LIQUOR AND THE ISO COMMERCIAL GENERAL LIABILITY COVERAGE FORMS

The liquor liability exclusion is unusual because it applies to only certain types of businesses. It often applies to vicarious situations where another person causes the injury. The allegations are that the liquor-related business caused or contributed to the inebriated state of the person who caused the accident and that the accident would not have happened without the liquor-related business’ negligence.

LIQUOR LIABILITY EXCLUSION

The Liquor Liability exclusion in the ISO CGL Coverage Forms states that coverage does not apply to bodily injury or property damage that is any insured’s liability because of any of the following:

• Causing or contributing to a person becoming intoxicated
• Furnishing alcoholic beverages to a person who is under the legal drinking age
• Furnishing alcoholic beverages to a person who is already under the influence of alcohol
• Any law that relates to the sale, gift, distribution, or use of alcoholic beverages

Any of the actions described above may result in an occurrence. In that case, there is also no coverage if any of the following claims related to that occurrence are brought against the insured:

• Hiring, employment, monitoring, or training others
• Noting that a person is intoxicated and either providing transportation to that person or failing to provide such transportation

This exclusion does not apply if the named insured is not in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages.

The named insured may not serve alcoholic beverages, but it may allow others to bring such beverages onto its premises. In that case, this exclusion does not apply even if a license is required to operate this way. It is not considered a liquor-related business even if a fee is charged for the beverage to be consumed on the premises.

Note This exclusion does not apply to host liquor situations if the insured is not in one of these liquor businesses. As a result, coverage applies to the insured's business lunches, parties, and other social functions where alcoholic beverages are served.

The 04 13 edition of the CGL Coverage Forms introduces two new parts. One has negative connotations for the insured, while the other appears to reduce potential ambiguity for both the insured and the insurance company.

1. Coverage is denied when there is an occurrence, and it is alleged that the insured’s negligence, not the liquor, caused the injury. This allegation is an attempt to bypass the liquor liability exclusion. This added wording explains that there is still no coverage when the negligence is for either of the following. This wording is placed within the liquor liability exclusion because the allegations are interrelated.

• The first negligence is in hiring, employing, training or supervising others.
• The second negligence is in either providing transportation for an intoxicated individual or failing to do so.

2. This exclusion has been changed to recognize that some businesses allow alcohol on their premises but do not actually serve or sell alcohol. A question arose as to whether the liquor exclusion would apply to such operations. This revision specifically states that permitting a person to bring alcoholic beverages on the named insured’s premises in order to consume them does not, “by itself,” make the operation in the business of selling, serving, or furnishing alcoholic beverages. This applies regardless of whether a license is required, or a fee is charged for that activity.