More Bars, Restaurants Can Now Deliver Alcohol, Shifting Liability Risks

A bill that would allow home delivery of alcoholic beverages in Georgia is moving forward after it won approval in the Georgia House of Representatives on June 25. House Bill 879, headed to Governor Brian Kemp for consideration within 45 days, would permit stores and some restaurants to provide home delivery of beer, wine and liquor. Virginia’s state-run liquor agency, meanwhile, recently began allowing to-go cocktails and distillery deliveries and is now finalizing a pilot delivery program for its retail stores.

“While it is good for businesses to capitalize on the opportunity, verifying they are adequately insured is crucial. These changes in law and business operations are significant, so they need to make sure they have a properly-tailored Liquor Liability Insurance policy and the right protections in place.” –Aaron Pfister, Burns & Wilcox

The two states are among many in the U.S. where lawmakers have pushed to permit home alcohol delivery either permanently or temporarily to help shore up an industry hit hard by the ongoing COVID-19 crisis. Several Canadian provinces have also temporarily allowed establishments to deliver alcohol.

The state legislature in Colorado recently passed a law allowing bars and restaurants to continue alcohol takeout and delivery through July 2021, while Michigan lawmakers passed a bill June 24 allowing alcohol pick-up and delivery through 2025. Oklahoma, Louisiana, New York and other states have enacted similar legislation or emergency orders to loosen alcohol restrictions. Ontario’s temporary order allows the sale and delivery of alcohol with food orders.

“States are trying to find further ways to stimulate their economies during this difficult time,” said Aaron Pfister, Associate Managing Director, Burns & Wilcox, Scottsdale, Arizona. “While it is good for businesses to capitalize on the opportunity, verifying they are adequately insured is crucial. These changes in law and business operations are significant, so they need to make sure they have a properly-tailored Liquor Liability Insurance policy and the right protections in place.”

Liquor sales can keep restaurants afloat amid COVID-19 crisis

Coronavirus-related shutdowns have devastated bars and restaurants across the U.S., where 11 percent of restaurant operators surveyed in March reported imminent plans to permanently close. Restaurants in Canada have faced similar challenges and some are still struggling to pay the bills while partially reopened.

Although many states now allow indoor dining, bar owners in Florida and Texas face a second round of closures due to surges in COVID-19 case numbers, and reopening delays are being considered in New York and New Jersey. Since the coronavirus crisis began, alcohol home delivery has been relied upon to keep sales going during quarantine restrictions.

“Restaurants are operating at limited capacity, and for those that serve liquor, it is often 25 to 30 percent of their receipts,” said Bonnie Steen, Vice President, Associate Managing Director, Burns & Wilcox, New Orleans, Louisiana. “Liquor is a big-ticket item for restaurants and right now they want to do whatever they can to stay afloat.”

The decision to begin alcohol deliveries must be carefully considered, however. Bars, restaurants, liquor stores and grocers that offer home delivery of alcohol for the first time should begin by investing in an appropriate Liquor Liability Insurance policy to help mitigate costs related to a delivery vehicle-related accident or other unforeseen event.

“If you have to restructure your business model for any reason you should have a conversation with your insurance broker or agent,” said Meghan Maher, Manager, Property & Casualty – Atlantic, Burns & Wilcox, Halifax, Nova Scotia. “Your insurance broker or agent is your insurance expert and advisor, and should be the first one you consult regarding new or existing risks and your coverage options.”

“Business owners should verify their Liquor Liability Insurance policy covers deliveries off-premises. Some Liquor Liability Insurance coverage may only apply to costs related to incidents that take place on businesses’ premises.” –Bonnie Steen, Burns & Wilcox

In addition to Liquor Liability Insurance, business owners should review their coverage for delivery drivers and vehicles. Non-Owned Auto and Hired Auto Insurance can help with the costs of liability claims from injured third parties related to accidents involving vehicles used in a delivery on behalf of the business but that are not owned by the business. Business owners should also discuss the role of third-party delivery providers such as Uber Eats or DoorDash with insurance brokers or agents.

“Restaurants should require indemnification or hold-harmless agreements from third-party delivery vendors so that the restaurants’ business is indemnified if there is a problem involving that delivery service,” Steen said, adding that restaurants may want to be added as an additional insured party on the vendor’s Non-Owned Auto and Hired Auto Insurance policy.

“Business owners should verify their Liquor Liability Insurance policy covers deliveries off-premises,” Steen noted. “Some Liquor Liability Insurance coverage may only apply to costs related to incidents that take place on businesses’ premises.”

