Liquor Liability
Liquor LiabilityChris Behymer, CPCU, ASLI, CIWDirector of Client Education – Markel SpecialtyChris Schramm, VP Underwriting – Head of Primary CasualtyArgo Group USWSIA Underwriting Boot Camp October 10-13, 20221
Today’s AgendaI. Why We Need Liquor Liability CoverageII. Dram Shop: Origins and HistoryIII. Legal and State DifferencesIV.Risk Profiles and Exposure FactorsV. Loss Prevention MeasuresVI.Coverage HighlightsVII.Claims Case Examples2
Why Do We Need Liquor Liability Coverage?Commercial General Liability form – CG 00 01Exclusion:This insurance does not apply to:c. Liquor Liability –“Bodily Injury” or “property damage” for which any insured may be held liable byreason of causing or contributing to the intoxication of any person; the furnishing ofalcoholic beverage to a person under the legal drinking age or under the influence ofalcohol; or any statute, ordinance or regulation relating to the sale, gift, distribution oruse of alcoholic beverages.3
History of Dram Shop Liquor has been around a long, long time! Earliest record of alcohol production found onMesopotamian pottery dating 4,200 B.C. Artwork illustrates fermentation processes In 2,300 B.C., price-fixing and dispensing measures foralcoholic beverages referenced in Code of Hammurabi4
Definition of Dram Dram A small drink of whiskey or other spirits A unit of liquid capacity equal to 1/8 fluid ounce First known use in 14th century England Dram meant small draught of cordial or alcohol Dram-house was tavern where a dram was purchased5
Dram Shop Law Dram Shop Liability Body of law governing liability of taverns, liquor stores andother commercial establishments that sell or servealcoholic beverages Dram shop law varies by state No dram shop statute in some states Some states impose liability on social hosts also Service of alcohol to minors (under 21) illegal in all states6
Dram Shop Law Proximate cause: An event sufficiently related to a legally recognizableinjury to be held to be the cause of that injury. Question must be: Was the illegal sale and/or service of alcohol theproximate cause of the injury?7
Individuality by State Most states have a dram shop statute Exceptions: States with no dram shop statute Delaware Kansas Louisiana Maryland Nebraska Nevada South Dakota Virginia8
State with no Dram StatuteExample of legal ruling: Court of Appeals of Maryland stated that "a tavern ownerwho provides alcohol to an intoxicated patron does notexercise control over the conduct of the patron, in driving orwalking, for example. In the absence of control a dutydoes not exist to the general public”. In addition, the courtexpressed no opinion regarding any effect of sales ofalcohol by tavern owners on premises liability.9
Mandatory States Individual state dram shop statutes vary Mandated Liquor Liability insurance coverage in some states Alabama Iowa Massachusetts Michigan Minnesota Oregon South Carolina Utah10
“Tough” States Minnesota Mandatory 300,000 minimum limit required Establishments cannot operate without liquor liabilityinsurance in place Alcohol Control Board will shut down operations Michigan Proof of Responsibility form must be filed with thestate for each risk11
“Tough” States Iowa All carriers must register a dram certificate on theAlcohol Control Board’s website, for new and renewalbusiness Includes any special event with a liquor license Will not permit any policies to exclude assaultand battery12
Legal Considerations Legal environment Joint liability Several liability Joint and several liability Cap on damages Some states place a cap on limit that can be paid for any one incident E.g., Colorado - 150,000 Strict liability Alabama, Vermont13
Legal Considerations Who can bring a right of action against theestablishment? Victim(s) Victim’s family members Consumer(s) of alcohol In some states, the consumer of the alcohol cannotfile suit14
Legal Considerations When does the law respond? Injury found to be caused by sale or service to: Minor or intoxicated minor Obviously intoxicated person Known/habitual drunkard Server knew or should have known personwas intoxicated15
State Examples – Dram Law California – Intoxicated minor Pennsylvania – Person visibly intoxicated, or toany minor Florida – Person not of lawful drinking age or a personhabitually addicted to the use of alcoholic beverages West Virginia – Person visibly or noticeablyintoxicated, or any person known to be insane or ahabitual drunkard16
Social Host Liability Not in the business of selling, serving or distributing Laws vary widely from state to state No liability on social hosts Limit liability to injuries that occur on host’s premises Extend host’s liability to injuries that occur anywherea guest who has consumed alcohol goes Liability only when minors served17
Type of Loss Is incident considered Liquor Liability or Assault & Battery(A&B)? Many Liquor Liability policies do include extension ofcoverage for A&B claims Must prove that the proximate cause of the assaultand battery injury was the illegal service/sale of liquor GL policy does not require proof18
Risk Profile “Traditional” licensed establishments Bar Tavern Nightclub Adult club/gentlemen’s club Sports pub Restaurants Bowling alley19
Risk Profile “Traditional” licensed establishments (cont’d) Private fraternal clubs Country club/golf club Comedy club/dinner theater Billiards hall Banquet/catering hall Retail liquor or convenience stores Wholesale distributor20
