LIQUOR LIABILITY
Gatherings — especially following many months of COVID-led cancellations and restrictive protocols — are bringing us back together again . Barbecues , holiday parties , and other social events are once again fostering the “ community ” in community associations . But as boards of directors and management companies plan these events , an awareness of liquor liability must also be addressed so the association does not leave itself open to lawsuits .
Included in most General Liability policies is “ host liquor ” liability coverage , principally afforded by exclusionary language that does not apply when the insured is not in the business of manufacturing , distributing , selling , serving , or furnishing alcoholic beverages ( whether or not a fee is charged or a license is required ). But boards are encouraged to review their specific insurance contracts for coverage or exclusionary language and to understand the limitations of the host liquor provision .
Host liquor liability coverage , when included in the policy form or by endorsement , addresses claims that arise out of the community serving — but not selling — liquor ( spirits , wine , beer ) at an association-sponsored event . Once the event entails a cash bar or the purchase of drink tickets ( even when there is an insured third-party bartender present ), the Association ’ s master policy carrier may elect not to cover the event . Stand-alone policies , then , inclusive of liquor liability coverage , may need to be purchased . Remember that an association ’ s General Liability policy is written to cover the regular day-to-day exposures within the community . Events , particularly those that include alcohol , fall outside an association ’ s normal operations and dramatically increase liability . Always consult your agent prior to holding any event , but particularly any event that includes alcohol .
The proliferation of 55-and-better communities is also changing the landscape of associations as active adults , ready to enjoy more leisure time , are demanding a resort or club-type lifestyle . The mantra “ 60 is the new 40 ” is never so evident as at active adult communities where clubhouse wine lockers , wine tastings , and bring-your-own events are becoming increasingly popular .
The concept of BYO — bring-your-own alcohol — can reduce the expense of an association-sponsored event such as a Sunday football watch party , and most General Liability policies do not have specific BYO exclusions . However , BYO events can create issues because there typically are fewer controls over the amount of alcohol being brought in or consumed .
Associations should work with counsel to develop protocols in how to recognize and address overconsumption as the average Master Policy carrier is not looking to insure a bar-type atmosphere with the possibility of drinking getting out of hand . It is worth noting , too , that alcohol can contribute to incidents involving assault and battery . Most liability policies exclude coverage for claims involving assault and battery under the expected and intended loss provision within the policy .
An owner / member who keeps alcohol on an association ’ s premises ( such as within a leased wine locker ) should make certain to advise their homeowners ’ policy carrier of the lease agreement . The lease agreement may exclude any care , custody , and control obligations of the association for loss , damage , or theft of stored wine ( property loss ), but just as important , wine that is furnished by a member and enjoyed by others carries liability to the member furnishing the wine .
Where minors are concerned , it should be recognized that furnishing alcohol to a minor or knowingly allowing a minor to consume alcohol on association property by an adult is against the law under most circumstances and can result in penalties to both the minor , the adult , and the association that allows the consumption . Allowing minors to drink on association property should be avoided entirely as General Liability forms generally include a coverage exclusion for furnishing alcoholic beverages to a person under the legal drinking age or under the influence of alcohol .
Boards should also make certain to collect evidence of insurance from their members who host private , nonsponsored events on association property and to have the association member name the association as an additional insured on that policy . Private events that include the serving or sale of alcohol can result in claims that leave an association open to liability since the premises belongs to the association . An endorsement to a homeowners ’ policy — or better still , a separate event policy — can be purchased by the homeowner relatively inexpensively , which has the added benefit of protecting the homeowner should the event result in a bodily injury and / or property damage suit against the homeowner . +
BY : ROBIN MANOUGIAN , CIRMS , ACCOUNT EXECUTIVE JGS INSURANCE , A BALDWIN RISK PARTNER
Robin Manougian , CIRMS , is a CAI- Educated Business Partner and an Account Executive with JGS Insurance , A Baldwin Risk Partner , in the firm ’ s Silver Spring , Maryland , office . Robin has specialized in community association insurance programs since 1994 . Robin wants associations to have a good time but encourages they do so responsibly , well informed , and , of course , insured .
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