Hospitality Community Under Threat Due to Soaring Liability Insurance Rates

CHARLESTON, S.C. — Three years after the coronavirus pandemic temporarily shuttered bars and restaurants across the state of South Carolina, soaring liquor liability insurance rates threaten to close them permanently, according to the members of a local grassroots business organization.

The group, SC Venue Crisis, was started in April by small business owners Asheton Reid, Kynn Tribble and Sheila Merck, all of whom have ties to the food and beverage industry in the state’s Upstate region.

Since then, they’ve held nearly two dozen town halls around the state to raise awareness of the issue and advocate for the passage of two bills — one in the state House, the other in the state Senate — that they hope will save their industry and prevent their insurance nightmare from having a disastrous ripple effect across the state economy.

Their most recent town hall was held last week at the Frothy Beard Brewing Company in West Ashley, a suburb of the city of Charleston.

The event brought out scores of attendees, including business owners who said it’s everything they can do to keep their low-margin establishments solvent in the existing liability environment.

Their current travails stem from the 2017 passage of state Senate Bill 116, which requires all bars, restaurants and venues that serve alcohol after 5 p.m. to carry a $1 million liability insurance policy.

The problem, according to Merck and others, is that the bill didn’t contain critical language that would have prevented it from being exploited to the detriment of business owners, leaving them vulnerable to lawsuits and driving up their insurance rates.

In the last six years, according to the South Carolina Insurance Association, insurers are paying out about two dollars for every dollar they collect for liquor liability due to a rise in civil lawsuits.

As a result, over the same period, the cost of the average liability policy in South Carolina has jumped from between $2,000 and $5,000 to $25,000 or more, with some struggling to find rates under $100,000.

And that’s for businesses that only have one location. One business owner with multiple locations told SC Venue Crisis that he’s now paying over $500,000 for liability insurance.

“It’s been a shocking turn of events,” Merck told The Well News. “I mean, I got a call just today from a gentleman’s club in Charleston that had been paying about $6,000 a year for liability insurance and had just gotten a quote for $200,000 a year.

“I personally know of one venue that recently opted just to close completely with hopes that they’ll be able to reopen as a restaurant at some point,” she said. “A lot of these businesses and music venues and the like just can’t afford these insurances. So they’re going to have to either change their business model or not be in business at all.”

Merck, who serves as communications director for SC Venue Crisis, said the group chose its name very deliberately.

“I mean, if we’re being completely honest about things, if we had come out and said, ‘By the way, we’re trying to save bars,’ a lot of folks would not have gotten behind us — especially in the Bible Belt.

“But folks can get behind music and small business. And the reality is, small venues, which are the businesses being most impacted by this situation, are the bread-and-butter businesses in a lot of communities.

“They are where people can go to hear live music three or four nights a week after work, they are where couples get together for a drink and a bite to eat, they’re part of the social fabric, and they are also a significant part of the economy,” Merck said.

“I mean, you’re not just talking about the impact these insurance rates are having on business owners and employees, they also have a trickle-down effect on the people who provide the beer and wine and liquor to these establishments; on the people that do the cleaning; down to the people who come from time to time to repair the coolers and other pieces of equipment.

“It also affects the musicians, obviously, who perform at these venues, photographers who are hired to photograph events, and the trickle-down effect extends even beyond our business sector,” she continued.

“For instance, at our town hall the other night, some pointed out that if this situation continues — and even worsens — that’s going to have a huge impact on local real estate markets, because properties that would have been purchased or leased are simply going to remain vacant,” Merck added.

Business owners don’t question the need for liability insurance, but Merck points out that Senate Bill 116 failed to establish any percentage of fault rules for these establishments.

As a result, even if a business is just 1% at fault in a personal injury or wrongful death case, a business can be held responsible for $1 million in damages.

The business owners also contend that a surge of frivolous lawsuits filed since Senate Bill 116 went into effect has driven several insurance providers out of the market.

“Here in South Carolina, we used to have 12 insurance providers competing against one another for our business, now we’re down to just three,” Merck said. “And given what’s happened legislatively, I can understand that they feel they need to raise their rates.

“This is not the insurance carrier’s fault,” she said. “We’re business people, we understand the impact of supply and demand, but the fact that so many insurance carriers have left the state should tell our legislators that there’s a problem. There’s something wrong with the way South Carolina does business.”

