Story by Jay King, Megan Fitzgerald and Tiare-Leiana Solis
Perhaps none is more pressing than the need to remedy skyrocketing liquor liability insurance costs for the state’s restaurants and bars.
Soaring premiums have been described as an immediate crisis and are increasingly cited as the reason many restaurants and bars have shuttered in the past year, according to Hank Davis, vice president of governmental affairs and community development for the South Carolina Restaurant and Lodging Association.
The problem for restaurants and bars that serve alcohol is rooted in how two different sections of state law coalesced to drive up costs for liquor liability insurance.
The problematic aspect of the law — and this applies to businesses of every type, not just restaurants and bars — is a business that fights and loses a suit could be responsible for the entire settlement even if other businesses named in the same suit are more at fault.
“We actually renew [our insurance] in February, so I’m very anxious to see what our renewal will come back as. I can’t remember exactly how much it went up this past year, but it was significant, and unfortunately, the minimum premiums are really just going to be a huge barrier for new businesses to enter the market.” – Tammy Johnson, CEO of High Spirits Hospitality in Greenville
“Small businesses in South Carolina are one lawsuit away from going out of business because we have a system where a business might be 1% at fault but could be held 100% financially liable,” said Jason Zacher, senior vice president of business advocacy at the Greenville Chamber.
David Raad, owner of Six & Twenty Distillery in Greenville, saw a 40% increase in his insurance premiums within a year.
“Honestly speaking, the recession that we’re in, we’re seeing a dip in consumer consumption in this quarter right now. Add that to increased cost of doing business like a much, much, much higher premium for my insurance and lower revenue,” Raad said. “I mean, that’s just like you’re asking for businesses to shut down whether you want them to go or not.”
Escalating crisis
The current crisis was created when this law combined with legislation passed in 2017 which required every business serving alcohol after 5 p.m. to carry a minimum $1 million in alcohol liability insurance.
The economics proved untenable and the companies underwriting these kinds of policies fled the state. Davis said of the 35 companies operating in South Carolina prior to 2017, less than five remain.
“When there’s a lack of competition in this marketplace, what happens?” Davis asked. “Those that decided to stick around can hold our industry for ransom and can charge whatever they want to charge because our businesses by law have to carry this type of liquor liability insurance.”
The impact on the state’s restaurants and bars has been devastating, in part because those businesses typically operate on thin profit margins even at the best of times — typically 3% to 5%.
“The ripple effect of that is awful,” Davis said. “You lose such special places in your community that you love to go. … This is such a larger issue than just restaurants and bars not being able to afford their insurance.”
Tribble’s Bar & Grill owner Kynn Tribble started the SC Venue Crisis in response to his raised premiums. He agreed the issue impacts more than just restaurants.
“One thing we’ve changed in the way we word things is we say ‘venues’ because it covers golf courses, wedding venues, music halls,” said Tribble, whose business is in Anderson County not far from Piedmont. “When you say ‘bars,’ people automatically think of the little biker bar on the side of the road. They don’t think like Applebee’s Bar and Grill.”
For Raad at Six & Twenty, the higher rates would force a higher cost for every drink.
“We only generate so much revenue in this space,” he said. “And when our costs go up, we have to increase our [price for] goods as well, to make up for that difference.”
The dwindling number of insurance providers in the state has even affected openings. The owner of Simpsonville’s newly opened Scuffletown Food Truck Park, Justin Holck, was initially unable to find a policy for the park when he first looked nearly three months ago.
Zacher said the liquor liability insurance issue creates an enormous problem for the key tourism and hospitality sectors of Greenville’s economy.
The city may see an impact on local accommodations and hospitality tax revenues as businesses are forced to close due to high insurance rates. Greenville City Council member Dorothy Dowe said so far the city hasn’t seen a significant negative impact on the tax revenues, but not enough time has passed to see the full impact.
“Our tourism revenue is critical. Our business-license revenue is critical,” Dowe said. “Business license fees are roughly half of the revenue stream to our general fund.”
