Rising liquor liability rates are hurting businesses. What are the solutions?

CHARLESTON, S.C. (WCBD) — Liquor liability insurance rates are rising for restaurant and bar owners, and those in the hospitality industry say it is a factor leading to more restaurant closures across the state. Now, they are hoping South Carolina lawmakers can create a solution to the problem.

In 2017, a state law (Section 61-2-145) was passed that required establishments serving alcohol past 5 p.m. to carry a liquor liability insurance policy with total coverage of at least $1 million. It was a change that was made to ensure victims of alcohol-related incidents receive proper compensation. However, many in the industry say that the law led to some insurance companies pulling out of the state and skyrocketing rates.

Todd Miller, the owner of Community Crafthouse in Charleston, said when his policy recently came up for renewal the rates more than doubled. But because of their success, the rising costs have been manageable.

“We’ll serve upwards of 45 to 50,000 beers in a year,” he explained. “We can spread that raise of say $20,000 across 40,000 beers and maybe it won’t be such an impact.”

Many smaller establishments are in a different situation, including Veterans of Foreign Wars (VFW) posts that have been forced to close because they cannot afford the coverage.

Recently, Post 3433 and Post 3137 had to shut down, and they point to the 2017 liquor liability law as the reason. Post Commander Robert Zdenek of VFW Post 3433, said their rates went from $9,500 to $69,000.

“We’re working on rates right now because of the new law in effect on liquor liability,” he said. “So we’re scrambling as we are a nonprofit — as it is we have a hard time making it.”

Steven Burritt, the Regional Executive Director of Mothers Against Drunk Driving (MADD), said he understands the frustration but argues not all of the blame should be placed on the law.

“We did not see the rates go up immediately after that passage for one,” he said. “There’s a major sort of issue with insurance rates going up — so before we want to tie it to one specific thing that was good for victims and good for the state, we got to be careful not to undo something that was positive over what may be sort of a false connection.”

Another obstacle potentially contributing to the skyrocketing rates is it is now harder to find carriers in the state offering the coverage. Data from the South Carolina Department of Insurance shows the industry overall is losing about $1.77 for every dollar of premium earned.

“That’s why the premiums are so high because they’re running a business knowing that probability of them getting pulled into a lawsuit and having to pay out is pretty high,” said Ben Hebel, a producer at KSA Insurance.

One option that has been offered as a solution to lower rates on the state level is changing the Joint and Several Liability laws. A proposed bill, S.533, aimed to make it so financial damages in a personal injury or wrongful death lawsuit only equaled that person’s share of fault. As the current law stands, if the case involved an alcohol-related incident, parties could be found fully financially responsible despite their percentage of fault.

Some believe this opens the door for someone who is 1% at fault having to pay 100% of the damages. But Burritt said there are misconceptions about the current law, and changing it could negatively impact how victims are compensated.

“It doesn’t really work that way in real life — that anyone at a super low percentage is having these huge payouts they have to cover. You have to be proven to be willful and reckless in your alcohol sales to ever have to be involved in one of those sorts of big payouts,” he explained. “There are other ways we could lower insurance rates, other than changing joint and several liability. But we have to stand in front of that idea and say ‘absolutely not,’ because it’s unfair to victims.”

S. 533 (South Carolina Justice Act) did not pass, but there are hopes it will be addressed again next year. However, Burritt suggests taking measures that would lower rates by addressing the root of the problem instead.

“We wish the majority of the conversation would be focused on why we simply have so many of these tragedies occurring on our roads,” Burritt said.

As an example, he points to H. 5066 which would allow businesses to lower their required coverage amounts by taking steps like requiring alcohol server training to make their establishments safer.

“Because those were well thought out practices we may potentially agree and say that may make sense,” Burritt said.

The bill passed the House and ultimately stalled in the Senate.

Hebel is hopeful changes can be made soon before more businesses are forced to close. He also points out that some personal interests may need to be set aside for real solutions to be implemented.

“This is strictly a legislation problem — so I think that is the main point here,” he said. “If we don’t get any change there, then we’re going to see more and more places go out of business.”

In the meantime, business owners like Miller encourage customers across the state to reach out to their lawmakers to make their voices heard too.