Post written by: Greg Wetherwax
In Sarah Crowley's The Commercial Line article, "Fast-Casual Restaurants: A Delicious Balance Between Fast Food and Fine Dining," she discussed the growing trend of fast-casual dining restaurants. This growing trend has also sparked a growing trend of allowing patrons to bring in their own alcohol (BYOA / BYOB).
Although BYOA in restaurants, as well as other retail and service establishments, is not necessarily a new concept, it is one that is growing in popularity and concern. It is also catching the eye of state and local legislators, governmental bodies, such as state liquor control commissions, and insurance companies.
Why do we have BYOA establishments and what extra care of duty do these establishments have to their patrons, if any?
Why the Accelerated Popularity?
Although BYOA / BYOB establishments have been around for years, it has been a growing trend over the past 10 years for the following reasons:
- Due to the sluggish economy people are not going out to eat as often. Allowing patrons to bring in their own alcohol is a way to increase customer traffic.
- Other retail and service establishments, such as beauty salons, wedding boutiques, bowling allies, movie theaters, golf courses, etc., were looking for additional ways to attract customers and set them apart from their competition.
- Depending on the state or local jurisdiction, the number of liquor licenses issued to individual establishments may be limited. If the respected establishment was not able to obtain a liquor license, offering a BYOA setting was a way to allow their customers, in certain jurisdictions, to drink alcohol without actually having a liquor license.
- When a liquor license is available, the cost to obtain one may not be feasible. In some cases a liquor license can cost in excess of $1,000,000.
- The BYOA establishment may believe their liability is lessened since they are not actually selling, servicing or distributing the alcohol.
In most cases, BYOA restaurants are not generating revenue from the sale of beer, wine or other forms of liquor. However, many are generating income through service fees, corking fees, glass fees, and wash fees. These fees vary depending mainly on the customer base and city in which these restaurants are located.
For instance, a pizza parlor in a small town may not charge anything to have the server provide drinking glasses to their BYOA customers. On the other end of the spectrum, in certain high end New York City restaurants, it is not unusual to have corking fees of $100 or more.
BYOA / BYOB Regulations
The regulations surrounding BYOA establishments vary greatly by state or local jurisdictions. Some states don’t have regulations or laws while others have extensive ones. Since these rules and laws differ greatly by jurisdiction, and can change frequently, it would be impossible to document these individual state rules within this article.
However, I just wanted to bring to your attention that state legislators and state liquor commissions do acknowledge the increasing trend of BYOA establishments and are becoming more active and vocal in efforts to manage, monitor and control BYOA establishments. In certain states, BYOA liquor licenses are now required. These are normally called Bottle Club licenses, Brown Bag licenses, or Temporary licenses.
Do I Need Liquor Liability Coverage?
Since BYOA establishments do not actually sell, distribute or serve beer, wine or liquor, what duty of care do they have to their customers, or the general public, once the customer leaves their establishment? This is a very tough question to answer, because there are very few precedent court cases addressing this situation and each situation would depend on the state’s respected Dram Shop laws.
In some states, a BYOA restaurant that only allows patrons to bring in light beer has the same duty of care as a bar who actually serves hard liquor directly to the customer. In other states, the duty of care owed by the BYOA restaurant is minimal hence their liability exposure is minimal. Specific duties of care for BYOA establishments may include:
- Provide training to the servers on identifying impaired patrons.
- Not allowing alcoholic drinks to under-aged individuals even if they are not selling or serving the liquor. Do they need to check identification cards or driver licenses?
- Provide transportation to any person that may be under the influence.
Since there continues to be this gray area of liability and/or duty of care owed by the BYOA establishment, it would be very prudent to have these establishments error on the conservative side and purchase Liquor Liability coverage for this exposure.
Insurance companies also need to be aware of this exposure because the Liquor exclusion found on a standard General Liability coverage form only applies if the insured is in the business of selling, serving or distributing. Since the BYOA establishment is not selling, serving or distributing the alcohol, the Liquor exclusion would not apply hence there would be “Host Liquor” coverage available under the standard General Liability coverage form.
When purchasing Liquor Liability coverage, or underwriting this exposure, the Insuring Agreement on the Liquor Liability coverage form should include establishments that permit any person to bring alcoholic beverage on their premises for consumption. The reason for this is because the standard Liquor Liability policy only provides coverage if the insured is in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverage.
Since many BYOA establishments do not actually sell, serve or provide alcoholic beverage, it is important to have the Liquor Liability insuring agreement amended as just described above in order to have the appropriate Liquor Liability coverage.
When it’s all said and done, establishments that provide a BYOA environment should have the same concern and duty of care as an establishment that actually sells and serves alcohol. State and local authorities are taking notice of this increasing BYOA trend and most have, or will start to have, rules, regulations and guidelines in place that need to be followed. Insurance companies are also paying more attention and may elect to exclude the BYOA exposure (Host Liquor) from the General Liability coverage form and require the insured to purchase a separate Liquor Liability policy.
For more information, read another article from The Commercial Line, "BYOB (Bring Your Own Beverage) Restaurants."
Image credit: Flickr via Ann Larie Valentine