When our agents are competing against liquor liability policies from other companies, there are many key elements for them to consider and discuss with the insured. Some of the obvious topics are Assault and Battery sub-limits or exclusions, entertainment exclusions, and described premises limitations. If they are competing against a policy with an aggregate limit of insurance, they won’t want to miss the opportunity to point out the significant advantage of the ICC policy written on a No Aggregate limit basis.
We were recently provided a copy of a current liquor liability policy from one of our primary competitors. The policy was written with a $1,000,000 Per Common Cause limit and a $1,000,000 Aggregate limit.
An aggregate limit is the most the insurer will pay for the cumulative sum of all losses occurring during the policy period. Each time a claim is paid, it reduces the aggregate amount of insurance remaining to pay additional losses. Once that amount is exhausted, the insurer is no longer obligated to pay damages or defend claims subject to that aggregate amount. This remains the case until the policy is renewed to begin a new policy period or the policyholder buys another policy.
As an example, Johnnie’s Bar & Grill possesses a liquor liability policy with a $1,000,000 per Common Cause limit and a $1,000,000 Aggregate limit. Their annual policy period begins on January 1. They have the following claims:
- Claim 1
On February 16, a patron leaves the tavern in her vehicle and collides with another car that contains a couple who were on their way home. The husband and wife sustain multiple injuries, some of which require surgery and rehabilitation. The total value of their claim is $750,000. With a $1,000,000 per Common Cause limit and $1,000,000 Aggregate limit, the policy contains sufficient limit to cover the $750,000 required. Upon settlement of the loss, the Aggregate limit available is now only $250,000.
- Claim 2
On Memorial Day Weekend, a group of friends meet at Johnnie’s Bar & Grill. They stay until closing and then leave together and drive to a house party. During the drive, the vehicle goes off the road in a single car accident, killing the driver and seriously injuring two of the passengers. Multiple lawsuits are filed, however due to Claim 1, only $250,000 of the aggregate limit is available. Upon settlement of Claim 2, the policy limits are exhausted.
- Claim 3
On October 10, a man meets a friend at Johnnie’s Bar & Grill to watch a football game. When the game is over, he leaves and drives across town to another bar. On the way, he collides with a minivan carrying a mom and her two children. The aggregate liquor liability insurance limit has been exhausted, so no coverage, and no defense, is available.
The timing of these events illustrates the problem with an aggregate limit. The exhaustion of the limit of the policy due to prior claims may not be realized until months or even years after the incident, because the final dollar amount of the loss will not be known until the claim is settled. In all likelihood, the insured may be unaware that their limits have been exhausted at the time that the next event took place.
If an insured has a policy with an aggregate limit, they could be out of limit without knowing it, due to an incident that has occurred but is not settled or perhaps even reported yet. With the amount of time allowed in most states to report a liquor liability claim, the potential for an aggregate limit problem is significant.
Another consideration that is often overlooked requires the Agent to understand “Common Cause”. Liquor Liability limits are per Common Cause. “Common Cause” means “injury” sustained by one or more persons or organizations as the result of the selling, serving, or furnishing of any alcoholic beverage to any one person.
Unfortunately, it is not unheard of to have an altercation claim in a tavern that involves more than one Allegedly Intoxicated Person (AIP). By definition, each AIP that causes injury is a separate Common Cause. A single incident could result in the application of multiple Common Cause limits, which are subject to the total aggregate.
The ICC Liquor Liability Policy is written with no Aggregate Limit. When evaluating liquor liability coverage for your business, don’t miss out on the right coverage and the right company.
Learn more about insuring your business with ICC by contacting an ICC agent today. The Find an Agent search on our homepage will help you locate an agent in your area.
