Fewer bars, restaurants will serve alcohol in S.C. unless this state law changes [The State]

In a troubling trend that has caught the attention of business owners and lawmakers alike, South Carolina is witnessing a wave of hospitality businesses shuttering their operations due to exorbitant liquor liability insurance premiums.

Owners of bars, restaurants and other facilities that serve alcohol after 5 p.m. are facing a financial crisis in South Carolina behind a law passed in 2017 that requires them to carry a million dollar liability insurance policy. The premiums for such policies recently skyrocketed, leading some industry leaders to plead with policymakers for relief.

Short of a change in the law, South Carolinians may find it difficult to secure a drink at their favorite bar or restaurant, as a number of businesses are facing closure.

“The urgency of the problem is (liquor liability insurance premiums) have crept up as this ($1 million liability insurance) requirement has been in place,” said Phil Blair, former owner The Whig, a popular bar across from the State House that has since closed, and current owner of Weco Bottle and Biergarten.

“What we’re seeing are exponential rate increases as the number of insurers pulls out of the state because of the way the liability laws are written. For example, as our policy expires in 2023, we’re suddenly seeing a 100, 200 and even 300% rate increase, which equates to tens of thousands of dollars that we weren’t spending before to do the same thing we’ve been doing, even though we’ve done nothing wrong.”

Liquor liability insurance offers protection against claims related to alcohol-related accidents or incidents on their premises. For many businesses, the cost of insurance has become unsustainable, forcing them to consider drastic measures such as relocating to neighboring states with lower insurance costs or closing their doors altogether.

“We’ve seen dozens of closings already, people have cited (liquor liability costs) as the reason they’ve shut down shop all across the state,” Blair said. “It’s such a huge cost, it’s stagnating growing a business.”

To help owners in the hospitality industry, lawmakers have introduced two proposals — S. 1048 and H. 5066 — that aim to lower insurance costs by, in part, specifying the basis of an establishment’s liability.

Under S. 1048, establishments that serve alcohol can only be held liable for damages caused by drunk patrons if the patron was visibly drunk before being served more alcohol at that particular bar, restaurant or event venue.

H. 5066 would seek to lower liquor liability insurance premiums by creating a special reserve funded by taxes on individual alcoholic beverages.

State Sen. Michael Johnson, R-York, who sponsored S. 1048, said hospitality business throughout the state have been negatively impacted.

“You can’t call many restaurants or bars that won’t tell you that their liquor liability insurance has risen dramatically,” Johnson said. “Their premiums are doubling, tripling sometimes going from $6,000 a year to $45,000, and they sent me the receipts.”

Currently, if a patron visits a bar early in the day and consumes a beer, visits another establishment for more beers and then a third establishment for even more drinks, and then, upon leaving, causes an accident, all three establishments, at best, are held equally liable for damages. At worst, the first bar is held liable, according to Johnson.

“What my bill says is, ‘no,’ unless the patron was clearly intoxicated at the time they were served ... then you have no liability,” Johnson said. “That’s fair to the to the mom and pop businesses and restaurants that are doing things the right way, but it also will punish the guys who are serving dollar beers and tequila all afternoon.”

Factors driving premium increases

Several factors contribute to the exorbitant liquor liability insurance premiums in South Carolina, including high rates of alcohol-related accidents, the state’s liability laws and limited competition among insurers, according to Chris Long, an independent business insurance agent.

South Carolina ranks among the top 10 states with the highest rate of drunk drivers, according to Forbes, which has led to higher premiums to reduce potential liabilities.

In addition, the legal landscape in S.C., including liability laws and court precedents have influenced insurers’ risk assessments and pricing strategies.

Further, a lack of competition among insurers in the state have resulted in higher premiums, as businesses have fewer options to choose from, limiting their ability to negotiate favorable rates.

“The state passed a law (in 2017) requiring all businesses that serve alcohol or liquor to carry a million dollar liquor liability policy, which, in a way, has created some unforeseen results,” Long said. “Now, if you have a drink at one bar and you go to three others, and there’s a (liability) claim filed, all of the bars get brought into it. And if there’s a million dollar settlement from the policies involved, the insurance carrier sees that and quits writing coverage in the state, and if they do write coverage, the prices have gone up three times.”