Unlicensed Risks Banquet hall Off-premises catering Off-premises bartending BYOB restaurant Art gallery Beauty/barber shops Craft classes (e.g., paint your own pottery)21
Trending . Brewery Assisted living facilities Distillery Homeowner/condo associations Movie theater Liquor/wine promoters Growler sales Beer gardens Charter boat/dinner cruises Escape rooms Wineries Internet sales Event planner Liquor delivery (UberEATS) Beer bus Contingent liability Home brewers Arcades Social clubs22
Exposures and Risk Factors Alcohol and food sales Percentage of alcohol sales to total food and alcohol sales 100% alcohol sales Fine dining Type of alcohol sold Beer Wine Hard liquor23
Exposures and Risk Factors Hours of operation – Closing time, cease by time, and hours no alcohol sale is allowed After hours clubs Social clubs, private fraternal clubs, nightclubs Early closing/alcohol sales hours Allowable times can differ by state/county/type of license New York City – 4 a.m. Pennsylvania fraternal clubs – 3 a.m. Rhode Island – 1 a.m. Ohio – 2:30 a.m. Oklahoma – Sales can start at 6 a.m. “Blue Law” (Sunday law)24
Exposures and Risk Factors Average age group of target customers College students/young adults Catering to underage 18 allowed in Use of wristbands Drink incentives Beer drinking games – beer pong Drink specials – jello shots, 2-for-1s25
Exposures and Risk Factors Drink specials Aggressive pricing Late night/reverse happy hours Multiple drinks Size of drinks Bottle Service VIP tables Set-ups provided26
Bottle Service Example27
Exposures and Risk Factors Bouncers/security/doorpersons What is the difference? Isn’t this a good practice for the bar or restaurant? How often is a bouncer used? Type of establishment/events Assault and battery risk28
Exposures and Risk Factors Entertainment Types Band, DJ, karaoke, soloist/duets, guitarist Style of music, number of nights featured Concerts Comedy Movie/theater Frequency Assault and battery risk29
Exposures and Risk Factors Multiple locations All in one state or different states Same operations or different Multi-operation Insuring one or all the operations? On and off-premises exposure, or both?30
Postings from Yelp This is not your fancy schmancy bar with fancy schmancy drinks, but it isa bar with cheap drinks, young crowd and beer pong tables! Happy hours is pretty good, buy one get one free drink. Beware the sticky floors and the occasional splash of beer. Shoulder toshoulder crowds, plus 4 tables of beer pong. We ended up getting bottle service for a very reasonable price, plus theymoved us into the VIP area for no charge. Great buy one get one free deals on mixed drinks and beers.31
Exposures and Risk Factors Location Rural, suburban, city Driving or walking – greater risk? Entertainment districts Crime General crime rating Prior history at the location address Propensity for assault and battery incidents?32
Exposures and Risk Factors Claim history Date, type, open or closed, amount paid andreserved, expenses What measures taken following claim(s)? Frequency vs. severity Actuary: prior claims history is strong indicator offuture claims33
Exposures and Risk Factors Violations Imposed by state Liquor Control Board Number, type and frequency; any repetition? Measures to prevent? Common violations Service to underage patron Service after licensed hours Service to intoxicated patron Employee drinking on the job34
Exposures and Risk Factors Experience New ventures Years in business at risk location Years of experience running similar operation One entity multiple operations Bar restaurant retail sale Restaurant off premises catering Retail store wholesale distributor35
Exposures and Risk Factors Special events/banquets Open bar/BYOB/self-service Entertainment featured Who is serving alcohol during events? Frequency and attendance Assault and battery risk36
Special Events Some carriers will offer liquor liability for specific events Scheduled or blanket Coverage generally applicable to event activities only May offer general liability and host liquor37
Loss Prevention Tools Formal alcohol server training (TIPS is most common) ID scanner Surveillance cameras Employee practices and training Alternative transportation Pour measures38
Exclusion LanguageCommercial General Liability form – CG0001 (cont’d)However, this exclusion applies only if you are in the business ofmanufacturing, distributing, selling, serving or furnishing alcoholicbeverages. For the purposes of this exclusion, permitting a personto bring alcoholic beverages on your premises, for consumption onyour premises, whether a fee is charged, or a license is required forsuch activity, is not by itself considered the business of selling,serving or furnishing alcoholic beverages.39
Host Liquor Liability Is a liquor liability policy always necessary? Since the exclusion under the CG0001 CommercialGeneral Liability form only applies if the namedinsured is “in the business of”, so commonassumption is that host liquor liability coverage isapplicable but of course, subject to other policyterms and conditions.40
Liquor Liability Coverage Form Coverage form for Liquor Liability CG0033 Liquor Liability Coverage FormSection I – Liquor Liability Coverage1. Insuring Agreementa. We will pay those sums that the insured becomes legallyobligated to pay as damages because of “injury” to which thisinsurance is imposed on the insured by the reason of selling,serving or furnishing of any alcoholic beverage. We will havethe right and duty to defend the insured against any “suit”seeking those damages.41
