Question from a Big I New York member: “Does a grocery or supermarket selling beer need Liquor Legal Liability Coverage? In my mind, and I may be very wrong, a bar serving liquor needs it as they have a responsibility not to serve people who look or sound intoxicated. Can you make a cashier working in a supermarket or grocery assessing customers if they are intoxicated before checking out wine or beer liable for an injury?"
Answer: In my opinion, yes, it needs Liquor Liability Coverage. Reasons:
- They sell alcoholic beverages. If an injury or property damage occurs as a result of a person’s intoxication, the person suffering the injury or damage may sue anyone involved in the chain of sale. For example, customer buys a case of beer at a supermarket, drinks a quarter of it in a couple of hours, and opens fire on a cable guy who has come to service the home. Cable guy sues everyone including the supermarket that sold the beer. This is not hard to imagine actually happening.
- Section I—Coverages — Coverage A Bodily Injury and Property Damage Liability in the ISO Commercial General Liability Coverage Form, CG 00 01 04 13, as amended by New York Changes – Commercial General Liability Coverage Form, CG 01 63 04 17, excludes Liquor Liability Coverage for a named insured who is in the business of selling alcoholic beverages. Specifically, it states the insurance does not apply to BI or PD “for which any insured may be held liable by reason of … contributing to the intoxication of any person …"
- The Insuring Agreement under that coverage states, “We will have the right and duty to defend the insured against any ‘suit’ seeking those damages even if the allegations of the ‘suit’ are groundless, false or fraudulent. However, we will have no duty to defend the insured against any ‘suit’ seeking damages for ‘bodily injury’ or ‘property damage’ to which this insurance does not apply." The insurer is obligated to defend the insured against the lawsuit only if the insurance applies to that BI or PD, and it does not apply to BI or PD for which an insured may be held liable by reason of contributing to a person’s intoxication.
- The Insuring Agreement in the ISO Liquor Liability Coverage Form, CG 00 33 04 13, as amended by New York Changes – Liquor Liability Coverage Form, endorsement CG 26 03 04 17, states:
We will pay those sums that the insured becomes legally obligated to pay as damages because of "injury" to which this insurance applies if liability for such "injury" is imposed on the insured by reason of the selling, serving or furnishing of any alcoholic beverage. We will have the right and duty to defend the insured against any "suit" seeking those damages even if the allegations of the "suit" are groundless, false or fraudulent. However, we will have no duty to defend the insured against any "suit" seeking damages for "injury" to which this insurance does not apply. We may, at our discretion, investigate any "injury" and settle any claim or "suit" that may result. …
If the store carries this policy, the insurer must pay for the store’s legal defense even if the lawsuit is stupid. That’s the real value of the policy for this type of operation. It may be unlikely that a court would hold them liable, but it’s highly likely that an enterprising plaintiff’s attorney will name them as a defendant in a lawsuit. This policy makes the difference between whether the insured must foot the bill for the lawyers to defend it or an insurance company does.
That’s why I think the store needs the coverage – to pay for its potential legal defense, not so much because it may be held legally liable. If the store sells beer, it’s vulnerable to potential lawsuits. ISO rules say to refer to the individual insurer for the applicable rates, but I note that there is a separate classification for “Package Stores and other retail establishments selling alcoholic beverages for consumption off premises." I would expect the rates to be lower for this classification than for the others.