Summary: The liquor liability policy covers the liquor related exposure of insureds in the alcoholic beverages industry, such as, among others, bars, restaurants where liquor is served, package stores, and distributors. This liquor liability policy picks up coverage excluded by the commercial general liability policy; that policy specifically eliminates coverage for incidents arising out of the sale, service, or furnishing of alcoholic beverages. The policy is available on both an occurrence (CG 00 33 04 13) or claims-made (CG 00 34 04 13) basis (other than the coverage “triggers” the policies are identical).
Topics covered: Liquor liability coverage Insuring agreement Exclusions Supplementary payments Who is an insured Limits of insurance Liquor liability policy conditions Definitions Endorsements
The liquor liability coverage form is a liability policy specifically developed for covering the liquor related exposures of insureds in the alcoholic beverages industry, or whose business involves the sale or service of alcoholic beverages. It covers only claims arising out of the insured's selling, serving, or furnishing alcoholic beverages.
It is important to note that the liquor policy does not negate an insured's need for general liability coverage; rather, it picks up coverage for liquor related exposures that are specifically excluded under the commercial general liability policy.
The ISO Commercial Lines Manual includes the following classifications of businesses as prospects for the liquor liability coverage part: clubs; package stores and other retail establishments selling alcoholic beverages for consumption off premises; manufacturers, wholesalers, and distributors selling alcoholic beverages for consumption off premises; restaurants, taverns, motels, and hotels, including package sales; and temporary licensees.
The liquor liability exposures of such establishments are specifically excluded under the standard CGL policy.
a.We will pay those sums that the insured becomes legally obligated to pay as damages because of “injury” to which this insurance applies if liability for such “injury” is imposed on the insured by reason of the selling, serving or furnishing of any alcoholic beverage. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “injury” to which this insurance does not apply. We may, at our discretion, investigate any “injury” and settle any claim or “suit” that may result. But:
(1The amount we will pay for damages is limited as described in Section III — LIMITS OF INSURANCE; and
(2)Our right and duty to defend end when we have used up the applicable limit of insurance in the payment of judgments or settlements.
No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under SUPPLEMENTARY PAYMENTS.
b.This insurance applies to “injury” only if:
(1)The “injury” occurs during the policy period in the “coverage territory”; and
(2)Prior to the policy period, no insured listed under Paragraph 1. of Section II—Who Is An Insured and no “employee” authorized by you to give or receive notice of an “injury” or claim, knew that the “injury” had occurred, in whole or in part. If such a listed insured or authorized “employee” knew, prior to the policy period, that the “injury” occurred, then any continuation, change or resumption of such “injury” during or after the policy period will be deemed to have been known prior to the policy period.
c.”Injury” which occurs during the policy period and was not, prior to the policy period, known to have occurred by any insured listed under Paragraph 1. of Section II—Who is An Insured or any “employee” authorized by you to give or receive notice of an “injury” or claim, includes any continuation, change or resumption of that “injury” after the end of the policy period.
d.”Injury” will be deemed to have been known to have occurred at the earliest time when any insured listed under Paragraph 1. of Section II—Who Is An Insured or any “employee” authorized by you to give or receive notice of an “injury” or claim:
(1)Reports all, or any part, of the “injury” too us or any other insurer;
(2)Receives a written or verbal demand or claim for damages because of the “injury”; or
(3Becomes aware by any other means that “injury” has occurred or has begun to occur.
Analysis
The insuring agreement pledges to pay those claims that an insured becomes legally liable for as a result of injury arising out of the selling, serving, or furnishing of any alcoholic beverage. Injury is specifically defined in the policy, and broadly so: “all damages, including damages because of bodily injury and property damage, and including damages for care, loss of services, or loss of support.” This would include any direct bodily injury or property damage, and consequential damages, such as loss of consortium.
The insuring agreement contains the customary liability policy provisions related to defense of the claim. The insurer reserves the right to investigate any injury and may settle, without the insured's consent, any claim or suit. The duty to defend ends when the insurer has used up the applicable limit of insurance in the payment of judgments or settlements.
This version of the liquor liability policy also has the prior knowledge wording brought about by Montrose Chemical Corp. v. Admiral Ins. Co., 913 P.2d 878 (Cal. 1995).
