27 May 2015: The proposals in the National Liquor Policy, if implemented, will place responsibility on bars, restaurants and other alcohol-serving establishments for the actions of intoxicated patrons and could raise the number of liability claims in this sector to a similar level to that of medical malpractice claims.
This is according to Simon Colman, the Underwriting Executive of SHA Specialist Underwriters – the largest liability underwriting management agency (UMA) in Southern Africa – who says the proposals are highly concerning for the alcohol and hospitality industries from a liability perspective. “They state that should an alcohol serving establishment serve an intoxicated person alcohol and that person is then involved in a motor accident or crime related to alcohol abuse, the manufacturer, distributor and trader should bear liability for any harm or damages.”
He explains that currently if a drunk person causes an accident and someone is injured, that injured person is restricted by the law and is not allowed to directly sue the driver, but they can recover some of the cost from the Road Accident Fund (RAF). “However, the injured party can only claim up to the amount of R260 000 from the RAF. If this law goes ahead, there will be a notable rise in civil claims being made against bars and restaurants as people will actively seek new avenues to claim back their losses.”
This increase in civil claims against these types of establishments is likely to reach an uncontrollable level and could eventually match the overwhelming amount of medical malpractice claims, warns Colman. “This in turn will mean that the cost of liability cover for these establishments will also rise as it becomes increasingly expensive, and in some cases impossible, to insure. The laws will transform the industry from a relatively low-risk business, with typical liability related to slip-and-fall claims, to a high-risk liability business.”
Colman says the type of liability insurance that all restaurants and bars should have in place, regardless of whether the laws are implemented, is called broad form pubic liability insurance. “This insurance responds when there is an allegation of injury or damage made against the business.”
He says that should the new proposal of the National Liquor Policy come into effect, the same broad form liability cover will still protect the establishment. “The way broad form liability policies are structured talk about legal liability in general, if the law does change the cover expands with it.”
Internationally, some states in the United States operate under a similar law called the Dram Shop Law, says Colman. “In fact, some bars stopped giving out branded matchbooks because in the event of a car accident police would look for these branded matchboxes to see where the person had been before the accident. This in term would place liability on the establishment for having served someone who was visibly drunk.”
The proposals place an onerous responsibility on the establishment to handle the behaviour of its patrons, says Colman. “Determining whether someone is intoxicated is quite subjective. How will these establishments even know if the patron is going to drive or whether they are planning to go drinking at another place?”
“While these proposals may not actually solve the real problem of drunk driving, any business involved in the production and selling of alcohol products should ensure they have proper broad form liability cover in place in event that these laws do come into effect to ensure they are covered from the financial risk of liability,” concludes Colman.