At issue is insurance state law requires SC bars and restaurants buy to serve alcohol
By Abraham Kenmore
SCDailyGazette.com
COLUMBIA — Bar and restaurant owners across South Carolina are telling legislators they may be forced to close due to the skyrocketing cost of insurance the state requires to serve alcohol.
The rising cost and shrinking availability of this insurance — known as liquor liability insurance — has hit establishments of all sizes, from major restaurants to nonprofit Veterans of Foreign Wars posts. State legislators are trying to find a solution.
The VFW post in Elgin closed for three weeks as its leaders scrambled to find affordable insurance before re-opening Monday, according to Post Commander Christine Rogers.
The closure not only stopped member activities. It hampered the food drive they were in the middle of working on for a nonprofit in their tiny town northeast of Columbia.
“By closing, we were not able to collect very much food,” she told the S.C. Daily Gazette.
In 2017, the state Legislature passed a law requiring businesses that serve alcohol past 5 p.m. to carry at least $1 million in liability insurance. That insurance covers a business if it is sued — for example, if a customer who bought alcohol there ends up driving drunk and gets in a wreck that seriously injures or kills another person.
Rogers said her post already had a $1 million policy before the law. Last year, that policy cost $6,600. But this year, the offered policy more than tripled to $23,000. Eventually, the post found a policy that cost roughly the same as last year, Rogers said.
The Elgin post is far from alone.
Some companies won’t even write insurance policies for VFW posts, said Charles Holloway, the District 2 VFW commander, which covers Elgin and another post that had to close.
“It has become a problem,” he said, noting liquor liability insurance for his Lake Murray post increased from $5,800 last year to $8,000 this year.
That’s tiny compared to giant leaps in costs elsewhere. One restaurant owner told a legislative panel his insurance increased 86% in one year, and another VFW on the Isle of Palms faced a roughly 600% jump last year.
The questions before legislators: What’s causing the rates to jump and what can they do about it?
One House subcommittee is considering legislation that aims to incentivize more insurance companies to offer liquor liability coverage. The proposal would also reduce the amount of insurance coverage that bars and restaurants need if they meet certain requirements, such as being a nonprofit or closing by 10 p.m.
Susan Cohen, president and CEO of the South Carolina Restaurant and Lodging Association, told legislators Thursday she appreciates them tackling the issue and trying to help.
“We’re thrilled that they introduced this bill, because it allows the conversation and actual stories … to come out,” Cohen told the S.C. Daily Gazette after the meeting.
But the requirements are so narrow, they may not help many businesses, she said.
From her perspective, it’s a multi-pronged problem: The $1 million requirement has combined with an increase in lawsuits that name any business remotely related to a case. Those lawsuits lead to major payouts, which makes it harder for insurance companies to stay afloat and offer reasonable coverage, so fewer options exist.
“I don’t know what the average settlement is in these cases, but if they know you’ve got a million dollars in coverage, what are they going to go after?” Cohen said. “It started sliding up in 2017, after the mandated minimum … It just snowballs.”
Cohen referenced testimony at a prior meeting by Michael Wise, director of the state Department of Insurance. Wise told lawmakers that between 2017 and 2022, insurance companies were consistently paying out, at best, $1.90 for every dollar they collected.
If payouts continue to exceed what companies bring in through premiums, Cohen said, companies will leave the state.
Legislators in the Senate have proposed a different approach.
Sen. Majority Leader Shane Massey, R-Edgefield, believes the problem is that state law makes the place that served the customer alcohol legally responsible for all damages in civil cases, even if a jury finds they had a small proportion of responsibility.
“We have businesses that are going out of business because of this system,” Massey said. “They’re going out of business because they cannot afford insurance coverage that is required, and they cannot afford the insurance coverage because our civil justice system … has created a system where it is impossible for insurers to evaluate risk and offer affordable coverage.”
Not everyone agrees this is the issue.
Jay Angoff, a former insurance commissioner of Missouri and New Jersey, told senators this week the liability seems to have little relation to insurance prices.
Angoff, who was hired by the South Carolina association for trial lawyers to testify, said his research shows the civil liability law is not to blame for the increases. But, he added, it’s difficult to tell what is, since very little insurance information is public record in South Carolina.
“Not that Missouri is the repository of all insurance wisdom, but in Missouri this information would be public,” he told senators.
Twyla Reynolds, whose family members were killed and injured by a drunk driver going the wrong way on a Hilton Head Island bridge in 2021, told senators she opposes any changes that would make it harder to sue bars that serve people who are already intoxicated.
“We’ve heard people say ‘You know, the law is a problem because it’s closing restaurants and bars and that anyone can be sued for serving one drink,’ and that’s not true,” Reynolds said.
Meanwhile, restaurant owners and VFW members say whatever’s driving up insurance costs make it difficult to remain open.
“We have insurance for this year, but what’s going to happen in six to eight months when we have to renew this insurance?” said Holloway, the District 2 commander.
