Liquor Liability Insurance: Proposed Rulemaking

On April 25, 2014, The OLCC voted to initiate action to amend OAR 845-005-0400.  The rule governs the OLCC’s requirements for certain on-premises licensees to maintain liquor liability insurance.  The existing rule is excerpted below.

The primary changes proposed by the initial rulemaking include the following:

1. Revised Penalty Schedule for Failing to Maintain Liquor Liability Insurance (“LLI”).  The biggest proposed change is a shift in the proposed sanctions for failing to maintain LLI.  Currently, failing to maintain LLI constitutes a category I violation.  The proposed change shifts this violation off of the existing OLCC penalty schedule entirely.  The current proposed penalty is license cancellation.  In its place, the rulemaking establishes an independent penalty schedule for this violation based on the length of the lapse in LLI.  The proposed penalty schedule is as follows:
   1. If the lapse in coverage is no more than 30 days, the sanction is $1,650 or a 10 day license suspension;
   2. If the lapse in coverage is 31 days, but no more than 60 days, the sanction is $4,950 or a 30 day license suspension;
   3. If the lapse in coverage is 61 days, but no more than 90 days, the sanction is $4,950 AND a 90 day license suspension;
   4. If the lapse in coverage is no more than 91 days, the sanction is license cancellation.
2. Requirement that Proof of LLI is Posted or Otherwise Made Available for Immediate Inspection.  The proposed rulemaking would create a new affirmative requirement for licensees to post proof of their LLI or otherwise make the proof available for immediate inspection upon request by an OLCC employee.  Failure to do so would be a category V violation.  If verifying that this requirement was met became a regular part of OLCC premises visits, it’s likely that this would be a fairly common violation.  Posting the LLI would greatly reduce the probability of a violation.
3. Affidavit Requirement for Manufacturers.  Currently, winery, brewery and distillery licensees are only required to provide verification of LLI if they have been approved to engage in on-premises sales.  The proposed change would require such manufacturing licensees to now affirmatively provide an affidavit stating that consumption of alcoholic beverages will not occur on the licensed premises.
4. Bond Option.  The proposed changes highlight that applicants/licensees may fulfill this requirement by putting a corporate surety into place for the minimum amount.
5. No Change to $300,000 Minimum.  This is probably the biggest surprise.  The rulemaking is not proposing to raise the $300,000 minimum, which has been in place for a considerable period of time.

845-005-0400  Liquor Liability Insurance or Bond Requirement

(1) ORS 471.313(4)(i) requires applicants for a liquor license to demonstrate financial responsibility sufficient to adequately meet the requirements of the business proposed to be licensed. ORS 471.313(2) requires applicants listed in 471.168 to maintain liquor liability insurance or bond. In addition to other requirements, the Commission has determined that licensees listed in 471.168 must demonstrate financial responsibility for licensees’ liability for damages to third parties caused by patrons off the licensed premises by meeting the requirements in section (1)(a) or (b) of this rule. ORS 471.168 requires certain licensees to provide coverage for injuries suffered because of the conduct of visibly intoxicated persons who were served in licensed premises by:

(a) Maintaining liquor liability insurance of not less than $300,000; or

(b) Maintaining a bond with a corporate surety authorized to transact business in this state in the amount of not less than $300,000.

(2) The requirement applies to the covered licenses issued or renewed on or after March 15, 1998.

(3) ORS 471.168 also requires licensees subject to the requirement to supply proof of compliance at the time the license is issued or renewed. For insurance, licensees must provide proof by naming the Commission as Certificate Holder on the policy and giving the Commission a copy of the certificate. For a bond, proof may be satisfied by identifying the name of the surety and providing the bond identification number.

(4) Failure to maintain insurance or a bond as required is a Category I violation and the Commission may cancel the license.