The City of Peterborough won’t be increasing the minimum amount of general liability insurance required for Peterborough businesses seeking a patio extension licence this year.
At the city council meeting on Monday night (February 5), councillors voted to maintain the $2 million minimum already in place for the 2024 patio season after hearing from a delegation representing the Peterborough Downtown Business Improvement Area (DBIA).
A city staff report on insurance and risk management that was presented to council at the January 29th general committee meeting had recommended increasing the minimum insurance coverage to $5 million for businesses participating in the downtown patio licence program. The report stated “industry standards dictate that commercial entities should carry a minimum of $5 million coverage, especially for locations serving alcohol.”
At the January 29th meeting, councillor Alex Bierk had expressed concerns about the impact of increasing the minimum insurance coverage on businesses that operate smaller patios and those that don’t serve alcohol.
“Right now you have a big bar that’s going to be paying as much as a coffee shop would be for a picnic table,” said Bierk, referring to a 2022 survey conducted by the DBIA that found 40 per cent of respondents would not participate in the patio program if the minimum coverage increased to $5 million.
Bierk has then put forward a motion that the recommendation be deferred until city staff could report back to council with comparative information on patio insurance requirements from other municipalities. Just prior to Monday’s city council meeting, council held a special general committee meeting to review the city staff report that included a chart of patio licence insurance requirements for several Ontario municipalities.
According to that report, some municipalities — including Belleville, Toronto, Newmarket, Barrie, Milton, and Windsor — all require $2 million general liability coverage, whereas others — including Port Hope, Niagara Falls, Grimsby, Hamilton, St. Catharines, Markam, Mississauga, and Stratford — all require $5 million coverage.
Some municipalities require different amounts of general liability insurance coverage depending on the nature of a business’s patio. Kitchener and Kincardine requires unlicensed patios to have a minimum of $2 million coverage and licensed patios to have $5 million. Oshawa requires small patios to have $2 million coverage and large patios to have $5 million coverage. Ottawa requires $5 million coverage — except for café seating patios that are one-table deep with each table having one or two chairs, where $2 million is the minimum.
The staff report supported the original recommendation of a minimum of $5 million in liability coverage that was presented to general committee on January 29th.
At Monday’s city council meeting following the special general committee meeting, councillor Bierk put forward a successful motion to suspend the rules of procedure so that an unregistered delegation representing the DBIA could speak to the insurance coverage issue.
DBIA board chair Sacha Lai-Svirk and DBIA vibrancy manager Hillary Flood, along with Laura Montague of Ashburnham Realty, addressed council.
“We have many small businesses in our downtown that would be left out of this program if coverage was raised,” Lai-Svirk said, before describing the benefits of the patio program to the economy and social fabric of downtown Peterborough. “With only six patios, possibly nine, able to meet the newly proposed $5 million liability coverage, it is the opinion of the DBIA that the present patio licensing requirement does not support a successful patio program.”
“From the DBIA’s 2022 survey results, an increase in insurance coverage will result in lower participation. I know the city was hoping the increase would encourage businesses to level up, but they financially cannot. And it’s not the businesses are being defiant, it’s because they simply cannot afford it.”
“It’s one more cost that is added onto other factors they are contending with — the rising cost of food, labour shortages, and the drastically changing consumer behaviour of dining out,” Lai-Svirk added. “It’s just too much to ask them to increase their insurance coverage, at least not this year. Realistically, it might take a few more years before restaurants can get a solid footing beneath them.”
She also pointed out that businesses participating in the patio program are already assuming the majority of the liability risk, saying “the city’s risk management team has taken great steps to ensure the city’s exposure to claims is already limited through binding indemnity agreement waivers and waivers of subrogation.”
Lai-Svirk said the DBIA supported keeping the minimum $2 million insurance coverage but would be open to a more “tiered” or “nuanced” approach similar to Kitchener’s.
For her part, Flood noted that increasing the minimum insurance coverage to $5 million could have a significant financial impact on a business’s premiums, depending on factors such as claim history, the age of the building, and the type of business.
She also pointed out that businesses that were unable to pay back their Canada Emergency Business Account (CEBA) loan in full “will lose $20,000.”
Implemented by the federal government during the pandemic, CEBA offered interest-free loans with a repayment deadline of January 2024. Businesses that paid the loan back in full by the deadline were forgiven up to $20,000 of the loan. Those unable to pay back the loan in full by January would not receive any loan forgiveness and would begin to pay five per cent interest on any remaining balance.
“When we talk about what is a nominal $630 increase (in insurance premiums) means to small business, it is deeply significant,” Flood said. “Restaurants Canada is quoted as saying there is no harder time for restaurateur in Canada than 2024. One in five CEBA loan recipients are likely to close.”
In response to a question from councillor Kevin Duguay, Flood said that 14 or 15 patio licence holders in last year’s program would not be able to participate in this year’s program if the insurance threshold was increased to $5 million, adding that doesn’t include businesses in East City or new businesses that have opened since last summer.
Councillor Bierk said he was concerned about basing the amount of insurance coverage only on whether a business serves alcohol or not.
“I’m more worried about the grey area, like the La Haciendas (Mexican restaurant) that do serve alcohol but they’re not a big bar that’s open late. Those are the people that I would be worried about getting caught in the middle (by) having to get the $5 million if we did adopt the tiered approach tonight.”
Flood suggested the $5 million requirement could be based on 30 per cent or more “liquor exposure” (liquor as a proportion of total sales).
Later in the meeting, Bierk proposed that the $5 million requirement should only apply to businesses with 30 per cent or more liquor exposure, with $2 million for all others.
In response to a question from councillor Lesley Parnell, city staff were unsure how they could verify what qualifies as 30 per cent liquor exposure, but could distinguish between licensed and non-licensed patios.
Councillor Don Vassiliadis, who previously owned a restaurant, said it would be “almost impossible” for city staff to verify the percentage of alcohol served at a business as they would have to review the sales of each business and “that’s not gonna happen.”
Bierk put forward a motion that would leave the existing $2 million requirement in place for the 2024 patio season, to allow city staff time to develop a “more nuanced” approach for the following year and to report back to council before the next patio season.
While councillor Joy Lachica supported Bierk’s motion, both councillors Duguay and Riel supported increasing the requirement to $5 million for any business that serves alcohol on a patio on city property, with Riel noting he was representing the interests of the city and its taxpayers.
In response to a question from councillor Duguay, city staff recommended revising the wording of councillor Bierk’s motion to change “downtown Peterborough” to “central area” to accommodate businesses that do not belong to the DBIA but have patios, such as those in East City.
The revised motion was carried 7-4, with councillors Riel, Dave Haacke, Duguay, and Parnell voting against it.
The original version of this story identified Hillary Flood as communications manager for the DBIA. She is the DBIA’s vibrancy manager.