INTRODUCTION

The Insurance Services Office (ISO) Commercial Lines Manual (CLM) Rule 45. Liquor Liability Coverage details the rules for Liquor Liability classifications and rating procedures. These classifications depend on the establishment's or entity's occupancy and operations, and on whether it 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 off-premises consumption only
Class Code 59211: Package Stores and other retail businesses that sell alcoholic beverages for consumption off premises only
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 - allowing any individual to bring their own alcohol onto the premises for consumption
Class Code 58166: All Other Bring Your Own Alcohol Establishments – allowing any individual to bring their own alcohol onto the premises for consumption

LIQUOR LIABILITY GRADES

ISO created a grading scale for each state that assesses the liability level assigned to operations involved in supplying or selling liquor. States with lower numerical grades suggest that such establishments pose lower risks regarding alcohol-related issues.

· Grade 0: States with this grade do not hold any party involved in supplying, selling, or vending liquor liable for injuries, property damage, or death caused by an intoxicated individual. Manufacturers, wholesalers, and distributors are always graded as 0.

· Grades 1-9: States within this grade range impose varying degrees of moderate liability on parties that supply, furnish, vend, or sell liquor. Causes of action in these states can be brought against the liquor vendor for bodily injury, property damage, or death caused by an intoxicated person under specific circumstances.

· Grade 10: States with this grade impose strict liability on parties that supply, furnish, vend, or sell liquor. Simply furnishing liquor in these states is considered the proximate cause of the bodily injury, damage, or death.

PREMIUM DETERMINATION

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

Step 1. Choose the appropriate class code.

Step 2. Choose the rate according to the class code from step 1 and the state's liquor liability grade.

Step 3. Choose the basic limits rate for the class code.

Step 4. Update the basic limits rate(s) to account for any coverage changes, excluding deductibles.

Step 5. Modify the basic limits rate by applying the appropriate increased limits factors and any other relevant rate adjustments. Make sure to account for coverage written on a deductible basis.

Step 6. For each class code, multiply the units of exposure developed under the premium base by the adjusted rate calculated in step 5.

Step 7. Identify any minimum premiums.

Step 8. Identify any additional premiums.

Step 9. Add the higher of the premiums calculated in 6. or 7. to the premium from 8. to find the total policy premium.

Step 10. Use either the premium developed in step 9 or the policy writing minimum premium, whichever is greater.

DEDUCTIBLES

In exchange for a premium reduction, the insured agrees to contribute a specified amount toward damages awarded to claimants. Deductible amounts vary and may apply per claim or per common cause. The insurance company's responsibility to cover damages applies only to amounts exceeding the deductible.

Deductible discount factors are at the insurance company’s sole discretion.

PREMIUM BASE

The premium base for all classifications is annual gross sales, excluding food sales. However, this does not apply to Class Codes 58168, 58165, and 58166.

Class Code 58168 –Temporary Licensees

This class code is used for short-term policies covering specific activities or events where alcohol is served, lasting a few days or hours. A flat fee generally applies to this classification. However, the CLM recommends consulting Rule 24.C., which states the premium basis involves units of exposure and the quantity making up each exposure unit, as shown in the class code footnotes.

Class Code 58165 –Restaurants –Bring Your Own Alcohol Only

The premium base for this class is gross sales, including food sales. Since this is a restaurant class where alcohol is not served, the only logical premium base is total gross sales.

Class Code 58166 –All Other Bring Your Own Alcohol Establishments

For the premium base of this class code, it is necessary to refer to the company. This is due to the risk class being very broad and requiring an individualized rating.

ADDITIONAL INTERESTS

Refer the risk to the insurance company for any additional interests to be included. The insurance company has exclusive authority to determine any additional premium charges for these interests.

EXPERIENCE RATING PLAN/SCHEDULE RATING PLAN

The ISO Commercial General Liability (CGL) Experience Rating Plan and Schedule Rating Plan are not applicable to liquor liability coverage rating. No alternative plan exists for this coverage. Each insurance provider independently determines the applicable plan or approach, if any.

SPECIAL RULES THAT APPLY TO THE CLAIMS-MADE COVERAGE FORM

The named insured can request the Supplemental Extended Reporting Period Endorsement be added within 60 days after the Claims-Made policy ends. The insurance company will set the premium, which cannot exceed twice the previous year's liquor liability coverage premium. The premium is fully earned on the endorsement’s start date, due at that time, and coverage begins only after the premium is paid.

NOTE: The insurance company may make concessions when it provides coverage on a claims-made basis instead of an occurrence basis. Any changes are at its sole discretion, as ISO does not provide specific modifications.