Some Insurers Checking Out of Hotel Business

3-minute read

There’s no point in mincing words: The COVID-19 pandemic has been a nightmare for the hotel industry.

Whether we’re talking about New York, Seattle or Phoenix, hotel closures are way up, unemployment in the industry is sky-high, and no one expects a full industry recovery before 2025.

Adding insult to injury, COVID has played havoc not only with hotel owners’ finances but their insurance coverage, too.

Securing coverage, in fact, is tougher than ever, with a growing number of insurance companies increasingly stepping away from the business of underwriting hotels.

Those still willing to renew coverage, let alone issue a new policy, are charging more and offering less.

The pandemic, as we all know, brought travel, whether domestic or foreign, to a screeching halt. That left many hotel owners – whether major chain, a quiet lodge or a bed-and-breakfast – staring at skidding occupancy rates.

Risky Business

Understandably, carriers are worried about hotel owners’ financial stability but also the potential for vandalism, especially at a time of heightened civil unrest and street protests.

COVID-19 has played havoc not only with hotel owners’ finances but their insurance coverage, too.

Things have gotten so bad that some carriers have adopted moratoriums on any new hotel business, no matter how robust their risk controls or clean their claims records might be.

Cash-strapped hotels looking for ways to survive by converting themselves into emergency housing for coronavirus patients and first responders fared no better with insurers.

Even those that have continued paying their premiums have seen some of their coverage disappear because of vacancy clauses in their insurance policies.

Under these clauses, if a property is deemed vacant at the time of an insurance loss there is typically no coverage for vandalism, water damage, or theft.

Why? Because there’s no one there to protect the property or shut off the water in the event of broken water pipes.

What we’ve found is that hotel owners and operators often aren’t aware of their vacancy clause.

Fortunately, carriers will make special endorsements available that allow hotels to be vacant or unoccupied beyond the period stipulated in their original contracts. But, again, that’s a nuance that escapes many and leaves owners unprotected.

There are other ways that hotel owners can confront these harsher times, in part by making sure they’ve literally left the light on for you (forgive us Motel 6), hiring security and installing fences.

And while some insurers are balking at underwriting hotels at the moment, there are carriers that are more willing to take the risk. Finding them and negotiating with them on your behalf is how we can help.

As in most insurance matters, the details matter. If you’d like to learn more about risk control strategies to help you weather the current climate, please don’t hesitate to reach out to us.

The Mahoney Group, based in Mesa, Ariz., is one of the largest independent insurance and employee benefits brokerages in the nation. As an employee-owned organization, we’ve been protecting what’s yours since 1915. Contact us at or 480-730-4920.

This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.


Scroll to Top