Bret Dixon Insurance News
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pertinent industry news and offer more in-depth insight into various
types of coverage and endorsements. We publish our newsletters
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Bars
Often Roll Dice on Liquor Liability Coverage
The following is an
excellent article that appears in a recent issue of Insurance
Journal. While it primarily focuses on states we don't operate
in, there are parallels to be drawn for our hospitality clients in
Indiana and Missouri - states without mandatory dram shop
coverage legislation, like the states mentioned in the article.
Even for those in Illinois, which does have a Dram Shop Statute, it
provides something to think about with regard to how much liquor
liability coverage you carry and making sure you get the right kind
of coverage.
Louisiana
tavern owners Chuck Brechtel and Eddie Dyer are the first to admit
that plenty can go wrong when your main line of work is serving
alcohol to thirsty crowds all night.
For that
reason, they say they err conservatively when buying insurance for their
five-bar chain, The Bulldog and Lager. That includes paying roughly
$25,000 extra per year on a special line of coverage to protect each
location from liquor-related losses and damages.
Brechtel said
owners can't be there every day to ensure bartenders stop serving
visibly intoxicated patrons and call a cab for them, and they have
little control if an inebriated patron decides to start a fight on
their property and injures bystanders.
Three of the
bars in the chain are in New Orleans. Brechtel said plenty of
New Orleans bars choose to save money on premiums in the hopes they
won't be reeled into a lawsuit or that their standard insurance will
cover their claims. But all it takes is one suit to kill a business,
he said.
"If you
have to go out of pocket for tens of thousands of dollars paying
attorney's fees, that can bankrupt you," Brechtel said.
Alcohol service
is almost a universal feature of the New Orleans hospitality industry
and one that can leave bars and restaurants exposed to a world of risks.
The largest bars and restaurants in New Orleans often carry what's
known as liquor liability insurance, coverage that protects a
business against damages claimed as a result of a patron becoming
intoxicated and injuring themselves or others.
In the past,
this type of coverage typically was packaged with general liability
coverage for restaurants and bars. After Hurricane Katrina, however,
most large insurers that write packaged policies left the local
market. Now, businesses often have to request a separate liquor
liability line.
Local insurance
experts note many small businesses forgo liquor liability coverage to
save money on premiums or are unaware of the coverage. Those that do
have it may not know exactly what they are purchasing because what it
covers varies from policy to policy.
Many smaller
bars and restaurants often erroneously assume that their general
liability policy will cover legal fees and other costs if they are
sued for a liquor-related damage. But a general liability policy
typically contains an exclusion for liquor-related claims,
necessitating the need for a separate liquor liability policy.
"They
think that their liability policy will cover them fully, come what
may, come what might," noted one risk manager in the area.
"That's just not the case."
Stepen Hanemann,
a New Orleans attorney who specializes in commercial litigation, said
Louisiana law is fairly favorable toward busineses that serve
alcohol, a reason some may feel comfortable forgoing coverage.
Most states
have so-called "dram shop" laws that hold bars and
restaurants liabile if they knowingly over server a visibly
intoxicated patron and that person injures another person, causing a
car wreck, for example. Similar laws have failed to gain traction in
Louisiana, Hanemann said.
But local
businesses still face a lot of risk, he said. Many of the
alcohol-related claims against New Orleans bars and restaurants stem
from injuries during fights between patrons. One fight could mean
years in court and thousands of dollars in attorney's fees, even if the
court ultimately rules in favor of the business.
"Will they
be sued? Yes," Hanemann said. "Will they be liabile? That's
a question determined by the trier of the fact. Either way, paying
out of pockets for big damage claims is not good for business."
Another risk
management specialist for bars and restaurants in the New Orleans
area says that most of his 500 or so area clients buy liquor
liability insurance "for defense and not for judgment."
"To lose a
judgment, you have to knowingly serve an underage or intoxicated
patron, which is a difficult thing to prove. But the defense bills
can go on for years," he said. "Defense costs are
everything in our business right now."
One thing
businessowners need to do is make sure legal defense costs are covered
- otherwise the insurance is worthless. Some insurers will deduct the
cost of a lawyer from the total coverage, reducing a $500,000 policy
by $100,000 because of legal fees, for example. And no matter how
strictly you instruct your bartenders and other employees not to
drink on the job, it's likely that at some point, when they think the
coast is clear, they will drink on the job. So making sure employees
are covered under your liquor liability as well.
Bar and
restaurant owners should make sure they have an adequate level of
assault and battery coverage under their policy as well. Assault and
Battery is a coverage under both General and Liquor Liability
policies for fights on premises. Many insurers leave out this
coverage or provide a meager sub-limit.