Liquor Liability Coverage Form(1)The amount we will pay for damages is limited as described in Section III– Limits of Insurance; and(2)Our right and duty to defend ends when we have used up the applicablelimit of insurance in the payment of judgments or settlements.(b) This insurance applies to “injury” only if:(1) The “injury” occurs during the policy period in the “coverage territory”42
Common Cause Liquor liability policies have an “each common cause”limit Not the same as an occurrence limit Considers all acts of a defendant (allegedlyintoxicated person)43
Limitation of Coverage to Insured Premises Limitation of coverage to insured premises This insurance applies to “injury” only if the “injury”occurs during the policy period in the “coverageterritory” and the “injury” is a direct result of theselling, serving or furnishing of any alcoholicbeverage at the “insured premises”. “Insured premises” means the premises identified inthe declarations.44
Limitation of Coverage to Insured Premises How does this endorsement impact exposures for: Catering Distributing Special events on and off-premises Sidewalk service Incident must result from sale or service of alcohol at thelocation address listed on the policy. Coverage would not apply to operations or events taking placeat another location address.45
Assault and Battery CG0033 is silent on Assault & Battery. Commonly usedendorsements:Assault and battery exclusionorAssault and battery sublimitCarrier use of either could depend on type of risk, location of risk,prior loss experience, lack of A&B coverage on the insured’s GLpolicy, etc.46
Firearms Firearms Exclusion Sample language:“This insurance shall not apply to ‘injury’ arising out of, relatedto, or attributable to the ownership, maintenance, operation, orother use by any person of any firearms, including handguns,revolvers, pistols, rifles, shotguns, air guns, semiautomaticweapons or similar devices, and including ammunition for anyfirearm”. Although used by many carriers, can be a point of contention asit is not standard47
Additional Insureds AI – Manager or lessor of premises AI – Designated person or organization AI – Grantor of franchise AI – Liquor license holder AI – Club members Automatic AI48
Additional Insured Language Waiver of subrogation Primary and non-contributory One or both often requested by additional insureds May not be readily available on liquor liability policies49
Rating Typical policy rating bases: Licensed liquor operations – annual alcohol sales Rate per 1,000 of receipts Rate per 100 of receipts Unlicensed liquor operations – Number of events orflat charge Host exposures – Number of events or flat charge Minimum premium50
Rating by Exposure Rates can vary drastically due to type of risk andexposure factors Credits and debits (formal training, surveillancecamera, entertainment, etc.) Degree of liquor exposure (Nightclub vs. RetailStore) Management experience Higher limits may not be available51
Deductibles Deductibles sometimes available Are these effective deterrents or loss mitigationstrategies? Should carriers be offering a discounted premium whena deductible is selected?52
Claims Severity is more of a concern than frequency (althoughassault and battery losses can be frequent) Defense costs can be as significant (or moresignificant) than the settlement or award Thorough investigation is essential53
Visible Intoxication Service to “visibly intoxicated” patron is illegal in many states Burden to prove otherwise generally left to the defendant Courts have held that proof of visible intoxication (or lackof) can be supported by submission of circumstantialevidence Many court decisions based upon submission ofeyewitness affidavits54
Habitual Drunkard Often challenging to identify signs of intoxication withhabitual drunkard High “tolerance” level so may not demonstrate thephysical signs and behaviors of obvious intoxication This can be a defense for the establishment If the individual is “known” to be a habitual drunkard bythe establishment or server(s), the plaintiff can assertthat they should have ceased or refused service basedon this knowledge, regardless of the individual’soutward appearance and behavior55
Liquor Liability ClaimsExamplesWSIA Underwriting Boot Camp October 10-13, 202256
Claim #1North Carolina:A 32-year-old man and his 32-year-old wife, six-months pregnant with their first child,were just pulling away from an ATM machine to drive home, when a 25-year-old manslammed into their car, going more than 100 MPH. The young man had just left alocal bar and grill, where he had been served at least 10 drinks over the course oftwo hours. Husband and wife were hospitalized for over a month, requiring extensivesurgeries, and lost the baby.A jury returned a 1.7 million verdict against the restaurant, citing that they werenegligent in serving alcohol to a person it should have known was intoxicated.57
Claim #2Georgia:A billionaire attended a celebrity bartenderevent at a tavern, then went to another club.After leaving, he drove through a stop sign at63 MPH and broadsided a car driven by a 23year-old college student. That car wasknocked into a canal and the young mandrowned. Prosecutors could not produce aneyewitness, but his bar tab showed multipledrinks, and his BAC was .177. The defendantwas sentenced to 16 years in prison, and 46million was awarded.58
