Author: Chris Boggs
Insurance Services Office (ISO) introduced several changes to liquor liability coverage in its 2019 multi-state general liability filing. These changes include:
- Four additional insured endorsements were created for use with the Liquor Liability coverage forms (CG 00 33 and CG 00 34);
- The CG 20 01 Primary and Noncontributory Other Insurance Condition endorsement is now available for use with the Liquor Liability coverage forms; and
- A new alternate endorsement was created to address liability coverage for a "bring your own" (BYO) establishment.
Additional Insured Endorsements for the Liquor Liability Coverage Form
ISO states that it received requests from insurers to introduce additional insured endorsements for use with the Liquor Liability Coverage Part. The insurance carriers gave several examples to support the request including:
- The building owner requires additional insured status when the lessee is in the business of selling, serving or furnishing alcoholic beverages.
- A franchisor, as part of a franchising contract, may require additional insured status when the independent owner sells, serves or furnishes alcoholic beverages.
- A municipality may require additional insured status if the insured is selling, serving or furnishing alcoholic beverages on government property.
- A sponsor may request additional insured status when liquor liability operations are subcontracted to a vendor.
In response to these requests, ISO introduced four additional insured endorsements specifically intended for use with the Liquor Liability coverage part. All four follow a format similar to the General Liability additional insured endorsements:
- Coverage afforded to the additional insured applies only to the extent permitted by law;
- Coverage cannot be broader than what is required by any contract or agreement that exists between the insured and the additional insured; and
- The most that will be paid to the additional insured is the amount of insurance that is required by any existing contract or agreement or what is available under the applicable limits of insurance, whichever is less.
The four new additional insured endorsements are:
CG 34 01 Additional Insured Owners, Managers Or Lessors Of Premises Liquor Liability
This endorsement requires the owner, manager or lessor to be scheduled on the form. Additional insured status applies to liability for "injury" arising out of the selling, serving or furnishing of alcoholic beverages on the portion of the premises leased to the insured, which is also listed in the schedule.
CG 34 02 Additional Insured Grantor Of Franchise Liquor Liability
Like the CG 34 01, this endorsement contains a schedule to extend additional insured status to the specified person or organization but only with respect to liability as a grantor of a franchise to the insured and arising out of the selling, serving or furnishing of any alcoholic beverage by any insured.
CG 34 03 Additional Insured State Or Governmental Agency Or Subdivision Or Political Subdivision Permits Or Authorizations Liquor Liability
Again, this endorsement requires the governmental agency or political subdivision requesting additional insured status to be specifically scheduled. And like the other liquor liability AI endorsements, additional insured status extends to the listed entity's liability arising out of the selling, serving or furnishing of any alcoholic beverage where they issued the insured the permit for use of their premises.
CG 34 04 Additional Insured Sponsor(s) Liquor Liability
Another endorsement requiring the additional insured to be scheduled. Additional insured is extended to the scheduled sponsor for its liability from the scheduled event or function and arising out of the selling, serving or furnishing of any alcoholic beverage by any insured.
Although coverage is limited to the additional insured's vicarious liability for the named insured (as per the explanation in the filing), it is interesting that all four forms apply the "arising out of" wording rather than the "caused in whole or in part by" wording found in the construction-related additional insured endorsements. Not being an attorney, I can't foresee the ultimate outcome of this difference, but the "arising out of" wording has been judged to be much broader than intended. Even as part of this multi-state filing, ISO re-filed two other additional insured endorsements to replace the arising out of wording" with the caused in whole or in part by" wording (see, CGL Additional Insured and Insured Status Endorsement Changes).
I guess the answer to this question will be up to the judge and jury.
I'm also a bit confused as to why additional insured endorsements were created for the liquor liability coverage form. Generally, liquor liability laws dictate who can be held liable for the improper serving of alcoholic beverages; thus, liquor liability coverage is designed to respond to dram shop laws. Do these laws allow a non-participating third party to be held liable for the actions of the person who actually did sell, serve or furnish the alcoholic beverage?
The crux is this, how can the landlord be held legally liable for the actions of the tenant unless the dram shop law allows it? How can a governmental body be held responsible without statutory allowance? Etc., etc.
Did ISO create these endorsements just to satisfy requests that will or should never result in a claim? If, and that's a big if, there was ever any vicarious liability on the part of these AIs, it should be handled by contract and not insurance.
This question, too, is for smarter minds.
Expanding Use of the CG 20 01
This will be short and, well, short anyway. Because these new additional insured endorsements were introduced for use with the liquor liability coverage form, ISO refiled the CG 20 01 so that it can now be used with the liquor liability coverage part.
Not only do these parties now have the option to be additional insureds on the liquor policy, they can now be extended AI status on a primary and noncontributory basis.
BYOB Establishments
ISO revised the CGL's liquor liability exclusion in its 2013 multi-state revision to address "Bring Your Own" establishments (BYO). The revised wording stated that for purposes of the liquor exclusion contained within the coverage form, permitting a person to bring alcoholic beverages for consumption on an insured's premises, whether or not a fee is charged or a license is required for such activity, was not, by itself, considered the business of selling, serving or furnishing alcoholic beverages.
In the same filing, revisions were made to the optional liquor liability exclusion endorsements, CG 21 50 and CG 21 51, with respect to BYO; however, the revisions stated that within these optional exclusion endorsements the liquor liability exclusion will apply if an insured permits any person to bring any alcoholic beverages on the named insured's premises, for consumption on the named insured's premises. When either of these endorsements was attached, there was no coverage for a BYO exposure.
A new optional endorsement relating the BYO establishments was introduced in this filing with an effective date of 12/1/19. ISO promulgated and introduced the CG 40 09 - Amendment of Liquor Liability Exclusion-Limited Exception For Bring Your Own Alcohol. This new endorsement is similar to the liquor liability exclusion found in CG 21 50, except that it does not exclude BYO establishments and provides an exception to the exclusion addressing BYO similar to the exception found in the unendorsed CGL as discussed above.
ISO states that use of the new CG 40 09 could be either a reduction or a broadening of coverage, depending on the circumstances surrounding its use. If the CG 40 09 replaces the CG 21 50 or CG 21 51, this may result in a broadening of coverage. However, if this endorsement is attached to a policy not containing either the CG 21 50 or CG 21 51, the result is a reduction of coverage.
Other Articles on New Forms and Endorsements
The VU is slowing digging through all the 2019 ISO form and endorsement filings. So far, six other articles have addressed these filings. They are:
Only a few items remain to be discussed. Stay tuned.
Last Updated: January 3, 2020