ISO lowers Alabama’s rating following 2023 liquor liability insurance reform

Supporters of Act No. 2023-25 with Gov. Kay Ivey at ceremonial bill signing. Photo by Hal Yeager, Gov. Kay Ivey staff

The Insurance Services Office, or ISO, has cut in half the hazard risk for liquor liability insurance in Alabama thanks to reform legislation adopted during the Alabama Legislature’s 2023 regular session.

The intent of Alabama’s new standard for liquor liability was to drive down the cost of liability insurance for Alabama’s hospitality industry. Act No. 2023-25 took effect immediately after the governor signed it April 19.

Two months later, the Insurance Services Office (ISO) issued a revised hazard risk grade for liquor liability in Alabama of 5. Previously, Alabama’s rating was a 10, the highest and worst rating. The new lower rating will be applicable to all policies written on or after Aug. 1, ISO officials said.

Prior to the law’s enactment, only three carriers were selling liquor liability insurance policies in Alabama. The required $100,000 in coverage for restaurants and bars that serve alcohol can cost as much as $35,000 annually. Alabama’s Dram Shop Act as written in 1909 coupled with a 1991 case interpreting that law created a crisis in both availability and affordability of liquor liability insurance.

The reform legislation, sponsored by Sen. Chris Elliott, R-Josephine, and 15 other senators as well as Rep. David Faulkner, R-Birmingham, received unanimous votes in both chambers.

The new law creates a standard under which a server would have to knowingly serve a visibly intoxicated person and for that service to be the proximate cause of an injury or death for the business to be liable. This common-sense reform calls for increased personal responsibility in situations where damages occur due to the overconsumption of alcohol. The standard also aligns with what other states require.

Eleven interested groups, led by the Alabama Retail Association, negotiated the agreement with the Alabama Association for Justice to reform the Dram Shop Act.

Representatives of those groups were on hand for a ceremonial bill signing April 27.

Learn more about the crisis that led to this solution. The image below compares previous law with the revised Alabama Dram Shop Act.

This article is part of the Alabama Retail Report, a communication for Alabama Retail Association members. Not a member? Join us!

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Originally posted at 4:30 p.m. April 19, 2023