A property owner leases space to a restaurant that serves liquor. As landlord, the property owner wants to be named as an additional insured to include host liquor coverage. The restaurant has liquor liability insurance, but the property owner cannot be named as additional insured on this policy because coverage is not written to allow for third-party exposure. The landlord won’t serve the liquor or profit from sales.

Q: “I believe the landlord would have host liquor coverage under the current ISO commercial general liability policy, endorsed as Additional Insured – Lessor (landlord). I don’t see how the landlord can have anything other than the host liquor exposure, which I feel would be a difficult claim to prove and more related to GL, business interruption or property damage in the event of a suit. What do you think?”

A: “You’ll need a legal opinion to determine whether the landlord has more than a host liquor exposure. I believe many, if not most, state dram shop laws do not attach liability to a landlord, but I recall a court case several years ago that did. I agree that the CGL policy includes host liquor liability, which would extend to the landlord through the additional insured endorsements.

One would assume that in the event of a claim against the landlord for more than host liquor, the separation of insureds clause and the liquor liability exclusion would work so that the exclusion doesn't apply to the additional insured. After all, the landlord is not the one ‘in the business of’ selling, serving, furnishing and so on. However, the exclusion is very broad:

Liquor Liability

‘Bodily injury’ or ‘property damage’ for which any insured 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.

This exclusion applies only if you are in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages.

If ‘you,’ the named insured, are in the alcohol business, there is no coverage for any insured. Ideally, the landlord would secure additional insured status on the liquor liability form, but ISO has no way to do this.”

Bill Wilson is director of the Big “I” Virtual University.

This question was originally submitted by an agent through the VU’s Ask an Expert Service. Answers to other coverage questions are available on the VU website. If you need help accessing the website, email logon@iiaba.net to request login information.