The situation could have profoundly negative effects across the state, she and others argue. 

Though South Carolina’s economy has diversified in recent decades with the addition of Boeing, Daimler Chrysler and other multinational business, the state is still largely dependent on tourism dollars to make local economies hum.

Last year, South Carolina raked in rough $29 billion in tourism dollars, and economists in the state have estimated that there’s been an 11% increase in tourism revenue compared to pre-pandemic spending, since the end of the COVID crisis.

SC Venue Crisis argues that if you lose venues to the liability insurance crunch, you’ll soon start seeing those tourism dollars go elsewhere.

“If you lose the nightlife, the tourism dollars are going to go with it,” Merck said. “People don’t come to South Carolina only to play golf, or sit on the beach, or drive in the mountains. They’re going to shows, they’re having dinner and they’re doing things at which they like to have a drink.”

She also noted that other states in the South have come up against similar problems like the one now facing South Carolina, but have taken steps to fix it.

In April, Merck said, Alabama passed a law intended to place more personal responsibility on bar and music venue patrons. It did so by, among other things, including a provision in its law that says a bartender would have to knowingly serve a visibly intoxicated person to be held 100% responsible for a personal injury or death.

In North Carolina, a bill was recently passed that does not allow a patron to walk away from a bar with more than one drink in their hand.

“That one blows me away, because it’s so commonplace for someone to walk up to a bar and ask for drinks for their whole table, or to get a drink for themselves and a friend holding their spot near the stage. But you know, that’s what North Carolina felt it had to do. Personal responsibility has to be in there somewhere.”

Despite what’s happened since Senate Bill 116 was passed, Merck said she believes lawmakers had good intentions when passing it.

“I want to believe that everybody has good intentions behind their actions, but the unintended consequence was that people started suing because they could,” she said. “I mean, if you can get a million dollars from someone, why would you not try to get a million dollars, especially when you’ve got an attorney in your ear saying, ‘Hey, we can do this. I will get you every single penny I can.‘

“So again, I don’t think lawmakers acted maliciously against our industry, they just didn’t have any way to see into the future. Now that we have this situation, however, it has to be fixed,” she said.

Proposed legislation in the state House and Senate could address the business owners’ concerns.

The SC Justice Act, a Senate bill that was referred to committee in March, would ensure businesses are only required to pay damages equivalent to their share of fault in civil lawsuits.

House Bill 4529, introduced in the state House in June, would impose regulations similar to those in Alabama.

“Again, it’s about saying there has to be some level of personal responsibility when you are considering liability,” Merck said. “Should you be held 100% responsible if someone had mimosas at Sunday brunch, a few more drinks at dinner, and then went for a night out at your venue? And that’s to say nothing of the people who polish off a beer or two in their car before going to a club or someone’s having a medical condition that is exacerbated by their drinking.

“And don’t get me wrong, I have tremendous sympathy for someone who suffers an injury or has a loved one die of alcohol-related death, but there are some things that are simply out of our control as business owners,” she said.

While the proposed fixes are promising, the reality is they won’t be considered or voted on any time soon. Since the state’s legislative session ended in May, neither bill is likely to be considered until next year.

As a result, SC Venue Crisis is encouraging every bar and music venue and restaurant that serves alcohol to make sure they have cameras set up to record their serving employees’ interactions with patrons.

“The same goes for those scanners that we use to scan people’s driver’s licenses to make sure they’re of legal drinking age,” she said. “What we tell our fellow businessmen and women is make sure that everything you do is correct and appropriate under the current law, because people are looking to sue you whether you realize it or not.”

And Merck said SC Venue Crisis will continue to press its case.

“We’re basically going to continue to have at least one town hall every week,” she said. “And we’ve also started having business owner and vendor meetups so that we can explain this is what’s going on, this is what caused it, and here’s what we can do about it.

“We’re trying to hit every larger area in South Carolina,” Merck continued, “Our goal being to build a hub in each space and then have local ‘district’ leaders help get the word out.

“Our actual committee is tiny. It’s just a couple of us, but we’re loud,” she said.

Dan can be reached at [email protected] and at https://twitter.com/DanMcCue