COLUMBIA, SC (WPDE) — Premium pressure continues to weigh on bar and restaurant owners in South Carolina. Just days into the 2024 legislative session, lawmakers heard testimony in a committee dedicated to examining the liquor insurance market.
“For every dollar of premium that insurers take in, they have paid $2.77 in claims costs and expenses,” said DOI Director Michael Wise.
Wise also pointed out that the total amount of premiums paid in alcohol liability insurance has increased more than 100% from $7.6 million in 2017 to $17.0 million in 2022. It is also important to note that anecdotal data and references to the insurance market crisis appeared in late 2022 and throughout 2023. The DOI presentation did not include the latest market data from 2023. Business owners and brokers said the number of suppliers has decreased significantly from more than 40 to less than five.
“For our state, it’s consistently above other states,” Wise said, referring to the combined payout ratio insurers face in liquor liability claims compared to what businesses pay in premiums.
SC state law requires bars or businesses that serve alcohol after 5:00 PM to have a minimum $1 million liability insurance policy. That’s been the case since the state legislature made it a requirement under state law in 2017. However, Wise’s presentation showed that the average incurred claims faced by insurers from 2017 to 2022 never exceeded $340,000.
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Lawmakers gathered to begin the conversation about how to deal with an insurance market that some in their bodies consider a “crisis.”
Testimony Wednesday showed how lawmakers will have to walk a fine line between providing relief to the hotel industry and those who are victims of a drunken driving accident.
“You don’t want to make bad law; change joint and several liability that would hurt innocent plaintiffs if it didn’t lower premiums,” said personal injury attorney Theile McVey.
McVeigh and members of Mothers Against Drunk Driving spoke out against changing the practice under a state law called joint and several liability. This type of tort claim clause has been modified in SC, where an entity that is sued for damages in a civil case may be liable to pay a large amount or full compensation even if it is found to have minimal involvement in the accident.
SC senators currently have a bill sitting in committee that will address the law. However, McVeigh argued that lawmakers sought to increase the burden of proof injury attorneys on behalf of their clients must establish in a drunk driving injury case.
“Right now you ‘knew’ or ‘should have known,’ so ‘knowing service’ raises that a little bit higher,” McVeigh said, referring to the actual language in the state statute making bars liable in drunken driving cases condition.
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She also proposed that the Department of Insurance further regulate the industry by requiring insurers to disclose how they calculate rate increases using the Insurance Services Office (ISO) rating system, which is also used in multiple insurance markets from fire to flood.
“Based on ISO’s evaluations and statewide analysis, it does not appear that changing the joint and several liability law would have any impact on liquor liability, in fact the only thing it would do is hurt innocent plaintiffs,” McVeigh said.
The strain the market is putting on businesses was also evident with Lowcountry restaurant and bar owners sharing the impact it has had on their establishments.
“In 2023, from 2018 with no significant claims, our insurance costs at Uptown Social alone have grown 825%,” said owner Keith Benjamin.
Between hospitality markets like Horry and Charleston County, thousands of jobs are dedicated to the bar and restaurant industry. Hospitality officials said the increased premiums have put pressure on owners and workers.
“Combine that with inflationary pressures with the cost of food and alcohol, we’re operating on thin margins,” said Lowcountry Hospitality Association owner and president Jonathan Kish.