Legislative action
The best hope for reform this legislative session is a bill sitting in the Senate Judiciary Committee. S-533, the South Carolina Justice Act, which would apportion damages according to the percentage of fault.
But looking into the broader issues around alcohol liability insurance is the task of an ad hoc committee within the state House Judiciary Committee. It is led by Greenville Rep. Jason Elliott, whose District 22 includes the east side of the city. He said urgent action is needed.
“Clearly we have a problem, and it’s one we need to address as quickly as possible,” Elliott said.
He added that, while his committee will look at a range of issues, the only realistic prospect for a remedy this year depends on the state Senate and whether the Justice Act will make it out of committee and to the Senate floor before this session ends in May.
Davis said the stakes are too high for further delay, especially considering the potential risks to the $30 billion pumped into the state’s economy by the hospitality and tourism industry.
“It’s a little bit of a cause for concern if we’re having to worry about if one person comes into our place and has one beer and leaves, then goes and drinks 20 drinks somewhere else and gets into some trouble and liability can fall on any [establishment] where that person has been to.” – Aaron Robinson, part owner of 13 Stripes Brewery in Taylors
“We know what the problem is. We know what the solution is,” Davis said. “We do not have another year to wait. We cannot do another study committee.
“We’ve got to get this bill passed now.”
Greenville City Council members and legislative representatives discussed the city’s support of the Justice Act during a luncheon on Dec. 7. Dowe explained the city is looking to its partners in the state General Assembly to support the legislation.
The Upstate business community has also spoken loud and clear on this issue. Zacher said the Greenville Chamber met with hundreds of business leaders in the fall as they crafted their 2024 policy agenda.
“Seventy-eight percent of investors surveyed were in favor of lawsuit reform as it relates to joint and several liability,” Zacher said.
Not just bars
Soaring liability-insurance coststare a problem for many businesses in the Palmetto State, and not just those that serve alcohol.
“There are a long line of industries and segments of our economy — businesses — that would like to address joint and several [liability] in a significant way,” Elliott said.
Zacher and Davis said while the measure before the Senate is a much-needed first step, more comprehensive liability-insurance reforms are needed.
“First, alcohol has to be served responsibly to keep these claims from happening in the first place. Insurance companies also need to find a better way of handling the claims against businesses when they do get filed. It would be helpful if state legislators could meet with insurance companies as well, to see how they can better set laws to protect small-business owners from having sky-high insurance payments. … There has to be a better way to handle this and find some sort of middle ground.” – Nate Tomforde, owner of Southernside Brewing Co. in Greenville
“Relieving the alcohol insurance issue with a specific bill targeting alcohol insurance is a Band-Aid on a broader issue of unfair business liability,” Zacher said.
Alcohol liability and the broader business-liability issues remain a top priority for both the Greenville Chamber of Commerce and the city of Greenville. Zacher said the chamber has encouraged business leaders to contact their legislators to tell them how the laws are impacting their businesses.
Even though the issue impacts a wide range of the state’s businesses, Elliott cautioned against trying to tackle too much during the final stretch of the General Assembly’s two-year session.
“What that would likely do if it’s broadened beyond the issue of alcohol liability insurance is slow the process down,” he said.
S.C. restaurant industry fast facts (as of 2022)
- More than 10,700 restaurants and bars across the state
- $15 billion in annual sales
- More than 257,000 employed in the industry — 12% of total state employment
Source: National Restaurant Association
Tourism’s economic impact in Greenville
Accommodations-tax revenue collected locally equaled $14.3 million in fiscal year 2023.
Hospitality-tax revenue collected locally equaled $28.6 million in fiscal year 2023.
Source: VisitGreenvilleSC’s FY23 Annual Report (July 2022 through June 2023)
For more information
- Find your state legislators at scstatehouse.gov
- Find resources and info at the S.C. Coalition for Lawsuit Reform at sclawsuitreform.org
- Resources for restaurant owners and upcoming tort reform rallies can be found at scvenuecrisis.org
The SC Venue Crisis is a coalition of bar, restaurant, and venue owners united in bringing attention to the issue of rising liquor liability premiums.
