Monthly Archives: April 2014

OLCC Rulemaking: Requirement for Liquor Liability Insurance

Laws & Rules, OLCC

OLCC Rulemaking: Requirement for Liquor Liability Insurance

On April 25, the OLCC initiated the rulemaking process to cleanup the existing rule that requires that retail licensees that sell or serve alcohol for on-premises consumption to maintain a minimum level of liquor liability insurance.  It is important to note that the $300,000 minimum required by this rule is not being raised and thus continues to be lower than most (if not all) licensed businesses should carry.  Talk to your insurer to make sure that you have sufficient coverage.

Many of the changes are purely house keeping.  The proposed changes more clearly outline what is required, who is required to do it, and how the OLCC can verify that it is being done.  No problem.

The big change is in the sanctions.  From the perspective of a licensee, there is good news and bad news.  Let’s start with the bad news.

Bad News.  If a licensee fails to provide timely proof of coverage (at renewals or within 10 days of receiving a request from the OLCC), the OLCC may immediately suspend or refuse to renew the liquor license without a hearing.   Presumably, the suspension would only last until such time that the OLCC was provided with proof of coverage.  This may need to be clarified as the rulemaking progresses.  But, in any case, this would certainly catch the attention of any licensed business and provide extra incentive to maintain the required coverage.  An unintended consequence of this sanction would impact licensed businesses that also had retail contracts with the Oregon State Lottery.  Such businesses would be required to notify the Lottery of the suspension.  As a result, the Lottery would turn off the business’s video lottery machines and conduct an investigation into the underlying basis for the suspension.

Good News.  The OLCC has dramatically revised the sanctions for failing to maintain liquor liability insurance.  Previously, failure to maintain coverage resulted in a category I violation (the most serious).  The proposed sanction for a first category I violation within two years is cancellation.  Regardless of how long the lapse was, the proposed sanction was the same.  Tough love.

The OLCC is proposing a penalty schedule for this violation in which the proposed sanction will largely be a function of the length of the lapse in coverage.  This makes sense because the proposed sanction would be in direct proportion to the “threat to public health and safety” posed by the lapse in coverage.  The penalty schedule would be as follows:

  1. A lapse in coverage of no more than 30 days will result in a warning. However, the second lapse in coverage of this duration within a two-year period is a Category IV violation;
  2. A lapse in coverage of 31 days to no more than 60 days is a Category III violation;
  3. A lapse in coverage of 61 days to no more than 90 days is a Category II violation; and
  4. A lapse in coverage of 91 days or more is a Category I violation.

Recall that category I violations are the most serious and each subsequent category is less serious in terms of public safety, sanctions, etc.  For more on priority violations, view my earlier post.

Also note that these sanctions would be in addition to the immediate suspension in cases where the OLCC discovered the lapse in coverage at a time that the insurance was lapsed (as opposed to discovering a historic lapse after coverage had been subsequently put back into place).

You can view and follow the rulemaking here.

 

The TTB Suspends Pending Wine Growler Rulemaking

Compliance, OLCC, TTB

The TTB Suspends Pending Wine Growler Rulemaking.

Good news for Oregon licensees selling wine growlers.  The TTB has suspended its pending TTB Ruling 2014-3 entitled “Bottling Taxpaid Wine in Growlers or Similar Containers for Consumption Off of the Premises.”

In short, the ruling held that the filling of growlers with taxpaid wine for consumption off of the premises (in plain English, “to go”) was a bottling activity subject to the taxpaid wine bottling house provisions of the Internal Revenue Code of 1986.

Thus, the ruling held that businesses filling wine growlers were required to meet a number of requirements:

  1. Apply for approval as taxpaid wine bottling houses,
  2. Label their growlers,
  3. Keep certain records, and
  4. Comply with other regulations regarding their operations.

The end result would be mountains of extra paperwork for licensees and the TTB with virtually no public safety or protection of revenue benefit.  For more information, see my earlier post on the subject.

The TTB was likely inundated with negative feedback from industry members across the country, but particularly Oregon, including from U.S. Senator Ron Wyden.  As a result, the TTB backed away from the ruling, but tried to save face at the same time by stating that “our existing regulations were intended to cover traditional taxpaid wine bottling activities, rather than the filling of wine growlers.”  Agreed.

As a result, the TTB will now engage in formal rulemaking on this issue to “modernize” their regulations on wine growlers.  This will allow the TTB to balance protecting revenue (which was never at stake since the vast majority of wine growlers are being filled by retailers using taxpaid wine) without unduly burdening businesses that want to sell wine growlers (as with beer growlers, just get out of the way).  The rulemaking process will enable all interested parties to provide input.  Expect plenty of input.

