Controlling Liquor Liability Exposures
As an underwriter, I have probably underwritten hundreds of risks with an exposure to liquor liability claims. As an underwriting manager and underwriting consultant, I have reviewed more underwriting files of risks with liquor liability exposures than I can shake a stick at. While some states are more difficult to write coverage in because they impose a significant level of responsibility on businesses which serve alcoholic beverages, it is still a significant exposure anywhere in the United States for a wide range of business classes. Therefore, it is an exposure requiring both agents and underwriters to understand, evaluate, and address.
Sometimes, underwriters and agents lump liquor liability exposures in with Commercial General Liability exposures (remember the nomenclature Comprehensive General Liability is no longer in use). While related in nature, it is separate and distinct. Liquor Liability relates to exposures specifically excluded under the Commercial General Liability policy. I know the statement seems basic in nature, but sometimes the distinction gets lost.
A premises liability claim may ensue because a patron trips and falls at the restaurant because the walkway or steps were not illuminated adequately. The liquor liability claim ensues because the patron tripped and fell because the restaurant over served them alcoholic beverages.
Coverage for Liquor Liability can be provided by simply deleting the exclusion within the Commercial General Liability Coverage Form. In which case it becomes part of the Commercial General Liability. However, the more common method is to issue a stand-alone policy or add the coverage onto the Commercial General Liability policy with separate limits and a governing coverage part.
With that aside, how should a risk with a liquor liability exposure seek to prevent or control the likelihood of a liquor liability claim from occurring? The usual answer is to have a TIPS program. TIPS stands for “Training for Intervention ProcedureS.” TIPS is a skills-based program to help servers of alcoholic beverages prevent intoxication, underage drinking, and drunk driving.
The training helps identify problems and actions servers should take while confronting irresponsible drinking. But here is the kicker. It only works if it is practiced. The truth of the matter is in most applications it is only practiced on a haphazard basis. Typically, servers serve alcoholic beverages and continue to serve alcohol beverages until one of two things happens. The first is when the patron gets up and leaves. The second is when the patron is intoxicated enough, they cause a problem with servers or other customers.
In fact, I have only saw one risk which truly controlled their liquor liability exposure. They had a no exception policy of a 2-drink limit. Once a customer consumed their second drink, they would no longer serve that patron alcoholic beverages. It sounds extreme. However, when you think about it, it does not take a lot of drinks to get to the .08% blood alcohol level. For a single, the blood alcohol content increases by .02 %. Therefore, a blood alcohol content .08% takes about 4 drinks.
A general rule of thumb is it takes about 1 hour to process one drink. Drinking more than 1 drink an hour, results in higher concentrations depending upon age, genetics, size, and health and requires more time to break down the alcohol. In the USA a standard drink is:
1. 12 ounces of beer (about 5 percent alcohol by volume)
2. 5 ounces of wine (about 12 percent alcohol by volume)
3. 1.5 ounces of distilled spirits/liquor (about 40 percent alcohol by volume)
Many craft beers have alcohol content well above 5% and in some cases approaching 9%. Furthermore, some establishments serve in pints (16 ounces). Meaning just one beer within an hour may put some individuals close to legal intoxication.
Even implementing TIPS procedures has variations. Consider the aspect of assuring patrons consuming alcoholic beverages are of drinking age. I have been in numerous establishments who exercise what I consider the “gold standard” in assuring patrons are of age. The gold standard is to require all patrons without regard to their age show identification. This practice is non-confrontational and may even be viewed by older clientele as complimentary. After all who does not like being told they look young?
In the real world, most restaurants, taverns, bars, and pubs cannot survive restricting patrons to 2 drinks. TIPS is an effective control. However, TIPS relies heavily upon confronting patrons which inhibits servers from practicing it timely. But they can take effective non-confrontational common-sense steps to prevent incidents.
One effective method is slowing the rate of service. The rate at which individuals consume alcohol can have a dramatic effect on the level of intoxication. By slowing down the rate at which servers provide follow-up rounds reducing the likelihood of a patron becoming intoxicated. By managing how quickly follow-on drinks arrive to patrons to close to an hour per drink, the customer’s level of consumption can be controlled.
Another control rarely considered is product selection. By selecting alcoholic products with are lower in alcohol content, restaurants, and bars can reduce the incidence of intoxication of patrons. Not to mention they can also have more drinks with less alcohol. For example, many traditional light beers have an ABV or 4.3% versus the benchmark of 5%. In fact, Americans prefer light beers to other. Based on alcohol industry data, 52% of all beer consumed in 2018, were light beers. Therefore, skewing the selection to lower alcohol light beers will also be catering to the American taste bud.
The term “session beer” are commonplace have found their way onto menus all over the world. A session beer loosely defined as a beer below 5% ABV, which when consuming multiple glasses, is less likely to cause inappropriate intoxication.
Furthermore, the new NA beers are the same as your father’s NA beer. Many of today’s NA beers are very tasty and appeal to those who like beer for the taste and not the alcohol. In fact, there is a greater demand for low alcohol and no alcohol beverages.
Which recalls another method to reduce exposure to liquor liability incidents, establishments can list the ABV values of all the alcoholic beverages they serve, allowing responsible patrons to make a choice for lower alcoholic content or understand when they are consuming high ABV beverages. By catering to these consumer trends and showing the ABV, drinking establishments help their customers consume less alcohol and perhaps even consuming more product while decreasing intoxication.
TIPS is and always will be an important tool to prevent liquor liability incidents. However, their ability to prevent incidents can be greatly enhance by additional operational methods described above.