July 30, 2018 by Jason Contant
Risk managers in the restaurant and bar business need to “mine” for information from potential insureds to make sure they exercise their duty of care in serving alcohol responsibly.
“From a risk management standpoint, what’s key is the insured is well-run,” said Lorne Folick, a partner with Dolden Wallace Folick LLP, who specializes in liquor liability and other specialty insurance defence litigation. “And what I mean by that is the insured has policies and procedures and recognizes their duty of care and they’ve properly trained their staff around that duty of care.
“How you answer the well-run part is you have a detailed questionnaire and in that detailed questionnaire you mine for information: do you have policies and procedures? Do you have surveillance? Do you keep incident logs?” Folick said. “The smart businesses that understand their risks have all manner of protocols, of preservation of evidence, of incident reports, of checklists when things happen.”
From an underwriting perspective, the well-run, well-managed, well-documented liquor establishment is the “sweet spot,” Folick added. “Underwriters look at these liquor risks and one of the big identifiers as to whether they want to write them or not is, are they well-run?”
Another underwriting consideration is, “do you have a mechanical bull? Do you have activities on the premise that are inherently dangerous when combined with alcohol? That’s what the questionnaires mine for.”
Brokers also have a role to play. The first step is recognizing that their insureds have this exposure. Sophisticated entities like restaurant chains understand this risk, but how about a small pub at the 18th hole of a golf course with a staff of five? “Are you training your staff how to properly serve?” Folick asked. “Did the broker find out how much your liquor sales are next to food? Does the broker understand that this is part of a large entity and maybe there needs to be an additional named insured under their policy?”
In other words, where liquor is sold needs to be properly identified and conveyed onto underwriters. Once this liquor risk is brought to the attention of underwriters, the last piece is coverage limits.
Whenever there is a significant motor vehicle accident, entities like bars can get pulled into legal cases because drivers are carrying inadequate auto insurance, Folick explained. So the accident victim can be looking for somewhere else to seek recovery, especially on a “joint and several” liability basis.
This type of liability allows a plaintiff to recover damages from any of the defendants regardless of their individual share of liability. For example, if a plaintiff sues two defendants, one of whom is 90% liable but bankrupt and the other is only 10% liable but solvent, the latter may be required to pay 100% of the damages. “So adequate limits from a broker standpoint is absolutely critical,” Folick said.