This insurance does not apply to:
a.Expected or Intended Injury
”Injury” expected or intended from the standpoint of the insured. This exclusion does not apply to “bodily injury” resulting from the use of reasonable force to protect persons or property.
b.Workers Compensation and Similar Laws
Any obligation of the insured under a workers compensation, disability benefits or unemployment compensation law or any similar law.
c.Employer's Liability
”Bodily injury” to:
(1)An “employee” of the insured arising out of and in the course of:
(a)Employment by the insured; or
(b)Performing duties related to the conduct of the insured's business; or
(2)The spouse, child, parent, brother or sister of that “employee” as a consequence of paragraph (1) above.
This exclusion applies whether the insured may be liable as an employer or in any other capacity and to any obligation to share damages with or repay someone else who must pay damages because of the “injury”.
d.Liquor License Not in Effect
”Injury” arising out of any alcoholic beverage sold, served or furnished while any required license is not in effect.
e.Your Product
”Injury” arising out of “your product”. This exclusion does not apply to “injury” for which the insured or the insured's indemnitees may be held liable by reason of:
(1)Causing or contributing to the intoxication of any person;
(2)The furnishing of alcoholic beverages to a person under the legal drinking age or under the influence of alcohol; or
(3)Any statute, ordinance or regulation relating to the sale, gift, distribution or use of alcoholic beverages.
f.Other Insurance
Any “injury” with respect to which other insurance is afforded, or would be afforded but for the exhaustion of the limits of insurance. This exclusion does not apply if the other insurance responds to liability for “injury” imposed on the insured by reason of the selling, serving or furnishing of any alcoholic beverage.
g.War
“Injury” however caused, arising directly or indirectly out of:
(1)War, including undeclared or civil war:
(2)Warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign or other authority using military personnel or other agents; or
(3)Insurrection, rebellion, revolution, usurped power, or action taken by governmental authority in hindering or defending against any of these.
Analysis
Coverage provided by the liquor liability policy is tempered by seven exclusions, most of them standard in liability forms.
Note that there is an exception written into the “expected or intended injury” exclusion for bodily injury resulting from the use of reasonable force to protect persons or property. An example of this exception in operation would be where a bartender or security guard injures an intoxicated person in protecting other patrons where the injured party subsequently sues the establishment for causing his intoxication.
Obligations of the insured under a workers compensation, disability benefits, or unemployment compensation law are excluded. Further, liability for bodily injury to an employee of the insured occurring in the course of employment is excluded. This exclusion also applies to liability of an insured to the spouse, parent, child, or sibling of an injured employee. This applies to dual capacity and third-party-over actions (see Workers Compensation and Exclusive Remedy for an explanation of these actions).
Injury arising out of the named insured's product is also excluded. Since the term “product” is defined in the form as any goods manufactured, sold, handled, or distributed by the insured, this exclusion might seem to defeat the purpose of the liquor liability coverage form. However, the exclusion goes on to state that it does not apply to injury for which the insured may be held liable by causing or contributing to any person's intoxication, by furnishing alcoholic beverages to a minor, or by any ordinance or statute relating to the sale or use of alcoholic beverages. Therefore, even though the forms exclude product liability in general, they do not apply this exclusion to the product addressed by the forms, namely, alcoholic beverages.
We will pay, with respect to any claim we investigate or settle, or any “suit” against an insured we defend:
1.All expenses we incur.
2.The cost of bonds to release attachments, but only for bond amounts within the applicable limit of insurance. We do not have to furnish these bonds.
3.All reasonable expenses incurred by the insured at our request to assist us in the investigation or defense of the claim or “suit”, including actual loss of earnings up to $250 a day because of time off from work.
4.All court costs taxed against the insured in the “suit”. However, these payments do not include attorneys' fees or attorneys' expenses taxed against the insured.
5.Prejudgment interest awarded against the insured on that part of the judgment we pay. If we make an offer to pay the applicable limit of insurance, we will not pay any prejudgment interest based on that period of time after the offer.
6.All interest on the full amount of any judgment that accrues after entry of the judgment and before we have paid, offered to pay, or deposited in court the part of the judgment that is within the applicable limit of insurance.