Other things
businesses should check are covered include shootings, sexual assault
and other specific claims, including mental damages should a claimant
sue for stress or anguish following an incident.
Lastly,
restaurants and bars that serve at festivals or other events should
ensure that their liquor liability covers off-premises claims as
well. It may be necessary to add a catering endorsement or a separate
special event policy if your regular coverage won't cover your
operations off-premises.
One gray area
is coverage for establishments that do not sell alcohol, but allow
customers to bring their own alcohol to drink with a meal. ISO
(Insurance Service Offices), one of the largest U.S. risk research
firms, recently revised its policy language to clarify that
liquor-related claims would be covered under a general liability
policy since the restaurant is not in the business of selling
alcohol, but noted that insurers have the option to underwrite a
separate liquor liability policy if needed.
Hanemann said
such establishments may want to encourage customers to bring only
low-alcohol-content beverages such as beer. Insurers might push for a
separate liquor liability policy for higher content alcohol, he said.
Ultimately,
bars and restaurants should know their business, be realistic about
the risk and plan accordingly.
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Spotlight On: Flood Insurance
Every few
years we take time to remind folks in this space about Flood
Insurance. Given that it's been raining here in southern Illinois
for the last fo ur
days as I type this, it seems particularly timely. Flooding is not a
covered peril under standard Homeowners or Commercial Property
policy forms, so it must be added via endorsement, if available, or
as a separate policy. Since flood insurance is only mandatory if you
have a mortgage from a federally-regulated lender and are located in
a high-risk flood zone, most people go without it.
To put to rest
a common myth, everyone
is located in a flood zone. The only variance
is whether you are in a low, moderate or high risk zone.
You don't have
to live near a body of water to fall victim to a flood claim. The
insurance definition of a flood accounts for other sources of water as causes of
a flood:
a general and
temporary condition of partial or complete inundation of two or more
acres of normally dry land area or of two or more properties (at
least one of which is the policyholder's property) from one of the
following: (1) overflow of inland or tidal waters; (2) unusual and
rapid accumulation or runoff of surface waters from any source; (3)
mudflow; (4) collapse or subsidence of land along the shore of a lake
or similar body of water as a result of erosion or undermining caused
by waves or currents of water exceeding anticipated cyclical levels
that result in a flood as defined above.
If you think
you can wait until a flood seems imminent and still obtain coverage,
think again. There's typically a 30 day waiting period before a
policy can take effect.
Flood coverage
is also more restrictive than other property insurance. It covers
only direct physical damage to your property and possessions from
flooding - no loss of income for shut down businesses or loss of use
if you have to rent a hotel room for a few weeks because your
house is all wet. Coverage is more restricted in regards to what is
and isn't covered - a good list can be found here.
And items in basements are also closely scrutinized.
FEMA has some
statistics on their website that are worth repeating here:
- Floods are the #1 most common natural
disaster in the United States.
- Over the past five years (stats from
2007-2011) the average paid flood insurance claim was more than
$35,000.
- From 2002 to 2011, total flood insurance
claims averaged over $2.9 billion per year.
- The average flood insurance policy is
about $625 annually.
- People outside of high-risk areas file
over 20% of National Flood Insurance Program claims and received
about one-third of disaster assistance for flooding.
- In 2011, the NFIP paid over $2 billion in
flood insurance claims to all policyholders.
The stats FEMA
has compiled above don't reflect the massive flooding damage done in
October 2012 by Hurricane Sandy, which caused an estimated $75
billion in total damage.
If you want to
get an estimate of your risk of flood you can try the Map Your Risk
tool on floodtools.com.
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A Word
On Tornadoes
It's tempting
to think that climate change is bringing more frequent, stronger and
larger thunderstorms and accompanying tornadoes, but climate scientist
say they just don't know if that's the case. Tornadoes and the severe
thunderstorms that spawn them are
difficult to predict, they say.
"It's
hard to predict future tornado seasons when we don't understand
current tornado seasons," Harold Brooks, a researcher at the
National Weather Center, told the Associated Press during the
National Tornado Summit held recently in Oklahoma City.
Similarly, a report published
this year by Lloyd's of London, "Tornadoes, A Rising Risk,"
states: "While climate change may have a number of effects on
atmospheric conditions favorable to tornado formation, the relatively
short and unreliable record of tornado activity makes it difficult to
determine a definite trend in tornado climatology. Climate
models are currently unable to resolve small-scale phenomena such as
tornadoes, and no models exist which can use climate model data to
predict future tornado activity."
