It could come down to how the wait staff serves customers.

The scenario: An agent insures a small BYOB restaurant that does not have a liquor license. When the restaurant seats a party, staff takes the alcohol and places it behind the bar area, then serves it back when the party orders.

Q: "Without a liquor license, I do not think I can sell them a liquor liability policy, but it sure seems this restaurant is accepting a liquor liability exposure. Researching this issue, I do find that many BYOB restaurants pour alcohol that is on the table, but I think the restaurant I insure is taking this one step too far. What are your thoughts on both these scenarios?"

A: “The CGL liquor liability exclusion applies to anyone in the business of serving alcohol. Most likely, if the client discontinues this practice and properly trains their staff to avoid practices like picking up a customer’s almost-empty bottle and pouring the last bit into his or her glass, the exclusion probably doesn’t apply. But I’d confirm that with the carrier. Otherwise, count on the adjuster denying the claim.

ISO’s latest CGL revision, effective in most states since April 2013, addressed BYOB establishments by adding the following language to the exclusion [emphasis ours]:

‘For the purposes of this exclusion, permitting a person to bring alcoholic beverages on your premises, for consumption on your premises, whether or not a fee is charged or a license is required for such activity, is not by itself considered the business of selling, serving or furnishing alcoholic beverages.’ 

The ‘not by itself’ language is key. Presumably, even with this change, the situation you describe would trigger the exclusion because liquor is being served. If I owned a BYOB establishment, I’d still buy liquor liability coverage.”

Bill Wilson is director of the Big “I” Virtual University.

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