In the rush to begin deliveries, verifying appropriate protections and insurance coverage could easily be overlooked. “Many businesses want to address insurance later, after they get some momentum going, or in some cases not at all,” Pfister said. “In the event of a loss, that delay could prove catastrophic, especially to a small business.”

Taking alcohol off-site shifts liability risks

Prior to the COVID-19 crisis, the bulk of Liquor Liability Insurance coverage was needed to address risks related to patrons’ consumption of alcohol on businesses’ premises. Costly incidents could include dance floor-related injuries, slip-and-fall injuries in high-density venues, and bars offering happy hours where over-serving may be a concern, Maher noted. Altercations between intoxicated patrons or incidents involving staff forcibly removing problematic patrons from a venue are other high-risk, potentially costly scenarios.

Lawsuits can also arise when a customer who is over-served leaves the establishment and is involved in an auto accident. “Liability for drunk driving-related accidents can ultimately fall back to the bar or establishment who served the driver,” Pfister explained. “These losses can be hundreds of thousands of dollars—or more, if the worst happens.”

Excessive alcohol use leads to an average annual loss of 88,000 lives in the U.S. and in 2010 had an economic cost of $249 billion. Each day in the U.S. 29 lives are lost in motor vehicle crashes involving an alcohol-impaired driver, with an average annual cost of more than $44 billion. Impaired driving is one of the leading criminal causes of death in Canada.

In January, a $2.3 million settlement was awarded to the family of a Pennsylvania man who was paralyzed in a 2016 car crash involving a drunk driver and who died less than three years after the accident at the age of 60. The family’s lawsuit alleged that two bars over-served the drunk driver before the crash.

Home delivery of alcohol could alleviate some of these common liabilities, Maher explained. “Delivering may not be as high-risk as providing open alcohol for consumption on site.” Nevertheless, she said, businesses that offer alcohol delivery are still assuming risks.

Potential liabilities will persist, such as those that may be related to delivering alcohol to minors. Food delivery apps have recently been linked to alcohol purchases by minors, and officials in California are reporting a high frequency of delivery drivers failing to verify the age of alcohol delivery recipients. Under Georgia’s alcohol delivery bill, drivers could not leave alcoholic beverages on a porch and would need to scan the purchaser’s ID to verify their age.

In Louisiana, alcohol delivery was allowed before the coronavirus crisis but recently the state has slightly expanded the delivery radius based on population and contractors are now allowed to deliver alcohol. Delivery of alcohol to college campuses is still banned. “There should be risk management procedures in place that require drivers to verify that those to whom they are delivering alcohol are of legal age,” Steen said.

Follow state and local regulations, best practices

Businesses offering alcohol home delivery should closely review their state and local regulations, Pfister said. “Regulations vary from state to state and with something rapidly evolving like this, doing that extra research is especially important,” he said.

“Alcohol takeout and delivery could be very common going forward. Business owners should not be afraid to ask questions, put forward a business plan for their insurance broker or agent to review, and talk about what insurance coverages are available.” – Meghan Maher, Burns & Wilcox

Staff training, including Training for Intervention Procedures (TIPS) certification, and checking delivery personnel’s motor vehicle records may also be needed, Steen said. “Business owners must know who is delivering on their behalf and what kind of insurance and experience they have,” she emphasized.

Bar and restaurant owners should look to leaders in the industry for best practices and find out what has worked well for home alcohol delivery in other areas, Maher added. “As a business owner you need to know all of the laws in your state or province and the limitations around what you can and cannot do so that you are operating accordingly,” she said.

Restaurants often rely heavily on liquor profits, so it is not surprising that many businesses have adapted quickly to delivery, Maher said. “Alcohol takeout and delivery could be very common going forward,” she said. “Business owners should not be afraid to ask questions, put forward a business plan for their insurance broker or agent to review, and talk about what insurance coverages are available.”

Staying in touch with your insurance broker or agent is essential, especially as laws change and the Liquor Liability Insurance market hardens in many areas of the U.S. “With states changing regulations, it is very important that businesses make sure they are adequately insured, that the insurance company is aware of their intentions to provide home delivery, and that there are no gaps in their policies,” Pfister said. “It is too early to say for sure, but there is potential for home alcohol delivery to continue beyond the current crisis because it provides a great convenience for the end consumer.”

This information was provided by Burns & Wilcox, North America’s leading insurance broker and underwriting manager. As with any coverage need, an insurance broker or agent must be consulted

Learn more about Liquor Liability Insurance.