ASSOCIATION TIMES
January 2009

INSURANCE QUESTION OF THE WEEK:

“We have a common area recreation room which is often rented out by the Association for parties.  Should the Association be concerned if alcohol is served?   For that matter -- how about at Association-sponsored events.  For example, if we sell wine at our annual meeting, we might have a better turnout?”

                        -Randall H., Monterey, CA
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Randall,

That’s an annual meeting that I’d like to attend – but I’d caution you about selling alcohol as that act might inadvertently present some coverage issues for your Association.

Most well-written commercial general liability (CGL) policies will provide a coverage called “Host Liquor Liability” which is designed to protect the Association in the event that someone becomes “overserved” and the Association is sued for any resulting bodily injury or property damage.   The important thing to know about Host Liquor is its limitations:  it is designed to cover the serving of alcoholic beverages when the Association is in “host” capacity. It’s important that the Association not be construed as being in the business of selling alcohol.   

For that reason, I’d probably recommend against selling wine at your annual meeting. If a financial offset is important, consider selling the food at a higher cost, and provide the wine gratis.  In that way you couldn’t be construed as being in the “business" of serving alcohol.  Free alcohol also is a bit tricky.  It’s a law of nature that the less the alcohol costs, the more likely your guests may drink more than they should.

The existence of a recreation room could generate potential liability if you allow the meeting room to be reserved or rented for private parties.  Even in those circumstances the Association could be held liable for not properly screening an owner who is hosting a party.  Some attorney representing the injured party could sue both the owner and the Association.

It's sometimes difficult to determine when the Association may be acting as a "host" and when, in fact, they have a liquor liability exposure.  It's best to discuss the insurance requirements with an insurance professional before you host the event. It is also wise to discuss your legal responsibility with your attorney.

Here are a few tips for reducing your liquor liability exposure:
  • If you feel you must charge for alcohol, hire a licensed and insured vendor to serve the alcohol.  Make sure you obtain a certificate of insurance naming the Association as an additional insured for the event.
  • If you rent the recreation room out, require that the responsible party obtain a special event (single day) policy and name the Association as an “additional insured".
  • Always serve drinks to guests rather than offer a self-service bar (where someone might pour a little more than they should).
  • Don’t scrimp on the food.  Adequate amounts of food slow down the affects of alcohol.
  • If you do sell alcohol, keep the drinks moderately or above moderately priced.  Low priced alcohol means more alcohol consumption.
  • Set a “cut-off” time to quit serving drinks, well before the scheduled end of the party.
  • Offer free non-alcoholic drinks for designated drivers.
  • If possible, schedule the event earlier in the day to discourage excessive drinking.
 
This letter contains only a general description of coverage and is not a statement of contract. For a more detailed description of the policy conditions and exclusions, please consult the policy itself.
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