SC lawmakers pass tort reform compromise. Will it lower liability insurance rates?

South Carolina bars and restaurants may soon get relief from soaring liquor liability insurance rates with the passage of compromise tort reform language by the General Assembly in the waning hours of the legislative session May 7.

Members of the state House and Senate reached agreement earlier in the week on language somewhat shy of the Senate’s bill, S.244, and more expansive than a measure passed by the House, H.3492, earlier in the session.

Because there was insufficient time left in the session to go through the normal reconciliation process, the compromise language was appended to an unrelated bill having to do with the governor’s power to appoint the state auditor.

The issue

Pressure on lawmakers to pass some sort of tort reform measure has been intense over the past two years as an increasing number of the state’s bars and restaurants have faced skyrocketing liquor liability insurance premiums.

Those soaring costs have been frequently cited as among the reasons many Palmetto State bars and restaurants have closed in the past few years.

While the state’s food and beverage industry have been clamoring for relief and were joined over the past year by a broader coalition of the state’s businesses, advocates for the victims and families impacted by drunk driving incidents have urged a more targeted approach that avoids the unintended consequences a more sweeping tort reform effort might entail.

Related: More tort reform news

The compromise

Both original House and Senate measures contained provisions for alcohol server training, an aspect of the liquor liability debate that enjoys widespread support among those weighing in on the issue.

The compromise bill retains that provision and makes alcohol server training mandatory for businesses holding a license to sell alcohol.

Among the bill’s other provisions are:

• Requirements for the state Department of Insurance to file an annual report on the availability of commercial general liability and liquor liability insurance markets, including information on the number of claims, the volume of earned premiums, the amount of profit associated with liquor liability premiums and the number of insurers participating in the market.
• A liquor liability risk mitigation scheme for businesses open after 5 p.m. and which sell alcohol for on-premise consumption that offers the potential to lower their aggregate annual limit of $1 million, and thus their premiums, by closing at or before midnight or when alcohol sales amount to 40% or less of total sales, among others.

The reaction

As is often the case with compromises, no side on this issue is completely satisfied with the result.

While this legislation is a step in the right direction from the perspective of businesses — especially the food and beverage industry — there’s no guarantee that it will reduce liability premiums, according to Matt Wills, vice president of government affairs for the Greenville Chamber of Commerce.

He said what it does very clearly indicate is that the General Assembly heard the concerns of the state’s massive hospitality industry and translated that into concrete action.

“Ultimately, if you’re on the food and beverage side of things, this is a massive, massive victory,” Wills said. “The hospitality industry spoke, and they were heard.”

But concerns remain among advocates for victims of drunken driving that reducing the amount of insurance a bar or restaurant is required to carry may harm victims’ ability to obtain just compensation, according to Tom Killoren Jr., a Spartanburg attorney with KD Trial Lawyers.

He said the liquor liability mitigation component that would allow businesses to reduce coverage is ultimately a boon to insurers that could harm victims and their families’ ability to recover damages.

Killoren also said the provision in the compromise legislation that would allow placing a drunk driving defendant on the verdict form for a jury to consider could further hamper victims’ ability to recover compensation.

“I can’t figure out why the legislature would allow a reduction in coverage,” Killoren said. “Are South Carolinians not worth at least a million dollars?”

While Killoren and Wills said further action on tort reform is unlikely during the second half of this legislative session, which begins in January, the issue is likely to remain contentious.

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