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OLCC Rulemaking: Requirement for Liquor Liability Insurance

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.

 

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