotels that implemented regular safety inspections, staff training, and building upgrades were better positioned to negotiate favorable insurance packages.
The Impact of Legal Reforms on Hotel Insurance
In recent years, Georgia has implemented significant tort reforms aimed at reducing litigation and, by extension, insurance premiums. Governor Brian Kemp signed legislation that limits when businesses can be sued for negligence and imposes new trial regulations to reduce jury awards. Proponents argue that these measures will stabilize insurance rates by deterring frivolous lawsuits.
To operate legally, hotels in Georgia must obtain a hotel/motel occupancy tax certificate from the Georgia Department of Revenue. Non-compliance can lead to significant fines and legal repercussions. Additionally, adherence to health and safety regulations, including fire safety standards enforced by the Georgia Department of Public Health, is mandatory.
For instance, a hotel in Atlanta was recently fined $10,000 for multiple health and safety violations, including mold presence and inadequate fire suppression systems.​ The legal framework in Georgia emphasizes the need for transparent communication between hotel operators and guests, particularly concerning property liability. Clearly posted notices and written agreements can prevent misunderstandings and legal disputes.
Key Implications for Georgia Hotels
1. Limited Liability for Negligent Security Claims
Under the new laws, hotels can only be held liable for criminal acts on their premises if they had specific knowledge of a dangerous condition and failed to address it. This means that hotels are less likely to be held responsible for crimes committed by third parties unless there was a known, preventable risk. This provides legal protection that can reduce or restrict the amount of responsibility that hotel property owners might face if someone is injured on their premises due to a lack of adequate security. Some examples are below:
- Poor lighting in a parking lot
- Broken or missing locks on doors
- No security guards in high-crime areas
The injured person would argue that the crime or injury (like an assault, robbery, etc.) could’ve been prevented if the property had adequate security.
Georgia lawmakers passed legislation (Senate Bill 421 and HB 118) designed for protecting property owners from massive lawsuits in negligent security cases, especially when they already took steps to improve safety.
For example, a landlord of a hotel property might be protected from full liability if they had:
- Surveillance cameras
- Proper lighting
- Fencing
- Security patrols
If they can prove they followed the legal standards, their liability could be capped or limited, even if a crime still occurred.
2. Stricter Standards for Premises Liability
The reforms introduce a higher burden of proof for plaintiffs in premises liability cases. For example, guests must now demonstrate that the hotel owner acted wilfully and wantonly in failing to address a known danger. This change makes it more challenging for injured parties to succeed in lawsuits against hotels. Property owners can only be held liable if a crime was foreseeable due to a specific and known physical condition of the property, and the owner failed to remedy it. This is a higher bar than previous standards that considered general crime risks in the area.
3. Apportionment of Fault
Juries are now required to assign fault percentages to all parties involved in an incident, including the criminal perpetrator. If a jury fails to do so reasonably, the trial judge must overturn the verdict and order a new trial. This provision could reduce the financial liability for hotels if a significant portion of fault is attributed to the criminal actor.
4. Protection for Property Owners in Specific Situations
The reforms provide legal defenses for hotels in certain scenarios, such as when:
- The criminal act was committed by a tenant or their guest, and the hotel had initiated eviction proceedings.
- The injury occurred off the hotel’s premises or in an area where the hotel had no authority to exclude individuals.
- The injured party was a trespasser or engaged in criminal activity at the time of the incident.
5. Regulation of Third-Party Litigation Funding
Senate Bill 69 addresses concerns about third-party litigation funding by requiring entities that invest in litigation to register and prohibiting foreign adversaries from financing lawsuits. This aims to increase transparency and prevent external parties from influencing legal proceedings for profit.
Key Provisions of Senate Bill 69:
- Registration and Disclosure: Entities providing litigation financing must register with the Georgia Department of Banking and Finance and disclose any affiliations with foreign entities. These filings are public records subject to disclosure.
- Restrictions on Influence: Funders are prohibited from directing litigation strategy, making decisions regarding legal representation, expert witnesses, or settlement, and from paying referral fees to attorneys. They are also barred from accepting payment for providing goods or services to a consumer.
