The appeal of cross-border hospitality operations is apparent when considering tens of millions of citizens travel between the U.S. and Canada each year. And as the countries’ tourism businesses awake from the COVID-19 pandemic, the number of cross-border travelers will only grow.

However, the differences in laws, regulations and practices in hospitality can pose pitfalls to hospitality businesses with operations in both the U.S. and Canada. Protecting against risks can be both tricky and costly — especially for Canadian hospitality companies.

For example, master insurance programs that may apply to a Canadian company’s properties in Great Britain aren’t applicable to properties in the U.S. And the regulatory environments in the U.S. and Canada are much different, as are the civil systems for adjudicating claims.

It’s complicated, making it important for owners and operators to understand the nuances and their impact on risks and insurance.

Cross-border insurance disparities in healthcare and workers’ comp

Canadian businesses face a hurdle right off the top: providing a healthcare benefit, which annually costs more than U.S. $13,000 per employee.¹

By comparison, employers’ share of Canada’s socialized medical care program typically ranges from $5,000 to $7,000.²

Another issue is workers’ compensation. Canadian workers’ comp is typically insured through a provincial board, whereas American employers buy workers’ compensation insurance from different insurance companies.

Name that hurricane and liquor liability risks

Windstorms and floods are other major risks: A Canadian-based hotel group that expands to the U.S. East Coast or South, for example, needs protection against storms that it might not have in Canada.

In addition, risks need to be specified in the U.S. They need specific protection against a windstorm and separate protection against a “named” storm, like 2021’s Hurricane Ida, which cost $65 billion in damages.³ Without buying insurance for both windstorms and named storms, the operator may not be fully protected. (In Canada, a windstorm is covered automatically, named or not).

Liquor liability in the U.S. is another hurdle to Canadian hospitality operators: While the provincial laws in Canada are fairly uniform, the states have a patchwork of laws related to over-serving and serving minors.

Some states like South Carolina are considered less stringent in relation to liquor laws and may have caps on liability. Other states like New York have highly stringent laws over who is liable and the extent of liability. Either way, liquor-related exposure is expensive to insure.

Guard against sticker shock

The exposures in Canada that aren’t expensive can be costly to insure in the U.S.

For example, a Toronto hotel group that wants to expand into Florida will need to secure P/C coverage flooding. But the $25,000 deductible for flooding damages in Ontario could be as much as $500,000 in Florida.

Currently, the insurance market is hard on both sides of the border, with insurers less willing to provide coverage for certain lines (particularly as catastrophic claims mount). That’s another reason why it’s important for Canadian hospitality operations to know the risk management and insurance differences between Canada and the U.S.

HUB International’s hospitality industry specialists work with restaurants and hotels on a host of risk and insurance management issues.

¹Statistica, “Employers’ total annual healthcare costs per active employee in the U.S., from 2015 to 2020,” February 8, 2022.

²ICSTD, “Do Businesses Pay Into Health Insurance in Canada?” February 20, 2022.

³Marketwatch, “The 10 most expensive climate-change disasters of 2021 cost $170 billion — and this U.S. storm was No. 1,” January 1, 2022.