March: In like a lion, out like a lamb

Other areas are focused on nicer weather as some regions start to see crocuses and snowdrops blooming. March Madness is well-known to basketball fans, and many Christians will be observing Lent and Easter, depending on the lunar calendar.

St. Patrick’s Day is another event that people celebrate with parades, Irish food, and green beer; in Chicago, the Chicago River is even dyed green for the occasion.

Insurance is for more than bad luck.

Drinking is a large part of many St. Patrick’s Day celebrations, and that brings us to a more mundane interest: liquor liability.

All of those bars and restaurants serving corned beef and cabbage, as well as plenty of green beer: What is their liability exposure, and how is it handled?

St. Patrick’s Day doesn’t really change the general exposures, but it may increase the number of customers or clientele for some businesses.

Any restaurant, bar, tavern, package store, or distributor that handles alcoholic beverages needs what’s known as a liquor liability policy, which provides coverage for any liability that results from the selling, serving, or furnishing of alcoholic beverages. The coverage for that exposure is excluded from the standard commercial general liability policy for those types of businesses, so a separate liquor liability policy is needed.

The occasional serving of an alcoholic beverage when it is not the insured’s regular business practice is covered by the general liability, otherwise known as host liability. So if the company has a St. Patrick’s Day party for their employees and serves them green beer while they watch the parade from the corporate highrise, that exposure would be covered by the standard CGL policy. In fact, ISO even has an endorsement that provides a limited exception for permitting people to bring alcoholic beverages on the premises for consumption on the premises, commonly known as bring your own bottle (BYOB) (CG 40 09 12 19), and another endorsement will provide coverage for specifically scheduled premises or activities (CG 21 51 04 13) by exempting those scheduled premises or activities from the exclusion.

The exclusion in the standard CGL applies only if the named insured is in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages. The key emphasis here is on the words ‘in the business of’, meaning it is a regular part of the insured’s business operations. In such cases, a separate endorsement or a liquor liability policy is needed for the exposure.

Even if the exposure is not part of the insured’s regular business, they may want to alert the insurer if the exposure is greater than would normally be the case. For example, if a corporation hosts a family event where liquor will be served, that would likely require endorsement of the policy for the scheduled activity. Many a person has been known to get a little tipsy at such events, increasing the potential for accidents.

The coverage in ISO’s Liquor Liability Coverage Form (CG 00 33 04 13) is straightforward and provides coverage for injuries for which the insured is legally obligated to pay damages that result from the insured’s selling, serving, or furnishing of any alcoholic beverage. People often misbehave when they’ve had too much to drink, and sometimes injuries occur.

There are, of course, exclusions, such as expected or intended injury, workers compensation, employer’s liability, lack of a liquor license, or injury arising out of your product. The exclusion for your product does not apply to injury claimed against the insured because of causing or contributing to the intoxication of a person, furnishing of alcoholic beverages to a person under the legal drinking age or under the influence of alcohol, or any statute, ordinance, or regulation of the sale, gift, distribution, or use of alcoholic beverages. The standard exclusion for war also applies.

There’s plenty of fun to be had in March, whether you’re watching basketball, thunderstorms, eagerly awaiting the arrival of the Easter Bunny, or drinking green beer on St. Patrick’s Day. As always, there are insurance policies providing protection in event something goes wrong; and for bars, restaurants, taverns, and package stores, one of those policies is liquor liability.

For further reading, check out these resources from FC&S Expert Coverage Interpretation:

• Liquor Liability Exclusion
• Coverage for Alcoholic Energy Drink Manufacturer by Liquor Liability Exclusion
• Liquor Liability Bars Coverage for Negligence
• Liquor Liability Coverages
• Liquor Liability Exclusion and Scheduled Exception