7.Expenses incurred by the insured for first aid administered to others at the time of an event to which this insurance applies.
These payments will not reduce the limits of insurance.
Who Is an Insured
1.If you are designated in the Declarations as:
a.An individual, you and your spouse are insureds.
b.A partnership or joint venture, you are an insured. Your members, your partners, and their spouses are also insureds, but only with respect to the conduct of your business.
c.A limited liability company, you are an insured. Your members are also insureds, but only with respect to the conduct of your business. Your managers are insureds, but only with respect to their duties as your managers.
d.An organization other than a partnership, joint venture or limited liability company, you are an insured. Your “executive officers” and directors are insureds, but only with respect to their duties as your officers or directors. Your stockholders are also insureds, but only with respect to their liability as stockholders.
e.A trust, you are an insured. Your trustees are also insureds, but only with respect to their duties as trustees.
2.Each of the following is also an insured:
a.Your “employees”, other than either your “executive officers” (if you are an organization other than a partnership, joint venture or limited liability company) or your managers (if you are a limited liability company), but only for acts within the scope of their employment by you or while performing duties related to the conduct of your business. However, none of these “employees” is an insured for:
(1)”Injury”:
(a)To you, to your partners or members (if you are a partnership or joint venture), to your members (if you are a limited liability company), or to a co-”employee” while that co-”employee” is either in the course of his or her employment or performing duties related to the conduct of your business;
(b)To the spouse, child, parent, brother or sister of that co-”employee” as a consequence of paragraph (a) above; or
(c)For which there is any obligation to share damages with or repay someone else who must pay damages because of the injury described in paragraphs (a) or (b) above.
(2)”Property damage” to property:
(a)Owned or occupied by, or
(b)Rented or loaned to that “employee”, any of your other “employees”, by any of your partners or members (if you are a partnership or joint venture), or by any of your members (if you are a limited liability company).
b.Any person or organization having proper temporary custody of your property if you die, but only:
(1)With respect to liability arising out of the maintenance or use of that property; and
(2)Until your legal representative has been appointed.
c.Your legal representative if you die, but only with respect to duties as such. That representative will have all your rights and duties under this Coverage Part.
3.Any organization you newly acquire or form, other than a partnership, joint venture or limited liability company, and over which you maintain ownership or majority interest, will qualify as a Named Insured if there is no other similar insurance available to that organization. However:
a.Coverage under this provision is afforded only until the 90th day after you acquire or form the organization or the end of the policy period, whichever is earlier; and
b.Coverage does not apply to “injury” that occurred before you acquired or formed the organization.
No person or organization is an insured with respect to the conduct of any current or past partnership, joint venture or limited liability company that is not shown as a Named Insured in the Declarations.
Analysis
The liquor liability policy may be written for individual insureds, joint ventures, partnerships, or organizations other than partnerships and joint ventures (for example, a corporation). Coverage is afforded to the specified individual, partners, and members of joint ventures, and spouses with respect to liability arising from the conduct of the business. Executive officers and directors are covered with respect to their duties as such.
The policy also extends coverage to employees for acts within the scope of their employment. However, employees are not covered for bodily injury to the named insured or a co-employee occurring in the course of employment or for property damage to property owned, rented, or loaned to any employee.
Persons or organizations having temporary custody of the insured's property in the event of the death of the insured are covered with respect to liability arising out of the maintenance or use of that property.
Organizations, other than partnerships or joint ventures, formed or acquired by the insured are considered insureds if there is no similar coverage available to that organization. This coverage runs for ninety days and does not apply to injuries occurring prior to the acquisition or formation of the entity.
1.The Limits of Insurance shown in the Declarations and the rules below fix the most we will pay regardless of the number of:
a.Insureds;
b.Claims made or “suits” brought; or
c.Persons or organizations making claims or bringing “suits”.
2.The Aggregate Limit is the most we will pay for all “injury” as the result of the selling, serving or furnishing of alcoholic beverages.
3.Subject to the Aggregate Limit, the Each Common Cause Limit is the most we will pay for all “injury” sustained by one or more persons or organizations as the result of the selling, serving or furnishing of any alcoholic beverage to any one person.
