LIQUOR LIABILITY COVERAGE FORMS RATING CONSIDERATIONS

(November 2019)

INTRODUCTION

The Insurance Services Office (ISO) Commercial Lines Manual (CLM) Rule 45. Liquor Liability Coverage contains the rules that apply to Liquor Liability classifications and rating procedures. These classifications are based on the occupancy and operations of the establishment or entity that has a liquor or alcoholic beverages exposure.

CLASSIFICATIONS

Seven classifications are used with the Liquor Liability Coverage Forms:

Class Code 70412: Clubs
Class Code 50911: Manufacturers, Wholesalers, and Distributors that sell alcoholic beverages for consumption only off premises
Class Code 59211: Package Stores and other retail establishments that sell alcoholic beverages for consumption only off premises
Class Code 58161: Restaurants, Taverns, Hotels, and Motels. This includes all package sales.
Class Code 58168: Temporary Licensees
Class Code 58165: Restaurants–Bring Your Own Alcohol only
Class Code 58166: All Other Bring Your Own Alcohol Establishments

LIQUOR LIABILITY GRADES

Each state is graded based on the extent of liability it imposes on operations that supply or sell liquor.

0 denotes no cause of action against any party that supplies, furnishes, vends, or sells liquor for bodily injury, property damage, or death an intoxicated person causes. This grade is also used with all Class Code 50911 classifications, regardless of state.
1-9 denotes varying degrees of moderate liability on parties that supply, furnish, vend, or sell liquor. Causes of action can be brought in these states against the liquor vendor under certain circumstances for bodily injury, property damage or death an intoxicated person causes.
10 denotes strict liability on parties that supply, furnish, vend, or sell liquor. Simply furnishing liquor in these states is considered the proximate cause of the injury, damage, or death.

PREMIUM DETERMINATION

The formula to calculate the annual premium for the Liquor Liability Coverage Form is as follows:

Step 1. Select the correct classification.
Step 2. Select the rate based on the classification selected in step 1 and the state liquor liability grade.
Step 3. Multiply the rate determined in step 2. by the applicable coverage multiplier, if any.
Step 4. Multiply the rate determined in step 3. by the Products Liability Table C Increased Limits Factor.
Step 5. Multiply the rate determined in step 4. by any applicable insurance company rate multiplier. This includes credits for deductibles.
Step 6. Multiply the premium basis by the rate determined in step 5. to determine the premium.
Step 7. Compare the premium determined in step 6. to the insurance company's minimum premium and use the higher of the two as the final premium.

DEDUCTIBLES

In return for a premium reduction, the insured agrees to contribute a certain amount towards the amount paid as damages to claimants. Deductible amounts vary and can apply per claim or per common cause. The insurance company's obligation to pay damages on the insured's behalf applies to only the amount of damages that exceeds the deductible amount. Deductible discount factors are at the insurance company’s sole discretion.

PREMIUM BASE

The premium base for all classifications is annual gross sales with food sales excluded, except for Class Codes 58168, 58165, and 58166. Class Code 58168 is used for a short-term policy for specific activities or events where alcohol is served that last for a few days or a few hours and a flat charges usually applies to this classification. The premium base for 58165 is refer to company because All Other Bring Your Own Establishments is a very broad class that require individualized rating. The premium base for 58166 is gross sales with food sales included. This is because this is a restaurant class where alcohol is not served so the only logical premium base is total gross sales.

ADDITIONAL INTERESTS

Refer the risk to the insurance company for any additional interests to be added. The additional premium charges for additional interests are at the insurance company’s sole discretion.

EXPERIENCE RATING PLAN/SCHEDULE RATING PLAN

The ISO Commercial General Liability (CGL) Experience Rating Plan and Schedule Rating Plan do not apply to liquor liability coverage rating. There is no other equivalent plan available to use with it. Each insurance company that provides this coverage determines any such plan or approach at its sole discretion.

SPECIAL RULES THAT APPLY TO THE CLAIMS-MADE COVERAGE FORM

The named insured may request the Supplemental Extended Reporting Period within 60 days after the Claims-Made policy period ends. If it does, the insurance company determines the premium charge to make. However, it cannot be more than two times the annual premium for the expiring liquor liability coverage. The premium charged is fully earned on the endorsement’s effective date, is payable on the date due, and coverage does not take effect until the named insured pays the premium.

Note: The insurance company may make concessions when it writes coverage on a claims-made basis versus an occurrence basis. Any modifications it makes are at its sole discretion because ISO does not provide any specific modifications.