The Founders Liquor Liability Exclusions Problem

An overall problem with the hospitality insurance space is desperation. Owners are desperate for an affording insurance solution, agents are desperate to stay relevant with their clients and in my opinion we have a carrier desperate for an influx of premium dollars. This had led to a “perfect storm” of owners buying whatever policy they can and agents selling whatever policy they can. Lets take a look at an insurance policy for liquor liability in South Carolina from Founders. You see three exclusions:

Exclusion 1 – Persons Under The Age of Twenty-One

Exclusion 2 – Your Employees, Contractors and Subcontractors

Exclusion 3 – Dancers or Entertainers

Here is why these are a potentially BIG problem. 

Exclusion 1 – Persons Under The Age of Twenty-One. In South Carolina is doesn’t much matter, legally speaking, how an underage person got an alcoholic beverage it just matters that they DID receive an alcoholic beverage. Translation, let’s say you do everything right (scan IDs) and a person gave you a fake ID that passes the scan. Later on that person causes an accident, how does this play out? More than likely you will still be sued. Mos insurance companies will send an ROR (Reservation of Rights Letter) and deny the claim based on it being a covered incident. It’s now 100% on you and your lawyers to defend and pay any claims, and in the case of an underage drinker make no mistake you will be paying a claim. 

Exclusion 2 – Your Employee, Contractors and Subcontractors. Give your employees a shift drink? How about if your employees take a shot with a regular? Both of these would fall under this exclusion and just like Exclusion 1, you are on the hook for any claims that arise form that. How many times have you heard of an employee having a shift drink and heading out to a different bar with fellow coworkers after? Happens all the time, and that opens you up to claim that Founders will simply deny coverage for.

Exclusion 3- Dancers and Entertainer.  Do you have live music? Maybe karaoke or bingo/trivia? Well I have never worked in an establishment that did offer these entertainers a tab to use while they are performing. That right there, should an incident occur after they leave, opens you up to claims. Claims that Founders will simply deny. Leading you to pay claims yourself.

So before you sign that Founders policy that seems so “cheap” you better check to see if it’s cheap because it doesn’t cover much.