Claim #3Texas:A catering hall hosted a wedding event, and employees served atthe open bar. Several hours into the reception, two guests got intoan altercation on the dance floor over a woman, and one guestpunched the other in the head, knocking him to the floor and causingunconsciousness. The victim was later found to have a concussionand was out of work five weeks. The assailant had been showingsigns of intoxication prior to the incident. The insurance companypaid out 75,000 under the hall’s liquor liability policy59
Claim #4New Jersey:A 7-year-old girl was paralyzed from the neck down after a car shewas in was struck by a vehicle driven by a 34-year-old fan leaving aGiants game. The driver was more than twice the legal limit. TheGiants stadium mandates beer vendors sell no more than two beersat a time to a fan, but the defendant tipped the vendor 10 and waspermitted to buy six beers. The stadium concessionaire was sued. Ajury awarded 135 million, including 75 million in punitivedamages. The NFL was also sued but charges were dismissed.60
Claim #5Massachusetts:A 58-year-old woman purchased a bottle of alcohol at a local liquorstore, taking a taxi from her home as her husband had hidden thecar keys. Her husband had visited all the local liquor stores to advisethem not to sell her alcohol as she had a drinking problem. She laterdrowned near her home after falling or jumping off a bridge. Herfamily sued the liquor store for selling to a known habitual drunkard,and the case settled for 850K.61
Case #6Pennsylvania:During a brew festival, a minor was served alcohol.Later, he lost control of his car and struck a pole, causingserious facial injuries. He sued the beer vendor torecover 150,000 for his medical bills, alleging theyillegally served a minor. Defense costs incurred were 19,560. The event sponsor was also sued.62
Claim #7Washington:A young couple spent the evening at a billiards hall andconsumed three pitchers of beer. They got into anargument and the woman left alone. On the way to herapartment, she struck a cable installation truck doingwork on a pole at the side of the road. The cable workersuffered several broken leg bones. The claim was settledfor 250,000, and defense costs were 12,500.63
Claim #8New York:At a popular nightclub, a fight broke out in a group of men, andbouncer threw the men out of the club. Later that evening, one manreturned. The bouncer refused him entry and the patron tried tophysically push past him. The bouncer shoved him out into theparking lot, where the patron drew a gun and started firing. A youngwoman was struck in the shoulder but survived. The claim wasdenied by the carrier due to a firearms exclusion. The carrier alsostated there was no indication that the service of alcohol was theproximate cause.64
Claims Expertise Important for carriers to staff with experiencedadjusters familiar with state’s dram law Attorneys who specialize in dram cases should beutilized when possible Defense costs can grow quickly – Claims team andlegal team need to share information Settlement vs. jury trial65
Summary Importance of individual state dram statute and legalenvironment Wide range of hospitality risks nationwide indicatesignificant opportunity – and continues to grow Policy language and forms critical to providingcoverage and protecting the carrier Need for experienced claims adjusters and attorneys tohandle difficult claims66
Thank you for your attention!Chris Behymer, chris.behymer@markel.comChris Schramm, christopher.Schramm@argogoupus.comUnderwriting Boot Camp October 10-13, 202267
Liquor Liability Coverage Form Coverage form for Liquor Liability CG0033 Liquor Liability Coverage Form Section I - Liquor Liability Coverage. 1. Insuring Agreement. a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "injury" to which this insurance is imposed on the insured by the reason of .
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Document title Code of Practice for the Responsible Advertising and Promotion of Liquor Contact details Liquor.commission@nt.gov.au Approved by Northern Territory Liquor Commission - Section 20 Liquor Act 2019 Date approved 21 October 2020 Document review Annually TRM number Version Date Author Changes made 1.0 17 August 2020 Tania Chin First version
the Gaming, Liquor and Cannabis Regulation (GLCR). (Amended July 2018) 1.1.2 AGLC is the province's liquor and gaming authority, responsible for administering and regulating the liquor and gaming industries in Alberta. 1.1.3 Board policies are approved by the Board of AGLC and signed by the
Distilled liquor "Distilled liquor" means any alcoholic beverage that does not qualify as a wine, cider, or malt beverage. Other common names for "distilled liquor" are distilled spirits, hard liquor, hard alcohol, ethyl alcohol, and ethanol. Typically, distilled liquor comes from a distillation process using heat or
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Contribution to SA’s balance of payments - net exports in 2008 R3.8 billion Growth in liquor exports since 2000 253% Key statistics for the South African liquor industry (2009) Contributing to the economy of South Africa The South African liquor industry is a major force in the South African economy,
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