Are your clients willing to risk the loss of their liquor license, their business, and perhaps even their home and other personal assets? That’s what’s at stake when the owner of a business that serves alcoholic beverages fails to carry liquor liability insurance.
Yet many businesses operate without coverage. Most often, business owners are uninsured because they believe they can’t afford liquor liability insurance. Fortunately, there is much a business owner can do to reduce the cost of coverage.
When coverage is needed
To understand the cost of coverage, business owners need to understand the purpose of coverage. Liquor liability claims often arise when patrons overindulge, drive away, then harm or kill themselves or others.
Of course, other types of alcohol-related incidents can also lead to liability claims. Experience shows that assault and battery cases account for half of all claims against owners of establishments that sell alcoholic beverages, so employers should consider adding assault and battery coverage to their liquor liability policy.
Juries sometimes side with the individual against the business owner, although the individual has acted irresponsibly. It is often difficult to tell when an experienced drinker has had too much to drink, yet the person who serves the alcohol and the server’s employer can ultimately be held responsible. They made the incident possible by providing their patron with alcohol.
Attorneys typically seek a connection to those who have the most to lose, so lawsuits often name liquor manufacturers, distributors and others, along with the business owner and server. The average claim settlement has increased significantly in the past 20 years. Some cases result in settlements of millions of dollars, so those parties that lack coverage are putting a great deal at risk.
Liquor liability insurance typically covers not only the cost of damages but also all legal fees and related expenses. Without coverage for legal fees and the cost of claims, many establishments would be unable to afford to remain in business if a claim were filed against them.
Like most forms of insurance, premiums for liquor liability are based on the historical risk for the business.
A few major claims can have a dramatic impact on premiums. When a tragic fire killed 100 people at The Station in Warwick, R.I., in 2003, many insurance carriers determined that liquor liability coverage was too risky and they abandoned the market. Many have returned, but overall rates are somewhat higher than they used to be.
While overall rates are higher, they are especially high for establishments that have had claims filed against them, and those that have features that put them at risk for future claims. For example, the industry has determined that liquor liability exposure is higher, and premiums are therefore higher, when an establishment has pool tables, live music, exotic dancers or other forms of live entertainment. As a result, owners of such businesses typically pay a surcharge for their insurance.
Conversely, the Liquor Liability Joint Underwriting Association of Massachusetts (LLJUA) has taken a different approach. This insurer of last resort for liquor liability in the Bay State has eliminated a 10 percent surcharge on licensees that provide pinball, video games, Keno, sports-related games and other electronic games. Initially, the surcharge existed based on the assumption that patrons typically stay longer and drink more when they play such games, but claims have not supported the need for continuing the surcharge.
LLJUA has also begun offering a 10 percent discount to establishments that close by 8 p.m., because most liability claims result from incidents that take place late at night.
Training your staff
It may not be practical for a business to close earlier or to stop offering live entertainment, but discounts are also offered to businesses that properly train their staff to prevent liquor liability, or assault and battery claims. By helping to prevent claims, trained staff can help keep future rate increases in line, too.
Alcohol awareness training is a good starting point and should be required for all management and staff that serve alcohol. It teaches servers how to identify patrons who have had too much to drink, how to avoid serving under-aged customers and more. They also learn the consequences of failing to take responsibility for their patrons.
Many servers assume that they will not be held personally responsible for serving an intoxicated customer, but that is not the case. Unfortunately, in many cases, security staff have been overzealous, using stun guns, mace and physical force to restrain patrons. The Boston Herald recently reported that security staff have attacked more than 80 patrons at Boston bars since 2004. Such attacks, ironically, endanger rather than protect a business.
LLJUA recently added one of the first programs in the northeast for training security personnel to use nonviolent techniques to prevent assault and battery cases. It is offering half off on its general liability assault and battery coverage to establishments where all managers and 75 percent of non-management staff participate in training from Security Liability Reduction Associates (SLRA). SLRA itself is also offering a 50 percent discount on its training program through November 2006.
Training is essential but it will help only if managers and owners take it seriously. Managers and owners should monitor their staff and make certain everyone is consistently applying the lessons they’ve learned.
John Tympanick is president of the Liquor Liability Joint Underwriting Association of Massachusetts, the state’s insurer of last resort for liquor liability. He can be reached at (508) 366-1140 or firstname.lastname@example.org. Many servers assume that they will not be held personally responsible for serving an intoxicated customer but that’s not the case.
Was this article valuable?
Here are more articles you may enjoy.