Liquor Liability Coverage Endorsement BP 04 89
1. What the form is
The BP 04 89 Liquor Liability Coverage endorsement is designed to provide coverage for bodily injury or property damage arising from the selling, serving, or furnishing of alcoholic beverages. Standard Businessowners Policies (BOP) typically exclude this type of liability, making this endorsement crucial for businesses with liquor-related exposures. It essentially "buys back" coverage that would otherwise be excluded. This endorsement applies to businesses with significant liquor liability exposures. Coverage is subject to aggregate and per-cause limits specified in the endorsement schedule.
2. Classes of business it applies to
This endorsement is vital for a range of businesses that manufacture, sell, distribute, or serve alcoholic beverages. Real-world examples include:
- Restaurants and Bars: Businesses where alcohol sales are a primary or significant revenue source.
- Caterers: Those who serve alcohol at events.
- Liquor Stores and Convenience Stores: Retailers selling packaged alcoholic beverages.
- Grocery Stores: Supermarkets with liquor sections.
- Breweries, Wineries, and Distilleries: Manufacturers who may also have tasting rooms or serve on-site.
- Hotels and Motels: Establishments with bars or room service that includes alcohol.
- Private Clubs: Organizations that serve alcohol to members and guests.
Essentially, any business whose operations involve providing alcohol to patrons or customers could have a liquor liability exposure that this endorsement addresses.
3. Special considerations
There are several important factors to consider when utilizing the BP 04 89 endorsement:
- Licensing is critical: The coverage typically does not apply if the insured is operating without a required liquor license at the time of the incident. Underwriters will verify the type and status of the liquor license(s) held by the business.
- Dram Shop Laws: This coverage is particularly important in states with "dram shop" laws. These laws can hold businesses liable for injuries or damages caused by intoxicated individuals they served or sold alcohol to. The scope of these laws varies significantly by state.
- "Bring Your Own" (BYO) Establishments: While some policies may offer limited coverage for BYO scenarios under the main BOP, establishments that permit or encourage BYO may still have a significant exposure that warrants specific liquor liability coverage. The BP 04 89 can be crucial for these businesses. Endorsement BP 14 89 is specifically designed for BYO establishments.
- Exclusions: The endorsement contains its own set of exclusions. For example, it may exclude coverage for injury or damage arising from alcohol sold or served when a required license is not in effect, or for injury or damage for which other insurance is afforded. It also typically won't cover damage to the insured's own property or claims related to underage drinkers if specifically excluded.
- Not for Incidental Exposure: For businesses with very limited or incidental liquor liability exposure (e.g., an office party), other solutions like host liquor liability (often included in a standard CGL or BOP) might be sufficient. The BP 04 89 is for businesses more regularly involved in selling or serving alcohol. There is another endorsement, BP 04 88, which deletes the liquor liability exclusion and is used for insureds with limited exposure; BP 04 89 should not be used in conjunction with BP 04 88.
4. Key information for agents and underwriters
Agents and underwriters should pay close attention to the following when dealing with the BP 04 89:
- Pricing and Rating: Premiums for this coverage are often based on the annual receipts or sales of alcoholic beverages. The percentage of total sales derived from alcohol is a key rating factor; a higher percentage generally means higher risk and premium.
- Risk Assessment: Underwriters will scrutinize the nature of the business. Factors increasing risk include:
- High ratio of alcohol sales to food sales.
- Promotional activities that encourage excessive drinking (e.g., happy hours, drink specials, drinking contests).
- Late operating hours.
- History of liquor-related incidents or claims.
- Lack of or inadequate employee training in responsible alcohol service (e.g., TIPS certification).
- The average age of patrons.
- Coverage Gaps: It's crucial to ensure the limits provided by the endorsement are adequate for the exposure, considering potential severity of liquor-related claims. Agents should discuss aggregate limits and per-common-cause limits with the insured. Also, be aware that this endorsement typically covers liability to third parties for bodily injury and property damage; it does not cover damage to the insured's own property or fines/penalties for violating liquor laws.
- Underwriting Guidelines: Insurers will have specific underwriting guidelines for liquor liability. This may include requirements for employee training, security measures (especially for establishments with a history of altercations), and adherence to all local and state liquor laws. The type of liquor license held is a primary underwriting consideration. Businesses operating without a valid license are generally uninsurable for this exposure.
- State Variations: While the form is listed for "All States," the specific application of liquor liability laws, including dram shop statutes, varies significantly. This can impact the level of risk and potentially the availability or cost of coverage.
The BP 04 89 endorsement is a critical tool for managing the significant liability exposures faced by businesses involved in the sale or service of alcoholic beverages. A thorough understanding of its purpose, applicability, and limitations is essential for both insurance professionals and their clients.