Liquor Liability Insurance: Mitigating Your Risk

To sell alcohol in Oregon, a business must carry at least $300,000 of liquor liability coverage. Unfortunately, the cost for this mandatory coverage — and the minimum premiums that insurance companies are charging — keep rising, placing increased financial pressure on the Oregon hospitality industry. 

Just one liquor liability claim can place your hospitality business or event venue in fiscal jeopardy. Here’s a brief overview of the challenges, along with steps you can take to protect your establishment.

The liquor liability landscape
Many restaurants, bars, and taverns are facing double-digit premium increases. Why? Over the past five years, liquor liability claim frequency and severity have grown significantly, along with the litigious environment. 

Underwriters look at historical data to estimate future costs. With the rise of high-profile lawsuits and multi-million-dollar judgments, the historical data is no longer adequate for forecasting losses. As a result, fewer insurers are willing to underwrite liquor liability. And those who do are pricing the coverage conservatively.

Delayed reporting
Liquor liability claims often emerge weeks or months after an injury occurs. In Oregon, an injured party must provide written notice to the alcohol provider within 180 days of the incident in order to pursue a claim. Then, they have up to two years from the incident date to file a liquor liability lawsuit.

Many plaintiffs wait until day 179 to provide the written notice and day 729 to file the lawsuit. During that elapsed time, you may experience staff turnover. If you have security cameras and only keep the video footage for 30 days, important evidence may be long gone. How do you remember a specific patron from six months ago or two years ago?

The unpredictability and delayed reporting of liquor liability claims contributes to insurer’s reluctance to take on the risk.

Employee training: The cornerstone of your liquor liability defense
Employees are your first line of defense against potential liquor liability claims. Train them beyond state-required basics so they know how to:

1. Prevent underage drinking through careful ID inspection: Some establishments are asking all patrons for ID, including 80-year-old grandmothers. But do your employees know the acceptable forms of ID? Can they spot a fake ID? Bring in an expert who can teach your workforce how to identify underage patrons. Also, let your staff know that serving alcohol to an underage patron is a fireable offense. 
2. Identify the signs of intoxication: Slurred speech and inability to walk in a straight line are obvious signs of impairment. But employees need training and practice to discern more subtle signs of alcohol, marijuana, or other drug use. If a bar hopper arrives, already under the influence, do employees know not to serve alcohol to the patron and to report the situation to a manager?
3. Communicate effectively with patrons and managers: As a manager, you are “captain of the ship.” You have the final say on whether to deny alcohol service. Ask employees to come to you any time they have a question about whether to serve. Teach them what to say/not say to patrons and when to loop you into the communication. Show them what to do if a patron becomes angry or demanding.
4. Document incidents: Once you cut someone off, document what you did, when, and why. Consistent documentation can make the difference in how a jury views your establishment. 

No documentation, no defense
Even establishments who are doing all the right things can find themselves named in a liquor liability lawsuit. This is why it’s crucial to document incidents thoroughly.

In a recent case, state police came into a bar within 48 hours of an incident, so the establishment knew about a potential liquor liability claim right away. The manager was able to secure video footage, point-of-sale data, and other documentation, which later proved pivotal in minimizing the claim. The bar had video of the specific table, knew exactly what they had served, and what the patron had consumed. 

Do you have a “red book”? This is Oregon’s name for an incident log (each state calls it something different). In this book, you document any liquor-related incidents, such as a brawl, dating violence, or other event. Write as much detail as possible about what happened, when, which server(s) witnessed the incident, etc. If you have video on premises, there needs to be a procedure to pull and store the video related to the incident. Similarly, you want to capture all the point-of-sale data related to the incident, so you have proof of what you served to the patron(s).

All employees need training on the documentation process and its importance. Check the incident log daily to make sure your team is documenting events thoroughly. If a claim occurs and you’re missing documentation, there will be a presumption of liability. In contrast, if you have video, an incident log, and point-of-sale data, you have a way to defend your business. Documentation can lessen the impact of a potential claim.

The role of policies, procedures, and operational controls
Do you have written policies governing whether you give doubles or stop serving shots after certain hour? Do your bartenders have specific procedures for communicating with one another — so if you deny service to Johnny, he doesn’t try to get a drink from a different bartender? 

If you suspect a patron may have over-consumed, do you pay for a rideshare to get the person home safely? 
Implementing best practices for managing liquor liability will not prevent lawsuits, but you position yourself for a better outcome. You want a jury (and your insurance company) to see that you consistently take well-thought-out precautions to keep you customers and community safe. | Rob Hoover, Risk Strategies

About:
​Rob Hoover of Risk Strategies is a national expert on liquor service safety. At 15, Rob started as a potato peeler in a small, family-owned diner. Today, he’s an industry insider with deep knowledge of day-to-day hospitality challenges. For the past 20 years, he’s helped hospitality businesses as a risk management and insurance advisor. Rob Hoover of Risk Strategies Fournier Group manages ORLA’s Hospitality Insurance Program (HIP). Contact him to for more information on any of the topics in this article.

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This guest blog was submitted by Risk Strategies Fournier Group. For more information on guest blog opportunities, contact Marla McColly, Business Development Director, Oregon Restaurant & Lodging Association.