The Limits of Insurance of this Coverage Part apply separately to each consecutive annual period and to any remaining period of less than twelve months, starting with the beginning of the policy period shown in the Declarations, unless the policy period is extended after issuance for an additional period of less than twelve months. In that case, the additional period will be deemed part of the last preceding period for purposes of determining the Limits of Insurance.
Analysis
The policy contains an aggregate limit for all damages due to the selling, furnishing, or serving of alcoholic beverages. Subject to the aggregate limit, the “each common cause limit” is the most the insurer will pay for all injuries sustained by one or more persons as a result of the providing of alcoholic beverages to any one person.
Liquor Liability Policy Conditions
1.Bankruptcy
Bankruptcy or insolvency of the insured or of the insured's estate will not relieve us of our obligations under this Coverage Part.
2.Duties In The Event Of Injury, Claim Or Suit
a.You must see to it that we are notified as soon as practicable of an “injury” which may result in a claim. To the extent possible, notice should include:
(1)How, when and where the “injury” took place;
(2)The names and addresses of any injured persons and witnesses; and
(3)The nature and location of any “injury” arising out of an occurrence.
b.If a claim is made or “suit” is brought against any insured, you must:
(1)Immediately record the specifics of the claim or “suit” and the date received; and
(2)Notify us as soon as practicable.
You must see to it that we receive written notice of the claim or “suit” as soon as practicable.
c.You and any other involved insured must:
(1)Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the claim or “suit”;
(2)Authorize us to obtain records and other information;
(3)Cooperate with us in the investigation or settlement of the claim or defense against the “suit”; and
(4)Assist us, upon our request, in the enforcement of any right against any person or organization which may be liable to the insured because of “injury” to which this insurance may also apply.
d.No insured will, except at that insured's own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without our consent.
3.Legal Action Against Us
No person or organization has a right under this Coverage Part:
a.To join us as a party or otherwise bring us into a “suit” asking for damages from an insured; or
b.To sue us on this Coverage Part unless all of its terms have been fully complied with.
A person or organization may sue us to recover on an agreed settlement or on a final judgment against an insured obtained after an actual trial; but we will not be liable for damages that are not payable under the terms of this Coverage Part or that are in excess of the applicable limit of insurance. An agreed settlement means a settlement and release of liability signed by us, the insured and the claimant or the claimant's legal representative.
4.Other Insurance
If other valid and collectible insurance is available to the insured for a loss we cover under this Coverage Pad, our obligations are limited as follows:
a.Primary Insurance
This insurance is primary. Our obligations are not affected unless any of the other insurance is also primary. Then, we will share with all that other insurance by the method described in b. below.
b.Method of Sharing
If all of the other insurance permits contribution by equal shares, we will follow this method also. Under this approach each insurer contributes equal amounts until it has paid its applicable limit of insurance or none of the loss remains, whichever comes first. If any of the other insurance does not permit contribution by equal shares, we will contribute by limits. Under this method, each insurer's share is based on the ratio of its applicable limit of insurance to the total applicable limits of insurance of all insurers.
5.Premium Audit
a.We will compute all premiums for this Coverage Part in accordance with our rules and rates.
b.Premium shown in this Coverage Part as advance premium is a deposit premium only. At the close of each audit period we will compute the earned premium for that period and send notice to the first Named Insured. The due date for audit and retrospective premiums is the date shown as the due date on the bill. If the sum of the advance and audit premiums paid for the policy period is greater than the earned premium, we will return the excess to the first Named Insured.
c.The first Named Insured must keep records of the information we need for premium computation, and send us copies at such times as we may request.
6.Representations
By accepting this policy, you agree:
a.The statements in the Declarations are accurate and complete;
b.Those statements are based upon representations you made to us; and
c.We have issued this policy in reliance upon your representations.
7.Separation Of Insureds
Except with respect to the Limits of Insurance, and any rights or duties specifically assigned in this Coverage Part to the first Named Insured, this insurance applies:
a.As if each Named Insured were the only Named Insured; and
b.Separately to each insured against whom claim is made or “suit” is brought.
