Agent & Broker Group spotlight: Revised Liquor Liability Exclusion Addresses BYO Establishments

Revised Liquor Liability Exclusion Addresses BYO Establishments

January 6, 2014 by Arthur Flitner

Revised Liquor Liability Exclusion

By Arthur L. Flitner, CPCU, ARM, AIC, AU

An ISO revision of the Commercial General Liability Coverage Form, which took effect in most states in April 2013, changes the Liquor Liability exclusion to address how the exclusion applies to “bring your own” (BYO) establishments, typically restaurants.

The revised exclusion clarifies that allowing patrons to bring their own bottles does not, in and of itself, mean that the insured is in the business of selling, serving, or furnishing alcoholic beverages, even if the insured charges a fee or is required to be licensed for such activity.

This means that the question of whether the insured is in that business must be answered by considering additional factors. Unless the insured is found to be in the business of selling, serving, or furnishing alcoholic beverages, the exclusion does not apply.

According to ISO, this revision may be considered a broadening in CGL coverage because it is an exception to the exclusion that allows customers to bring alcoholic beverages for consumption on the insured’s premises.

To provide an underwriting tool for insurers that are unwilling to cover BYO operations under a CGL policy, ISO has also revised endorsements CG 21 50, Amendment of Liquor Liability Exclusion, and CG 21 51, Amendment of Liquor Liability Exclusion -- Exception for Scheduled Activities. The revised versions of these endorsements now exclude bodily injury or property damage caused by intoxication resulting from BYO operations.

If you are an agent or a broker with BYO establishments in your book of business, the change in the Liquor Liability exclusion will be good news for your customers, but watch out for the revised versions of CG 21 50 or 51, which could be added to the policy.

Arthur Flitner, CPCU, ARM, AIC, AU is the Senior Director of Knowledge Resources at The Institutes.

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James P Robbins CPCU 414 days ago

Mr Flitner;

I don;t have the form in front of me, but I'm confused by the 4th paragraph that taks about broadening coverage. An exception to the Exclusion that ALLOWS customers to bring Alcoholic beverages for consumption on the insured's premises? I must be missing something.

Arthur Flitner 407 days ago

While ISO has described the wording change as a potential broadening of coverage, that does not mean that BYO establishments are exempt from the liquor liability exclusion. Other factors in a particular case could be the basis for determining that a BYO establishment is indeed in the business of "manufacturing, distributing, selling, serving, or furnishing alcoholic beverages." If, for example, a waiter gave a restaurant patron an unfinished bottle of wine that another patron had left in the restaurant, that action might be evidence that the restaurant was in the business of serving or furnishing alcoholic beverages, thus activating the exclusion.

Daniel Roy 407 days ago

I may be totally off here but perhaps you are interpreting it as the exclusion being what allows customers to bring alcoholic beverages, and therefore an exception to that type of exclusion wouldnt broaden coverage. I believe what was intended was that the exception to said exclusion, is what is allowing the liquor to be brought in, and therefore broadending coverage.

My confusion was that i thought the endorsement allowed the exclusion to apply even if there was no sale, but that a license was required for such activity.