Fearless prediction–the TTB’s rulemaking will clear the way for wine growlers across the country.  Wine growlers–great wine with less environmental impact and for less $$$’s.  Everyone wins.

 

Incident Logs: To Log or Not To Log Is a Question All Licensees Should Ask Themselves

Case Studies, OLCC,

Incident Logs: To Log or Not To Log Is a Question All Licensees Should Ask Themselves

The OLCC recommends that licensees maintain incident logs, but licensees must be mindful of how they maintain incidents logs or they could be used against them later.

OLCC Recommendations.  The OLCC encourages you to keep an Incident Log.  Per the OLCC, examples of when you should make an entry in the log include anytime you or your employees intervene to prevent or stop customer conduct such as:

  • Refusing someone alcohol service
  • Cutting someone off or removing a drink
  • Arranging safe transportation home for someone who appears intoxicated
  • Stopping an argument, fight, or assault
  • Stopping other illegal activities
  • Asking a noisy customer to be quiet as they leave or drive away

 

The OLCC also recommends putting other activities in your log, including whenever an incident is reported to the police or OLCC, whenever you receive a complaint from a neighbor, or any other time you think it necessary.  The OLCC argues that the licensee will benefit from keeping an incident log because:

“Sometimes, complaints, investigations, or lawsuits do not surface until weeks, months, or years after the incident occurred. Gathering complete and accurate information immediately after an incident is  one of the best ways to document how you and your employees handled the problem.”

Reason for Concern.  The OLCC could potentially substantiate a history of serious and persistent problems violation solely based on a licensee’s incident log.  In a recent decision, the OLCC made it clear that it considers incident logs to be sufficiently reliable to document a serious incident in a history of serious and persistent problems violation.  In other words, entries in a licensee’s log book can be admitted into evidence at an administrative hearing and can be held against the licensee to prove a history of serious and persistent problems violation.  The proposed sanction for such a violation is license cancellation.

The OLCC reasoned that the incident logs should be considered reliable because they would not be considered hearsay under the Oregon Evidence Code.  Specifically, log entries fall within a hearsay exception as a statement made by a party opponent under ORS 40.450(4)(b) and as business records kept in the ordinary course under ORS 40.460(6).  Because incident logs fall within these hearsay exceptions and would be admitted in civil litigation, the Commission concluded that incident logs are reliable under the applicable evidentiary standard set out in ORS 183.450(1).

The OLCC tries to soften this conclusion by pointing out that evidentiary value of incident logs would be reduced to the extent that there was not corroborating evidence or testimony concerning the events in the incident log.  Even with that being the case, it’s clear that a poorly kept incident log can cost a licensee their license under certain circumstances.

Best Practices.  Keeping an incident log can be very beneficial to operating a successful, profitable and compliant business.  The three most important aspects of keeping a log book are:

  1. Regular review of the log book,
  2. Documentation of proactive steps taken in response to problems, and
  3. Training staff regarding how to draft a log entry.

Regular Review.  To maximize the benefit and minimize the potential downsides, an owner or manager should regularly review log entries and should take appropriate steps in the light of documented incidents and trends in incidents.  The best practice is to review the log books every day.  If there is a serious incident, the owner or manager can investigate while the incident is still fresh in the minds of their staff.  In addition, if the business has video cameras, the owner or manager can review the applicable video records and preserve copies of the videotape before they are recorded over.

Proactive Steps.  If there is a troubling incident or trend in incidents, the business is well advised to take immediate steps to prevent or control the problems.  The scope and nature of the proactive steps will depend on the scope and nature of the incidents.  Getting ahead of problems can potentially prevent expensive and time consuming issues with the OLCC, law enforcement and the local government.

Drafting Entries.  If you do not direct your staff in how and when to prepare a log entry, you should not be surprised if the log entry seems to highlight the severity of a particular incident and fails to mention how it was resolved.  Specifying the basic components to an entry is a good first step, such as date, time, staff name, name of involved individuals, police called or involved, description of incident, proactive steps taken, etc.  Entries in log books should describe the incident in plain English without undue commentary, i.e. “there was a huge fight on the patio tonight, more like a riot.  We totally lost control of the crowd and it looked two people were almost killed …”  The log should focus more on how the business quickly identified and resolved the issue.

Take Away.  There are many reasons why a bar or restaurant should keep an incident log, but merely keeping an incident log without any regular review or follow up may do more harm than good.  Licensees should consider incident logs to be one of many potential tools to run a compliant business, such as regular staff trainings, secret shoppers, video cameras, etc.  Using the tool properly can be beneficial, but keeping an incident log just because you think it’s the right thing to do with no further action probably involves more risk than reward.

I regularly help clients review their compliance practices and would appreciate the opportunity to talk to you about your current practices and how to improve them going forward.