With the onset
of "tornado season" a few statistical reminders may be in
order.
- The Insurance Information
Institute reports that there were 939 tornadoes in the United
States in 2012.
- Insured losses resulting
from severe thunderstorms, including tornado events, caused
$14.9 billion in insured losses and $27.7 billion in economic
losses last year, according to Munich Re.
- The top ten states for
tornadoes in 2012 were: Kansas (145), Texas (114), Alabama (87),
Mississippi (75), Kentucky (65), Louisiana (53), Nebraska (48),
Oklahoma (41), Florida (40) and Illinois (39).
- Nearly 1700 tornadoes were
reported in 2011, and total damages from the outbreaks exceeded
$25 billion, according to the Lloyd's report. That number
includes the May 2011 tornado outbreak in Joplin, MO, which
caused $2.2 billion in insured losses and resulted in 158
deaths.
- Although tornadoes have been recorded on all
continents except Antarctica, according to Lloyd's the
United States annually has the most tornadoes - around 1000 on
average. The most violent tornadoes also typically occur in the
United States.
- Lloyd's reports that Canada has the second most
number of tornadoes but far fewer than the United States - about
80 to 100 annually. Additionally, according to Lloyd's,
"Russia may have many tornadoes but reports are
not available to quantify their occurrence."
Insurance
Considerations
Several
companies, both personal and commercial property insurers, are
tightening their policy language on wind and hail losses, especially
to roofs and siding. In some instances, carriers are mandating
Actual Cash Value (ACV) valuations automatically on roofs.
This type of valuation deducts depreciation from the claim
settlement. The older and more worn your roof is, the more
you'll pay out of pocket because the more the roof will be
depreciated.
Some other
companies have switched to wording in the last few years that inserts
conditions on the roof - if it's older than X number of years (often
20), then it will be paid on an ACV basis. If it's newer, then
it will be paid at Replacement Cost value.
And then there
are still some insurers out there who will pay Replacement Cost, no
matter the age. The point is, know what your policy
says. This is one of the more common first-party property damage
claims, if you own your home or commercial property long enough, it
will end up being a situation you'll encounter at some point.
Safety
First
So as we
approach tornado season, don't forget to remind your employees and/or
family (especially children) the basics of tornado response.
A tornado watch
means that conditions are ripe for a tornado to occur in the area.
A tornado
warning means that a tornado has actually been
spotted, either from the ground or on radar.
If
you are in a structure: go to a
pre-designated shelter area such as a safe room, basement, storm
cellar or the lowest building level. If there is no basement, go to
the center of an interior room on the lowest level (closet, interior
hallway) away from corners, windows, doors and outside walls. Put as
many walls possible between you and the outside. Get under a sturdy
table and use your arms to protect your head and neck. Do not open windows.
If
you are in a vehicle, trailer or mobile home:
get out immediately and go to the lowest floor of a sturdy nearby
building or a storm shelter. Mobile homes, even if tied down, offer
little protection from tornadoes.
If
you are outside with no shelter: lie flat in
a nearby ditch or depression and cover your head with your hands. Be
aware of the potential for flooding. Do NOT get under an overpass or
bridge. You are safer in a low, flat location. Never try to outrun a
tornado in urban or congested areas in a car or truck. Instead, leave
the vehicle immediately for safer shelter. Watch out for flying
debris, debris from tornadoes causes most fatalities and injuries.
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Unique Gaming Endorsement Rolled Out
As we teased in this space last issue, one of
our carriers, Illinois Casualty Company, has rolled out the first
endorsement we've seen specially tailored to the Video Gaming Bill
that many of our friends in the hospitality industry are jumping
on.
Last October, the State of Illinois began allowing
video gaming machines at licensed taverns, restaurants and
fraternal organizations. Business owners in the food and
beverage industry are always looking for ways to draw
customers to their establishments and video gaming is another
avenue to do just that. However, from an insurer's perspective,
it also presents another risk that needs to be considered and
addressed.
While some coverage may already be afforded in the
Businessowners Policy (BOP), video gaming does represent increased
exposure and current property limits may not be adequate in many
policies. The endorsement modifies the property coverage in the
following ways:
- Business
Personal Property Coverage for Video Game Terminals is provided,
subject to a $90,000 limit of insurance.
- Money
and Securities Coverage for cash contained within the video
gaming terminals and/or in the vault located at the designated
premises and for which the insured is legally responsible to the
Illinois Gaming Board or the Terminal Operator is provided, subject
to a $20,000 limit of insurance.
These limits are additional insurance, applicable only
to the specified items, and offered at a reduced rate in recognition
of the controls in place for the video gaming equipment and
associated cash. A flat premium of $350 is applied per
location.
