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Not Your Granddad’s Liquor Liability

Since ISO tightened liquor liability exclusions in its general liability and BOP policies, coverage developments for liquor liability have remained few and far between. And that means shake-ups in liquor liability will occur largely in the category of emerging risks.
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In May, a shootout between rival biker gangs in a parking lot outside a sports bar in Waco, Texas resulted in nine deaths, 18 injuries and 192 arrests.

The shocking event carries unknown implications for the liquor liability market, where “the legal landscape has not had any major shifts in liability or new laws,” says Mindy Pollack, business development specialist at Gen Re. “Throw in something like the Waco scenario and that obviously creates a lot of concern with how unpredictable events can be—and how catastrophic.”

A few years ago, ISO tightened the liquor liability exclusions in its general liability and BOP policies to confirm “the intent that it not cover liquor-related cases when there’s allegations of negligent hiring or negligent oversight,” Pollack explains. “That means there’s more pressure on liquor liability policies, because that’s what will be responding for coverage.”

But since that time, coverage developments for liquor liability have remained few and far between. “The liquor liability industry in general—and liquor liability business as a whole—doesn’t change all that much,” says John Tympanick, president & CEO of Hospitality Insurance Group, which focuses on establishments whose profits exceed 40% in liquor sales. “We use the same policy language we’ve used for almost 29 years.”

Emerging Risks

As a result, shake-ups in liquor liability will occur largely in the category of emerging risks. One of the biggest upcoming changes? Alcohol delivery services like Drizly: an app consumers can use to order beer, wine and liquor directly to their door. “People can go on and say, ‘I’m having a party—can you bring over two cases of beer and a couple bottles of wine for me?’” Tympanick says. “It’s a convenience thing.”

As a delivery service, Drizly is not a licensed owner of alcohol, Tympanick explains. The app simply connects the customer to a Drizly establishment, such as a packaging or liquor store. “They might have their own delivery service, or they might use something like Uber,” Tympanick explains. “And especially if you’re delivering directly to a home, the concern is: How experienced are the deliverers to look at an ID?”

Speaking of Uber, ride-sharing presents other problems from a liquor liability standpoint. Services like Uber and Lyft have already come under fire for complications regarding the lines they blur between personal and commercial auto insurance coverage, but alcohol adds a whole new element to the mix.

“When you think about Uber and the number of people they drive home after leaving an establishment, the Uber driver does not have the same protection as a taxi driver might,” Tympanick notes. “Somebody who’s intoxicated might do something that could cause harm to themselves or to their driver.”

How to Sell It

For independent agents who sell liquor liability insurance, the focus remains on coverage nuances like assault and battery limits, state-by-state dram shop laws and training programs for employees.

“Understand who’s in competition to try to get that establishment’s policy and what they offer for premium discounts,” Tympanick advises. “Are they offering discounts for risk management-type things like alcohol awareness training, security training and food preparation training?”

In the event that your client faces a lawsuit, they’ll be thanking you for more than just premium savings. “If the risks do what they should do—management shows it’s important to maintain a safe workplace and follow internal rules and procedures—they will find that courts will apply the laws and are more likely to absolve them of responsibility,” Pollack says.

Want details on how to approach insuring craft beverage enterprises like microbreweries? Keep an eye on and upcoming issues of the Markets Pulse e-newsletter.

Jacquelyn Connelly is IA senior editor.

Tuesday, June 2, 2020
Liquor Liability