By ShaunChornobroff
SCDailyGazette.com
COLUMBIA — Legislation that aims to drive down insurance premiums that have skyrocketed for businesses across South Carolina will soon be law.
A 41-1 vote Wednesday night, May 7, in the Senate sent Gov. Henry McMaster a bill he’s certain to sign. Earlier this year, he urged legislators to send him a solution to an unfair legal framework that’s crippling businesses.
When the week started, it was unclear if the effort would again fizzle for the year. But a compromise emerged Tuesday, which the House passed on an unrecorded voice vote.
Senate Majority Leader Shane Massey urged his colleagues to give final approval.
“This is the best we were going to get this year,” he said, adding “I don’t think we’d do any better next year.”
The compromise gives bars and restaurants options, as well as requirements, for reducing their minimum insurance coverage for serving alcohol.
It also reforms state rules for personal injury lawsuits that allows businesses to be held 100% financially responsible in a lawsuit even if they’re barely at fault.
The agreement allows leaders in both chambers to check off a majority priority of the session.
However, it goes further than the House intended. In March, House GOP leaders insisted they wanted to focus this year on helping restaurant owners.
And it’s not as broad as the bill that passed the Senate, which dealt with a host of business insurance and litigation issues, including medical malpractice. That piece is gone, as is a proposal to double bare minimums in auto insurance coverage.
“At the end of the day, this is about not holding our bars and restaurants hostage,” House Judiciary Chairman Weston Newton told the chamber Tuesday in advocating for passage.
Massey believes more legislation will be required in a few years to further bring down rates.
Lowering the minimum
A 2017 state law has gotten a lot of the blame.
It requires bars and restaurants that serve alcohol after 5 p.m. to carry insurance policies covering at least $1 million in damages in case a customer is overserved and causes an accident — what’s called liquor liability. That caused premiums to rise and insurers to leave the state. As the insurance options dwindled, the cost of policies kept rising.
Business owners have told legislators they struggle to stay open. Others said high insurance rates caused them not to expand or open at all.
The compromise would leave the $1 million minimum in state law but allow policies to be far lower.
For example, it would require all businesses that sell alcohol by the drink to have their servers complete alcohol training, which would lower the minimum policy by $100,000. For bars that stay open between midnight and 4 a.m., they must use scanners to verify that customers’ IDs are legit, which would shave another $100,000.
But closing before midnight, an option, would reduce coverage by $250,000.
Restaurants that make most of their money from food instead of alcohol could also get a break. If less than 40% of sales come from alcohol, policies can lower by $100,000.
By broadening the House bill to lawsuits, Newton said, the compromise addresses another reason for restaurants’ hike in premiums: rules known as “joint and several liability.” That refers to the possibility of businesses being required to pay the full amount of a court-ordered award even if they’re just 1% responsible for whatever happened.
Business owners said it forces them to pay — and perhaps puts them out of business — for things that aren’t their fault.
Personal injury lawyers, including those in the Legislature, have argued the law needs to ensure victims can be fully compensated for their loss following a tragedy.
And they’ve pointed to a 2005 law in calling additional changes to “joint and several liability” unnecessary. That 20-year-old law was touted as creating fairness in litigation by holding businesses fully responsible if they’re more than 50% at fault. If no single business or person meets that threshold, fault is divided proportionately between all those involved in the case.
But that law doesn’t at all help bars and restaurants in lawsuits involving alcohol, which were specifically excluded from the proportional rules. It also doesn’t help other businesses in practicality if plaintiffs only sue whoever or whatever can pay the biggest award, as often happens.
The compromise deletes the exclusion for alcohol and requires the verdict form given to a jury to include everyone at fault for determining their share of responsibility, including people and businesses that weren’t sued.
“That’s a big win,” said Massey, who led the fight in the Senate for a broader bill.
Under the agreement, if a business intentionally or recklessly causes harm, it can still be held fully responsible.
The president of the South Carolina Manufacturers Alliance praised the compromise as “something we can not only be proud of, but something we know helps those who need it most.”
It’s “stronger than current law, making the business landscape more predictable, fair and good for South Carolina families, businesses and consumers,” said alliance president and CEO Sara Hazzard.
No guarantees
But some legislators said they remain concerned that there’s no guarantee the agreement will lead to lower insurance rates.
Rep. Justin Bamberg noted that as South Carolina businesses struggle, insurance companies continue to thrive.
He reiterated a consistent complaint made in both chambers about a lack of testimony from the insurance industry.
“You know who we didn’t hear from? Anybody high up in the insurance industry,” the Bamberg Democrat said.
“Wouldn’t show up, wouldn’t talk to anybody, wouldn’t give the secret sauce because it’s a ‘trade secret’ about how they even label our state. How they label people at risk, how they determine premiums,” he said.
Shaun Chornobroff covers the state legislature for the S.C. Daily Gazette, part of States Newsroom, the nation’s largest state-focused nonprofit news organization.
