LIQUOR LIABILITY COVERAGE FORMS OVERVIEW

(November 2019)

INTRODUCTION

The Insurance Services Office (ISO) CG 00 01–Commercial General Liability Coverage Form excludes coverage for bodily injury or property damage the insured is liable for due to:

Causing or contributing to any person's intoxication
Furnishing alcoholic beverages to persons under the legal drinking age
Furnishing alcoholic beverages to persons already under the influence of alcohol
Any law or act that relates to selling, distributing, giving or using alcoholic beverages

However, the exclusion applies to only businesses that manufacture, distribute, sell, serve, or furnish alcoholic beverages. Coverage applies to all other businesses that do not engage in these operations. The basis for this legal liability imposed on the insured varies from state to state and comes from a variety of dram shop, liquor control, or alcoholic beverage laws. While the laws are different, most state that the owner of the liquor or alcoholic beverage business is liable for the injury or damage an intoxicated person or one "under the influence" causes if the liquor provider caused or contributed to the person's intoxication.

One way to provide coverage for businesses engaged in liquor and alcoholic beverage operations is to use either of the two ISO Liquor Liability Coverage Forms. CG 00 33 is the Occurrence Coverage Form and CG 00 34 is the Claims-made Coverage Form.

ELIGIBILITY

There is no requirement imposed or limitation on who can purchase liquor liability coverage. Businesses that manufacture, distribute, sell, serve, or furnish alcoholic beverages are the primary purchasers but any business is eligible. As a result, there are no ISO eligibility requirements or guidelines but individual insurance companies will establish their own.

COVERAGE

The insurance company agrees to pay amounts the insured is legally obligated to pay as damages because of liquor-related injury that this insurance covers. The liability must be imposed because of injury caused by a person to whom the insured sold, served, or furnished alcoholic beverages. The insurance company also defends against any suit that seeks damages but only if the coverage provided applies to the damages claimed.

POLICY COMPOSITION

The Liquor Liability Policy includes the following forms:

IL DS 00–Common Policy Declarations
IL 00 17–Common Policy Conditions. This form contains the conditions common to most commercial insurance coverage forms and policies. It is a required mandatory form on most monoline or multi-line simplified commercial coverage forms and policies.

CG DS 03–Liquor Liability Declarations

Related Article: Liquor Liability Declarations

CG 00 33 or CG 00 34–Liquor Liability Coverage Forms

IL 00 21–Broad Form Nuclear Exclusion

Policy Cover or Jacket. Each insurance company designs this for its own specific purposes and use. It may include a table of contents or an index as a courtesy to its customers or because some states require it.

LIQUOR LIABILITY COVERAGE FORM

The ISO Liquor Liability Coverage Forms contain the following sections:

Section I–Liquor Liability Coverage

This section includes the insuring agreement, exclusions, and supplementary payments.

Section II–Who Is An Insured

This section describes the persons or entities insured or that may be insured.

Section III–Limits of Insurance

This section explains how the limits of insurance apply.

Section IV–Liquor Liability Conditions

This section explains the specific conditions that apply to this coverage form.

Section V (Section VI in CG 00 34)–Definitions

This section defines certain words that appear throughout the coverage form.

Section V–Extended Reporting Periods (CG 00 34 only)

This section explains how extended reporting periods apply in the Claims-Made Coverage Form.

ENDORSEMENTS

The scope of coverage that either of the liquor liability coverage forms provides is relatively narrow. For this reason, there are only a limited number of endorsements available to use with it.

Note: ISO is introducing nine new endorsements with edition date of 12 19. All are optional endorsements but some insurance carriers may make their addition mandatory. The brief descriptions provided may be helpful in determining their impact on your client. The CG 99 09–Premium Audit Noncompliance Charge could be a particular concern on this policy because the charge assessed could be significant.

UNDERWRITING

Underwriting liquor liability coverage involves identifying potential exposures, analyzing them relative to the degree of risk each represents, classifying the risk, and then rating and pricing the exposures.

RATING

Rating liquor liability coverage is detailed in Rule 45 in the General Liability Section of the ISO Commercial Lines Manual (CLM). This rule describes the coverage and also has classifications, liquor liability grades, special rules for the claims-made coverage form, premium calculation advices, and deductible rules.