8.Transfer Of Rights Of Recovery Against Others To Us
If the insured has rights to recover all or part of any payment we have made under this Coverage Pad, those rights are transferred to us. The insured must do nothing after loss to impair them. At our request, the insured will bring “suit” or transfer those rights to us and help us enforce them.
9.When We Do Not Renew
If we decide not to renew this Coverage Part, we will mail or deliver to the first Named Insured shown in the Declarations written notice of the nonrenewal not less than thirty days before the expiration date.
If notice is mailed, proof of mailing will be sufficient proof of notice.
Analysis
Because the liquor liability coverage part is written as a separate policy and not as an endorsement to an insured's general liability policy, it is subject to the common policy conditions form, IL 00 17 11 98, and contains its own provisions setting liability limits and “other conditions” setting forth the rights and duties of the insured and insurer. These provisions are similar to those customarily found in liability forms. For a discussion of these provisions, see General Provisions of the CGL.
1.”Bodily injury” means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.
2.”Coverage territory” means:
a.The United States of America (including its territories and possessions), Puerto Rico and Canada :
b.International waters or airspace, provided the “injury” does not occur in the course of travel or transportation to or from any place not included in a. above; or
c.All other parts of the world if the “injury” arises out of:
(1)Goods or products made or sold by you in the territory described in Paragraph a. above; or
(2)The activities of a person whose home is in the territory described in Paragraph a. above, but is away for a short time on your business
provided the insured's responsibility to pay damages is determined in a “suit” on the merits, in the territory described in Paragraph a. above or in a settlement we agree to.
3.”Employee” includes a “leased worker”. “Employee” does not include a “temporary worker”.
4.”Executive Officer” means a person holding any of the officer positions created by your charter, constitution, by-laws or any other similar governing document.
5.”Injury” means all damages, including damages because of “bodily injury” and “property damage”, and including damages for care, loss of services or loss of support.
6.”Leased worker” means a person leased to you by a labor leasing firm under an agreement between you and the labor leasing firm, to perform duties related to the conduct of your business. “Leased worker” does not include a “temporary worker”.
7.”Property damage” means:
a.Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or
b.Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the occurrence that caused it.
8.”Suit” means a civil proceeding in which damages because of “injury” to which this insurance applies are alleged. “Suit” includes:
a.An arbitration proceeding in which such damages are claimed and to which the insured must submit or does submit with our consent; or
b.Any other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent.
9.”Temporary worker” means a person who is furnished to you to substitute for a permanent “employee” on leave or to meet seasonal or short-term workload conditions.
10.”Your product” means:
a.Any goods or products, other than real property, manufactured, sold, handled, distributed or disposed of by:
(1)You;
(2)Others trading under your name; or
(3)A person or organization whose business or assets you have acquired; and
b.Containers (other than vehicles), materials, parts or equipment furnished in connection with such goods or products.
“Your product” includes:
a.Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of “your product”; and
b.The providing of or failure to provide warnings or instructions.
“Your product” does not include vending machines or other property rented to or located for the use of others but not sold.
Endorsements
There are two endorsements available that modify the liquor liability coverage forms. CG 28 03 01 96 can be attached to the claims-made version of the liquor liability forms and is simply a supplemental extended reporting period endorsement.
CG 28 03 refers to section V of CG 00 34 04 13 and offers an extended reporting period of unlimited duration for additional premium. The extended period starts five years after the end of the policy period for claims arising out of an injury reported to the insurer not later than sixty days after the end of the policy period. It should be noted that a basic extended reporting period starting with the end of the policy period and lasting for five years is automatically provided without additional charge.
If the insured requests this extension in writing within sixty days after the end of the policy period, the insurer will determine the additional premium, not to exceed 200 percent of the annual premium for the coverage part, and the extension will go into effect if that additional premium is paid.
The endorsement offers a supplemental aggregate limit equal to the aggregate entered on the declarations page in effect at the end of the policy period.
CG 28 06 01 96 limits coverage to the insured premises. Through this endorsement, insurance under the liquor liability coverage part applies only to damages arising out of insured premises, which includes premises shown on CG 28 06 01 96 or on the declarations page. In addition, insured premises are any premises acquired during the policy period if the insured notifies the insurer within thirty days after the acquisition and there is no other valid and collectible insurance applicable to the loss.