Liquor Liability Exposure and Coverages

 

Question: My question concerns the liquor liability exposure for a number of both profit and nonprofit social organizations with fully stocked and operated bar operations.We have covered the exposure by including liquor liability coverage form CG 00 33.  The carrier has also included form #CG 21 50, “amendment of liquor liability exclusion,” which seems to exclude liquor liability coverage. Is it appropriate to include both forms?

What is the purpose of the CG2150 endorsement and when should it be used? It seems to be more restrictive than the liquor liability exclusion language of the GL form.  

— California Subscriber

Answer: You have correctly analyzed CG 21 50 – Amendment of Liquor Liability Exclusion.

This endorsement is indeed more restrictive than the coverage provided in the standard CGL coverage form. This endorsement replaces the coverage that is provided in the standard CGL form. By attaching the endorsement, it is amending the CGL coverage form to remove the coverage from the CGL.  The exclusion avoids the use of the phrase “in the business of…” In addition, liability resulting from the intoxication of any person because alcoholic beverages were permitted on the named insured’s premises, for consumption on the named insured’s premises (BYO), is excluded.

The company is appropriately attaching this endorsement to remove the coverage that is provided by the CGL, as it is being replaced by the full liquor liability coverage provided by CG 00 33.  If CG 21 50 were not added to the policy, then the insured would have two coverages for liquor liability; that in the CGL form and the coverage of CG 00 33. In event of a loss, both forms would provide primary coverage and contribution would be by equal shares.

Otherwise, the only time CG 21 50 would be attached to a policy is when an insured has no liquor liability exposure and therefore does not want to provide any coverage for liquor liability.

 

Does protection extend to bartenders and servers?

Question: Our agency has an insured with a banquet hall and art museum where the insured holds special events and sells alcohol to the guests. Our insured does have a liquor license and liquor liability coverage on its commercial package policy.

The insured hires bartenders/servers from a local vendor for these events. The vendor’s insurance company has told the vendor that it does not have to carry liability insurance, nor do the bartenders since they are not selling the liquor; our insured is.

Our insured is wondering now if it is protected under its liquor liability policy, since it seems the vendor and the bartenders do not carry such coverage.

— Indiana Subscriber

Answer: The standard liquor liability exclusion applies to any insured that is in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages.

In our opinion, a banquet hall that sells alcohol is definitely in the business of selling, distributing, serving, and furnishing alcohol. It may not be the main source of income for the hall but selling alcohol has to be a huge percentage of income for the insured and probably, if alcohol was not sold, the number of events scheduled for the hall would diminish. Therefore, if your policy has the standard liquor liability exclusionary language, failure to carry liquor liability coverage would be a big mistake in our opinion. The fact that the insured does have liquor liability coverage is a very good risk management decision.

The liquor liability coverage that the insured has will provide it with the necessary liability coverage regardless of whether the vendor and/or the bartenders do not have such coverage.

Your insured is an insured under the terms of its policy for injury imposed on it by reason of the selling, serving, or furnishing of any alcoholic beverage. The vendor and the bartenders are not going to be considered as insureds under your insured’s policy, since they do not meet the descriptions of insureds under the “who is an insured” clauses.

 

When it comes to ‘wining and dining’…

Question: If an insured restaurant serves liquor, the standard ISO General Liability policy CG 00 01 excludes liquor liability coverage since the named insured (“you”) are in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages.

If the building owner is added to the CG 00 01 as an additional insured using CG 20 11 or CG 20 26, would the owner have liquor liability coverage since they are NOT in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages?

Since the exclusion only applies to the named insured, I would like to know if the building owner as additional insured is granted coverage that the named insured would not have in this GL policy.

— Illinois Subscriber

Answer: Previous editions of the liquor liability exclusion did exclude coverage for owners or lessors of premises used by others for purposes of liquor businesses.

Now, in the current edition of the CGL form, owners or lessors of premises are covered. The exclusion definitely applies only if the named insured is in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages. The building owner does not fit this description.

The bottom line is that owners or lessors of premises are now covered when they are not engaged in the liquor business. The building owner or lessor has coverage for its premises exposures and if the owner or lessor has no part in the manufacturing or selling or serving or furnishing of liquor, there is no reason for the liquor liability exclusion to come into play for the owner or lessor.

 

Excluding the liquor liability exposure

Question: We are concerned about liquor liability exposure. The insured is an Amvets hall and it sells liquor at meetings at cost. Can this exposure be excluded by adding CG 21 50, amendment of liquor liability exclusion? Does this sufficiently exclude the liquor liability exposure?

— Ohio Subscriber

Answer: If it is your intention to delete the liquor liability coverage that the current CGL form offers, then yes, endorsement CG 21 50 will do that.

The standard CGL form does provide some liquor liability coverage, since the exclusion applies only if the named insured is in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages.

This exception to the exclusion would allow coverage for your insured since an Amvets hall obviously is not in the alcoholic beverage manufacturing or distribution business.

However, CG 21 50 amends the liquor liability exclusion by adding that the exclusion also applies if the named insured serves or furnishes alcoholic beverages for a charge whether or not such activity requires a license or is for the purpose of financial gain or livelihood.

So, the liquor liability exclusion would then apply in any situation, even a social gathering, when the insured serves alcoholic beverages for a charge.

 

Understanding the coverage for special events

Question: Liquor liability exclusion endorsement, CG 21 51, is attached to the CGL form of our insured; the insured is a non-profit symphony.

The insured is holding a fundraiser that will serve wine. The cost of the fundraiser includes music by the symphony, dinner and beverage. Wine is served by the non-profit (not a separate caterer) and included in the price. No license is required from Pennsylvania , as far as the insured is aware.

In the absence of listing the event in the schedule on CG 21 51, does the insured have coverage for this liquor liability exposure?

— Pennsylvania Subscriber

Answer: If your insured has CG 21 51 on its CGL form, it is recommended that the specific activity be described on the endorsement so that the liquor liability exclusion does not apply to the described event. CG 21 51 states that the liquor liability exclusion applies if the named insured sells or distributes alcoholic beverages, or furnishes alcoholic beverages for a charge. Based on your description of the event, this fits the named insured non-profit.

This endorsement is actually stricter than the liquor liability exclusion on the CGL form, as that exclusion requires the insured to be in the business of manufacturing, distributing, selling, or serving alcoholic beverages. Whereas, the endorsement applies to an insured that merely sells or distributes the alcohol and does not require the insured to be in the business of doing that. Therefore, since the non-profit here is not in the business of selling or distributing alcohol, you can use CG 21 51, but fill in the schedule so that the exception to the exclusion can be applied.

 

** Each State has it's own liquor liability laws and policies.  This arcticle was shared with the express intention of prompting readers to ask their own questions about their coverage.  The "Answers" in this article are specific to the states the questions came from, and in no way does the sharing of this article constitute insurance or coverage advice from Premier Insurance.  For answers about your business liquor liability coverage, please contact a licensed agent in your state for advice.

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