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Businesses and homeowners are likely familiar with insurance companies of last resort, quasi-governmental agencies established by states that provide property and liability coverage when the primary market does not provide insurance. These include many state storm underwriting associations or corporations, South Carolina medical malpractice associations, and national risk-assigned workers’ compensation funds.
This year, the South Carolina General Assembly is considering a bill that would introduce that approach to liquor liability insurance for bars and restaurants. Seeing premiums double or even quadruple over the past few years as private insurers exit unprofitable markets, some property owners are looking to combine this with other solutions. He says this plan cannot be implemented immediately.
“Our broker offered our insurance to over 40 carriers. 33 declined. 3 did not respond,” said the owner or founder of at least seven popular restaurants in the state. , Carl Sobocinski, told a joint legislative committee last week.
The reasons cited by insurance companies that have fallen into financial trouble range from “they no longer do business in South Carolina” to “too much of their revenue comes from alcohol sales.” In the end, he said, he was left with one option to increase his premiums from $62,000 a year to more than $115,000 a year.
“With just an 86% increase, I feel like I’m one of the lucky ones,” Sobocinski said.
He told lawmakers about another Greenville restaurant’s premium that jumped from $8,000 in 2022 to $50,000 this year.
The crisis has forced some established bistros to close or merge, and more closures are expected this year, restaurant owners and insurance brokers say.
House Bill 5066, sponsored in part by Rep. Jason Elliott, R-Greenville, is titled the Fair Access to Insurance Requirements, or FAIR Act. An alcoholic beverage debt fund will be created, funded by a portion of beverage sales tax revenue. The fund will be able to contract with private insurance companies to administer the program.
The fund will have limits. To be eligible for the risk mitigation program, establishments must close by 10 p.m. This would allow owners to reduce their coverage limits by up to $100,000 for each hour they close earlier, the bill says.
The owner of a well-known pub said the provision would not help bars and nightclubs, which make most of their revenue during after-hours.
“We can’t close two hours early because we can’t make a profit,” Josh Bumgarner, owner of Transmission Arcade in Columbia, the state capital and college town, told the committee.
Bumgarner also said they would not benefit from the 30% cap on alcohol sales required by HB 5066. Most late-night clubs and even some restaurants already far exceed that standard, he said.
In South Carolina, which relies on tourists, the plight of restaurants and the cost of their insurance has become a major issue in recent years, due to two main reasons: If any injury or death occurs, you will be held 100% responsible. And in 2017, after a high-profile car crash that killed two people and seriously injured a police officer, the state Legislature approved a law increasing the liquor liability coverage requirement to $1 million. Neither the driver nor the liquor store had liability insurance, and the officer’s county employer would be responsible for his medical expenses.
Combined with the Solidarity Act, coverage requirements have transformed the hospitality industry. A report released in January by the state Department of Insurance called the state’s liquor liability market “extremely unprofitable” for insurance companies.
Senate Bill 533 would allow juries to apportion fault in most liability cases, as many other states do. But while the bill received early attention, it appears to have stalled in Congress. No votes have been taken since it was assigned to a subcommittee of the Senate Judiciary Committee. South Carolina news outlets, including Mothers Against Drunk Driving, opposed the change, saying it would ignore the fact that South Carolina has an abnormally high rate of drunk driving crashes and deaths. It was reported that
House Bill 5066 would not reduce the $1 million compensation requirement, except for stores that close early or limit alcohol sales. However, the change would change coverage from $1 million total to a $1 million annual cap, which some industry observers say could lead to lower premiums for bars and restaurants.
The bill is still before the House Judiciary Committee. A subcommittee will meet on February 27 to consider it. Supporters believe the bill could gain momentum before Congress adjourns on May 9.
“Everyone in the General Assembly has heard from their constituents about this,” Rep. Elliott, the bill’s sponsor, told the committee. “We believe we can find a way to balance safety and business interests. We hope to bring down insurance premiums by bringing more airlines back to the state.”
Top photo: Transmission Arcade owner Josh Bumgarner speaks before a legislative committee last week. (South Carolina General Assembly)
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