The departure of big players from the liquor liability market spells plenty of expectations for rates at year-end, but the biggest trends to watch involve coverage developments. Here’s what to keep an eye on.
You know your restaurant client reports sales of 60% food and 40% liquor. But do you know how expensive that liquor is, or how many bar fights take place in an average weekend?
The departure of big players from the liquor liability market—including liquor liability-heavy Indemnity Insurance Company, which went into receivership earlier this year—spells plenty of expectations for rates at year-end. “As companies jump in and out of this market, it gets tighter on pricing,” says Sandra Haley, senior vice president of underwriting and marketing at Hospitality Insurance Group.
But the biggest liquor liability trends to watch involve coverage developments rather than rates. Here’s what to keep an eye on.
Higher Quality
As consumers become more aware of higher-end beers and wines, the liquor liability market has experienced “a move to quality,” says Kathy Clark, products director for casualty at Fireman’s Fund. For brew pubs or restaurants with an extensive beer or wine menu, that translates into a higher dollar amount of alcohol sold compared to food sales—“without really increasing the liquor liability exposure,” Clark says. “They’re not serving more alcohol—they’re just serving more expensive alcohol.”
Agents should pay attention to the average cost of the beer, wine or alcohol their liquor clients sell to avoid overcharging them “based on someone who’s just looking at their sales with a standard rate vs. someone who takes into account that they’re actually selling less alcohol,” Clark explains.
A related trend involves businesses that sell alcohol by the bottle to specific tables, leaving the bottle with the setups and mixers that go with it. In these cases, it’s crucial for agents to convey controls to the insurer.
“With the bottle on the table with the setups and mixers, the establishment may appear to have less control over how much is getting served in a limited amount of time and who it’s being consumed by,” Clark explains. “They need to have very stringent controls at the door to make sure there are not under-aged patrons on the premises at all. And in an ideal situation, the establishment will also provide a server to do the actual pouring even though the bottle and the setups and mixers are provided at the table.”
Lower Limits
Haley notes that the majority of liquor claims are the result of assault and battery, whether liquor-related—patrons drink too much and start a fight—or not—patrons aren’t drunk, but happen to be in a bar when they get into a fight. As a result, many companies have made limits for assault and battery “not as readily available,” Haley says. “Companies are really reducing their risk on one of the highest claim-driven coverages.”
As limits become harder to find, most companies have started providing sublimits to address the need for coverage. Unfortunately, that means a client “might buy a million dollars’ worth of liquor insurance, but the company is only willing to sell you maybe $50,000 or $100,000 of assault and battery,” Haley explains.
And that’s a problem: “If you’re a bar, that’s a coverage you really, really need,” Haley says—if overlooked, the coverage gap could have enormous implications for commercial clients.
“You can risk-manage minors, because you can put in a really good system and make sure IDs are checked,” Haley says. “And if you have good bartenders who have been trained in alcohol training to notice when they need to cut back, you can risk-manage over-serving. But assault and battery—you never know.”
Jacquelyn Connelly is IA senior editor.