A copy of the endorsement can be found on our website,
here. If
you're interested in adding this coverage ASAP, please contact our
office.
Has your business started Video Gaming yet? What
do you think of it thus far? Worth the hype? Over-rated?
We'd love to hear more feedback on the subject. Drop us a line
on our Facebook page.
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You Posted What?!?!
Social Media Use and Personal
Liability
Note:
While this article focuses on teens, social media and personal
liability ramifications, there's an important parallel for everyone
posting information to the internet.
Jealousy.
Passion. Betrayal. No, not the latest television drama,
but high school. For many the high school experience comes with
social pressures and obligations to fit in and belong, and sadly this
can lead to exclusion and isolation of some students. At some point
we all probably said something in our teen years in the heat of the
moment that we wish we could take back, but today's teens face the
added burden that if they convey those statements on social media
sites like Facebook and Twitter, their words could be around for a
lot longer than just the heat of the moment.
It doesn't take much searching of the news to see
stories of teens using social media sites like Facebook to transfer
the cruelty of high school hallways into the online world. Teens that
make fun of a student or tease them may not just be responsible for hurt
feelings, but if they're publishing bullying or teasing posts online
or revealing private information about another teen in a public
forum, whether a blog, to their Facebook profile or other social
space, they may be exposing you and your insurance policy to a claim.
Are my kids covered under my
insurance?
Generally speaking, any coverage you have through your
homeowners or renters insurance policy also provides coverage to
other residents of the household, including your teenage children.
Standard homeowners and renters policies include liability protection
for bodily injury or property damage, which would pay for the costs
to cover medical bills or repair/replacement costs if your child
injured a friend in a pick-up basketball game or if they were at a
friend's house and accidentally spilled soda on a $13,000 oriental
rug, subject you your policy's deductible.
But what if your son or daughter were to post rumors
about other teens online that implied drug use, promiscuity, or other
information that could damage that person's reputation? With college
admissions offices and employers beginning to look up applicants on
social networking sites, rumors and gossip have the very serious
potential to damage someone's ability to get into the college of their
choice, or find a job. Or if your son or daughter "outs"
another teen's sexual orientation, there's the potential that someone
could pursue legal action under a type of defamation known as
publication of private facts. Interestingly, a standard homeowners or
renters policy would not cover these instances.
Get a Personal Injury Endorsement
In order to cover claims from that kind of situation,
homeowners and renters policies must have a "Personal
Injury" endorsement. You may be surprised to
find that this expanded coverage may not cost you much additional
premium. A personal injury endorsement will pay the costs up to the
limits of your policy to defend you, pay a judgment or settle a case
when legal action is brought against you or your children for
non-physical types of injury - defamation, slander, privacy
violations, false arrest and wrongful eviction or entry.
Make sure that if you're a parent, you talk to your
children about social media, how they use it and what's expected of
them. It's critical that they understand how their use of social
media could impact your insurance. Some parents choose to actively
monitor their children's use of social media, and there are various
software programs available to assist those who want to closely
monitor what their children do in social spaces. No matter what you
choose to do, we should all encourage each other to treat others with
respect - follow the golden rule.
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Check Out our Personal Lines in 2013
We offer a full range of personal lines coverages for homeowners,
condos, renters and rental property, auto, boats, motorcycles, RVs and
more.
Give
us a shot at your next renewal to see how we compete.
Package
multiple policies together with the same insurer for additional
discounts.
Several insurers
have been changing their policy forms the last few years to restrict
coverage for wind/hail damage to roofs, taking away the option of
Replacement Cost coveage and only offering Actual Cash Value, which
includes depreciation deductions.
Wind
and Hail claims are one of the most frequent affecting homes. A recent
State Farm report on hail claims puts Illinois, Missouri and
Indiana numbers 2, 5 and 7, respectiveley, for hail claims in
2012.
Does
your Homeowners policy fully protect you from hail and wind
claims? Our companies do offer full replacement cost on roofs
from these types of losses. Yet another reason to allow us to
take a look at your home coverage.
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Carrier Corner
We represent over 15
insurance carriers directly and have access to many more via brokers,
but you may only know one or two that we deal with. Each issue,
we'll highlight one of our valued partners in this space.
Founders
is a 112 year old, A- rated company based just north of O'Hare
Airport in Chicago. We have been contracted with them since
2007. While they offer some personal lines coverage, we find them
most useful for Liquor Liability coverage on several classes of
Hospitality Businesses.
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 Bret
Dixon Insurance is a Trusted Choice Agency. Learn more
about it here.
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