Myrtle Beach area VFWs, Legions struggle with rising liquor liability insurance rates

Scott Loftus, quartermaster at Murrells Inlet VFW Post 10420, is wondering where the post's next liquor liability insurance policy is going to come from.

And if they can find one, the next question is, can they afford it?

It's through no fault of their own. They've had no catastrophic claims at the Murrells Inlet VFW. The post serves a members-only clientele. And the canteen only stays open after 9 p.m. one day a week, closing before most bars get busy.

Still, Loftus said, "I'm scrambling right now to find someone to insure us. We've got a couple of months." The post has enlisted a pair of brokers in the search.

It's not a problem unique to Murrells Inlet.

"We're seeing this happen statewide," said Jim Fox, commander of the South Carolina VFW.

Insurers have been fleeing the liquor liability insurance market in South Carolina, while those remaining have raised prices. It's a problem borne by all proprietors that serve alcohol, but low-volume license holders like small-town bars and service organziations like the VFW or American Legion that operate canteens are particularly hard-hit.

"Really, it's any small business with a liquor license," Loftus said.

State Sen. Greg Hembree (R-North Myrtle Beach) agreed that there's a problem, and said there are a couple of factors at play that "have insurance companies running scared."

There's the state's $1 million liquor liability insurance policy requirement for any business or other entity — even nonprofits like VFWs — that serve alcohol on the premises after 5 p.m. It's been in place since 2017.

Then there's South Carolina's joint and several tort law. The state law holds that a defendant in a civil lawsuit, even deemed only partially responsible for the damages, can be made to pay the entire judgement.

Those two factors, which have brought about an increase in lawsuits, amount to a "double whammy" for VFWs, American Legions, fraternal clubs and small mom-and-pop bars and restaurants, Hembree said, adding he hopes to see both laws addressed in the next legislative session.

Hembree said he voted in favor of the $1 million liquor liability requirement when it was approved in 2017, as a way to assure that victims of criminal DUI accidents are fairly compensated.

"It has that sound-good kind of thing, but maybe there are unintended consequences we haven't thought about," Hembree said.

Minor tweaks to the law, like allowing bars that close by 9 p.m. to be exempt from the liquor liability insurance requirement, could be helpful for some veterans and social clubs, he said.

The underlying problem — the joint and several tort law — would also need to be addressed.

"The way it is now, someone could have one drink at our bar, and then 10 drinks down the street, and we could be held entirely responsible," said Fox, the VFW's state commander.

South Carolina House Bill 533, co-sponsored by more than a dozen state senators, including Hembree, would address the problem. It was introduced earlier this year, but became snagged in a sub-committee in the 2023 session, and never made it to the floor for a vote.

But Hembree said it's still a viable bill when the legislature reconvenes in January to finish its two-year session, and could be revisited. It would allow juries to apportion fault in more cases, lessening the potential for a business being held entirely responsible for an action in which it was only tangentially involved. Theoretically, that would lower rates and bring insurers back to the market.

Hembree said he's heard from 12 to 15 alcohol establishments expressing concerns about the liquor liability insurance situation.

"Almost all of them were little mom-and-pop, small bars. It's the little guys who are reaching out to me; their profit margins are so small," he said.

Lawmakers are also awaiting the results of an inquiry into the problem by the South Carolina Department of Insurance. DOI held a data call with insurers in June to ascertain why liquor liability insurance rates are rising, and why some insurers have stopped writing policies.

Diane Cooper with the DOI said the analysis of the effort is nearing completion and the results will be available soon.

But Fox, the state VFW commander, said the lack of insurers and the increase in premiums is easy to explain.

"It's a case of supply and demand," Fox said. "The rates have gone up because fewer insurance companies are writing policies."

He said the state VFW, with about 22,000 members and auxiliary members statewide, will lobby for changes to both the tort and liquor liability laws, and ask the organization's 67 Palmetto State posts to do the same.

Loftus said the post has reached out to area legislators, and that South Carolina Gov. Henry McMaster needs to get involved. Hembree said he's also heard from some nonprofits, including the VFW post in Little River, about the need for action.

It can't come soon enough for Fox, who said small VFW posts are struggling with both the insurance requirement, and the premium increases.

In fact, his home post, Isle of Palms VFW Post 3137, survived a close call. It was forced to close its doors for several days in September.

"We ran into big trouble," he explained.

Fox said when the post's policy came due last month, and the premium skyrocketed from about $15,000 per year to about $85,000, the post locked the door while desperately seeking affordable insurance.

Isle of Palms was able to find a policy and keep the doors open, but Fox said he's afraid that some smaller posts will find that the premium cost exceeds their profit margin, and will be forced to close their canteens.

Canteens provide an affordable place for members and their guests to eat, drink and socialize. While you might pay $7 or more for a cocktail in a bar on the Grand Strand, you can have a drink at the Murrells Inlet VFW for a couple of bucks and change.

Posts often rely on canteen profits to meet obligations.

"Without a canteen, a lot of posts would have a very difficult time making ends meet," Fox said.

Worse, said Loftus, without that place to eat, drink and socialize, a post could "wither and die on the vine," and the community and veterans would suffer.

Fox said proceeds from canteens are used by many posts to not only pay the bills, but to help support veterans and community organizations and programs.

And in some towns, the community would lose valuable meeting space if veterans or fraternal clubs close. For example, in Murrells Inlet, Loftus said a multitude of groups and clubs ranging from bikers to bridge players utilize the VFW on the Highway 17 Bypass for meetings.

So far, Fox said, "some of the smaller posts [in South Carolina] haven't been able to renew (their policies), but none have closed."

Others are watching warily.

At North Myrtle Beach VFW Post 10804 in Little River, officers are hoping for the best, but expecting the worst.

"It hasn't hit here yet, but we are expecting it. We're sure we're gonna see a big (premium) increase," said Post 10804 Commander Mike Mallory.

At American Legion Post 178 in Murrells Inlet, which also operates a canteen and supports vets and community organizations, officers are waiting for the liability insurance shoe to fall.

Commander Charles Bruce Shelnut said officers at Post 178 are keeping their fingers crossed that they can find an affordable policy.

"It's all you can do," he said.