If you run a business that sells or serves alcoholic beverages, you know first-hand how important it is to have liquor liability insurance, as this type of coverage can protect you from costly lawsuits and damages if an intoxicated customer causes harm to themselves or others. But did you know that the liquor liability insurance market is undergoing some significant changes that could affect your coverage and premiums? In this blog, I will explain what these changes are specifically and how you can best prepare for them.
Introduction
Liquor liability insurance is a specialized line of commercial coverage that has faced hardened conditions in recent years. This is mainly due to the rising frequency and severity of liquor liability claims, especially those involving drunk-driving incidents. As a result, many insurance carriers have either increased their rates, reduced their capacity, or exited the market altogether. This has made it more difficult and expensive for businesses to secure adequate coverage.
To help you understand the current and future state of the liquor liability insurance market, here are some of the key developments and trends to watch in 2024:
Surging Drunk-Driving Lawsuits
Drunk-driving incidents are one of the biggest liquor liability exposures for businesses, as they can lead to serious injuries, fatalities, and property damage. According to the National Highway Traffic Safety Administration, more than 13,000 people have died in alcohol-impaired crashes annually since 2021, representing a 23% increase from the 10-year average. This has resulted in a growing number of large-scale lawsuits and claims against businesses that served alcohol to the drivers. These lawsuits are expected to continue impacting the market in the coming years.
Evolving Legislation
Most states have dram shop laws that hold businesses liable for serving alcohol to minors or intoxicated patrons who cause harm to others. Some states, however, have been revising these laws to limit the liability of businesses and make it harder for plaintiffs to prove negligence. For example, some states now require that employees knowingly continued to serve alcohol to visibly intoxicated customers and that such service was the proximate cause of the harm. Businesses should keep track of the changing legislation in their states and comply with the relevant regulations.
Coverage Challenges
As the liquor liability market continues to face large losses, many policyholders have encountered coverage challenges. Industry data shows that most insureds have seen double-digit rate increases since 2021, with some carriers imposing minimum premiums between $25,000 and $50,000. Moreover, some carriers have lowered their capacity or left the market in certain locations, leaving policyholders with limited options and insufficient coverage. Some states also have laws that require businesses to have liquor liability coverage with policy limits of at least $1 million, which has become increasingly hard to obtain.
Tips For You
Given these challenges, businesses need to be proactive and strategic when it comes to buying liquor liability insurance. Here are some tips to help you secure the best coverage for your needs:
- Hire experienced workers and train staff regularly on verifying customers’ ages, watching for signs of intoxication, and confirming patrons have a designated driver or utilize a ride-hailing service.
- Review your business hours and serving protocols to determine your specific liquor liability exposures. Make adjustments as needed, such as closing earlier and implementing regulated pour systems.
- Consult legal counsel to ensure compliance with applicable liquor liability legislation.
- Work with a trusted and knowledgeable insurance broker who can help you find the most suitable and affordable coverage for your business.
Conclusion
Liquor liability insurance is a vital coverage for any business that sells or serves alcoholic beverages, as it can protect them from costly lawsuits and damages stemming from intoxicated customers’ actions. The liquor liability insurance market, however, has been facing hardened conditions due to rising claim frequency and severity, especially from drunk-driving incidents. As a result, policyholders have experienced premium increases, capacity constraints, and coverage challenges. To mitigate these issues, businesses should stay updated on evolving legislation, implement effective loss control measures and work with a trusted insurance broker to secure the best possible coverage for their needs. In doing so, businesses can reduce their liquor liability exposures and ensure a successful and profitable operation.
Each month, Swarts Manning insurance experts cover relevant topics for your business. Stay tuned for more discussions about managing insurance and industry-specific tips.
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