- Transparency in Agreements: The existence, terms, and conditions of a litigation financing agreement are subject to discovery in the underlying lawsuit. While disclosure does not automatically make the information admissible as evidence, it opens the door to that possibility.
- Liability for Costs: Financiers are jointly and severally liable for any award or order imposing or assessing costs or monetary sanctions against a consumer arising from or relating to an action or proceeding funded by the financier.
- Penalties for Violations: Willful violations of the bill’s provisions may lead to a felony conviction, imprisonment, and a fine of up to $10,000.
This should allow Georgia hotel owners to benefit from these regulations through reduced litigation risks, lower insurance costs, and enhanced legal predictability.
Legal and Social Considerations
While these reforms are designed to reduce litigation costs and liability for hotels, they have sparked debate:​
- Supporters argue that the changes will lower insurance premiums and foster a more business-friendly environment.
- Critics, including trial lawyers and some advocacy groups, contend that the reforms make it more difficult for victims, particularly those harmed by human trafficking, to seek justice. Some argue that large trial verdicts are rare and question the correlation between litigation systems and insurance costs.
For hotels in Georgia, these legal changes necessitate a review of current security protocols, staff training, and insurance policies to ensure compliance and mitigate potential risks.
Market Dynamics and Underwriting Challenges
The hotel insurance market has seen a retreat of some carriers, leading to fewer options for hotel operators. This consolidation has resulted in higher premiums and reduced coverage options, as insurers become more selective in their underwriting processes.​
The Role of Crime Scores in Underwriting
In Georgia, the use of crime scores in underwriting insurance for hotel and multifamily property owners has become a significant concern, particularly in high-crime areas.​ Insurers are increasingly using crime scores as a factor in underwriting decisions. These scores, which assess the level of criminal activity in a property’s vicinity, can significantly impact insurance premiums. High crime scores may lead to increased rates or even denial of coverage, regardless of a hotel’s individual risk profile.
Numerical representations of crime risk based on data such as the FBI’s Uniform Crime Reporting (UCR) database are being utilized by underwriters to assess the risk associated with insuring properties. For instance, some insurers have denied assault and battery coverage to properties in specific counties like Henry, Clayton, Fayette, Coweta, Dekalb, S. Fulton, Bibb, Muscogee, etc. citing the area’s high crime score as a determining factor. This trend is particularly challenging for hotel owners in economically disadvantaged neighborhoods, where crime rates are higher, and insurance costs are escalating. The inability to obtain necessary coverage can deter investment and development, hindering efforts to revitalize these communities.
​1. Risk Assessment for Insurance
- Property Insurance: Higher crime scores can lead insurers to consider a location more prone to risks like theft, vandalism, or arson, resulting in higher premiums or limited coverage options.
- Liability Insurance: Hotels may face higher liability premiums if located in areas with frequent violent crime, as the risk to guests and staff increases.
- Business Interruption: Some insurers may adjust business interruption coverage terms based on crime risks that could disrupt operations.
2. Financing & Lending Decisions
- Lenders’ Risk Tolerance: Lenders assess the risk of default partly through external risks to the business, high-crime areas may lead to lower occupancy rates, reputational harm, or higher operating costs, affecting a hotel’s profitability.
- Loan Terms: Crime scores can influence interest rates, loan-to-value ratios, and other key terms in commercial real estate loans.
3. Operational Planning
- Security Requirements: Higher crime areas might necessitate increased security investments, like surveillance systems, guards, or lighting, which could be factored into operational budgets during underwriting.
- Reputation Management: In the age of online reviews and social media, crime-related incidents near or on a hotel property can damage reputation and occupancy, and this risk is often modeled in underwriting.
4. Site Selection & Development
- Hotel brands often evaluate crime scores during site selection. High crime scores might deter investment in certain areas unless offset by other factors like tourism, strong local economic growth, or planned redevelopment.
Strategic Approaches for Hotel Operators
Implementing comprehensive risk management strategies can help mitigate potential liabilities. This includes regular safety audits, staff training, and the installation of security systems. By proactively addressing risks, hotels can demonstrate to insurers their commitment to safety, potentially leading to more favorable insurance terms.​
1. Risk Management and Loss Prevention
Proactive risk management can reduce the frequency and severity of claims, which directly impacts premiums.
- Install safety systems (sprinklers, smoke detectors, security cameras).
- Regular maintenance of HVAC, plumbing, and electrical systems to prevent costly incidents.
- Employee training on safety protocols, guest handling, and emergency response.
- Slip and fall prevention through proper flooring, signage, and cleaning protocols.
2. Comprehensive Risk Assessments
Insurers may offer better rates if you can show that you understand and mitigate your risk profile.
- Hire third-party risk consultants to perform annual risk audits.
- Create a risk profile report to present during insurance renewal discussions.
3. Bundle Policies and Use Industry-Specific Providers
- Look for Hospitality-tailored insurance bundles (property, liability, business interruption, cyber).
- Work with brokers who specialize in hotels, they may have access to programs designed for your industry.
4. Increase Deductibles Strategically
- Choosing higher deductibles can significantly reduce premiums, especially if your hotel has a strong cash flow and low claim history.
5. Invest in Technology
Smart tech can reduce both risk and premiums.
- Leak detection systems, smart thermostats, or occupancy sensors can prevent costly damage.
- Cybersecurity tools to prevent data breaches (a growing insurance concern).
6. Minimize Liability Exposure
- Strong contracts with vendors, waivers for amenities (e.g., gym, landscaper, pool).
- Clear policies for guest behavior and responses to complaints.
Collaboration with Niche-Based Insurance Brokers
Working closely with experienced, niche-based insurance brokers can help hotel operators navigate the complex insurance landscape. Brokers can assist in identifying suitable coverage options, negotiating terms, and ensuring that policies align with the hotel’s specific needs and risks.
Policy Recommendations for Policymakers
1. Risk Mitigation and Management
Hotels can take proactive steps to reduce their risk profile, which can make them more attractive to insurers:
- Disaster Preparedness: Develop and maintain emergency response plans (fires, floods, earthquakes, etc.).
- Regular Maintenance: Ensure buildings and facilities are up to code to reduce risks of accidents or damages.
- Cybersecurity Protocols: With increasing reliance on digital systems, protecting against cyber threats is essential.
- Health and Safety Standards: Especially post-COVID, maintaining high hygiene standards and reducing liability risks is crucial.
2. Data Sharing and Transparency
Improving data collection and sharing between hotels, brokers, and insurers can help the insurance market price risk more accurately:
- Loss History Transparency: Sharing past claims data can help with more precise underwriting.
- Use of Tech: IoT devices, smart alarms, and building sensors can provide real-time data that insurers value.
3. Industry Collaboration
Hotels can collectively support insurance stability by:
- Industry Associations: Hospitality industry groups can negotiate better terms with insurers or offer group policies.
- Education Initiatives: Helping hotel operators understand insurance products and risk management.
4. Policy and Regulation Support
Governments and regulatory bodies can play a key role:
- Subsidized Insurance Programs: Similar to crop or flood insurance, governments could offer backstops for hotels in high-risk zones.
- Tort Reform: Limiting frivolous lawsuits and excessive liability can help control premiums.
- Incentives for Risk Reduction: Tax credits or premium discounts for hotels that invest in safety upgrades.
5. Diversifying Coverage Options
Encouraging the development of alternative insurance products tailored for hospitality:
- Parametric Insurance: Pays out automatically when a specific event occurs (e.g., a hurricane of Category 3 or higher).
- Microinsurance: For smaller hotels or B&Bs that cannot afford comprehensive policies.
Conclusion
The hotel insurance landscape in Georgia is shaped by a complex interplay of legal, environmental, and market factors. By understanding these dynamics and implementing proactive strategies, hotel operators can better navigate the challenges and uncertainties of the insurance market. Collaboration between industry stakeholders and policymakers is essential to create a balanced and sustainable insurance environment that supports the growth and resilience of Georgia’s hospitality industry.
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