Unhappy Hour

Just a five-minute walk from Robert Hartwig’s office in Columbia, South Carolina, is Columbia Craft Brewing, an award-winning brewery that opened in 2017 and concocted an assortment of ales, lagers, IPAs, sours, and barrel-aged beers for sale at an on-site tap room and other bars and restaurants.

“The place is in a great location, always seemed to be busy, and was one of my favorite places for a pint—they even had a beer called Macroeconomics,” says Hartwig, an associate professor of finance at the University of South Carolina and formerly the president and chief economist at the Insurance Information Institute.

In October, Columbia Craft Brewing’s tap room closed, one of more than two-dozen bars across the state announcing their final “last call.” The main reason for these closures is soaring premiums for liquor liability insurance. The coverage protects owners of bars and restaurants that serve alcohol against financial losses from drunk driving accidents and fatalities connected to their operation.

While national figures on the aggregate scope of the premium hikes are unavailable, various news reports, studies, and interviews suggest colossal increases in several states, with some businesses experiencing 300% to 600% spikes annually and even smaller neighborhood bars that previously paid $5,000 each year now looking at $50,000. A 2024 report from the South Carolina Insurance Association stated that “Even clean accounts with no losses are seeing premiums rise to between $25,000 and $50,000, which is too high for many to reasonably pay. Without liquor liability coverage in South Carolina, bars, venues, or restaurants are forced to close.”

The long list of establishments that have fallen victim to sky-high liquor liability premiums include bars that have been around for decades (goodbye to the Blind Horse Saloon in Greenville and The Woody on Main in Columbia), along with taverns of more recent vintage. The 7-year-old, two-story Carolina Western Pub in Columbia called it quits after its premiums more than tripled to $25,000 in 2024.

“South Carolina is the liquor liability crisis center of America,” Hartwig says.

That is driving carriers in the state away from offering liquor liability coverage, other industry sources add.

“We went from a state with plentiful liquor liability insurance markets to where we have maybe three left, and those are generally markets of last resort,” says Renee Middleton, specialty broker and office president at CRC Specialty in Sumpter, South Carolina. “I haven’t heard from one market that left that says they’re considering coming back in.”

Dram Shop Dilemmas

Liquor liability insurance was born when dram shop laws emerged in the United States in the mid-1800s. Forty-three states today have enacted these laws, which allow victims of intoxicated people to file a civil lawsuit against the party that provided the alcohol. The laws vary, with some states permitting lawsuits only against establishments that served underage patrons. Without liquor liability insurance, the cost of defending a single drunk driving lawsuit can easily put a bar out of business.

Drunk driving accidents and fatalities have actually been in decline for decades. Data from the National Highway Traffic Safety Administration indicates that the rate of drunk driving fatalities per 100,000 people decreased by 41% between 1991 and 2023, the latest year for full figures.

Juries, apt to side with plaintiffs against businesses, have nonetheless issued massive penalties against bars and restaurants in drunk driving lawsuits over the last decade, including $112.9 million and $831 million verdicts in Texas and a $37.5 million verdict in Illinois. Those sky-high verdicts and settlements in fatal car crashes are driving liquor liability insurance premiums to record heights, the insurance industry maintains. They are attributable to the expansion of liability in South Carolina and other states that permit plaintiffs to sue multiple parties.

“South Carolina’s joint and several liability doctrine allows a plaintiff to collect the entirety of a damage award from any one defendant—even if that defendant is only partially at fault,” Hartwig explains. He cites a case in which a South Carolina bar was sued after a patron died in a head-on crash with another driver, who was also killed, 80 miles away and five hours after being served. The autopsy report showed the patron had also ingested marijuana and cocaine, Hartwig notes. Still, the establishment settled the lawsuit for a reported $6.5 million, paid for, in part, by its insurance carrier.

Trial lawyers nationally strongly support joint and several liability because of the economic incentive to reap settlement and verdict windfalls. Plaintiff lawyers’ contingency fees can range from 30% to 40% of a verdict or settlement amount, Hartwig says.

South Carolina’s bars and restaurants are just the tip of a litigation and insurance crisis. Establishments in Vermont, Texas, and Washington, D.C., each with a dram shop law, face “extreme” insurance challenges, according to a 2024 report by CRC Insurance Services, a provider of specialty and commercial liquor liability insurance through excess and surplus (E&S) carriers. It attributed those challenges specifically to plaintiff lawyers and joint and several liability. In Montana, another dram shop state, members of the Montana Tavern Association reported liquor liability premium increases ranging from 20% to 80% from 2023 to 2024. The CRC report provides more examples of the cost of liquor liability insurance: in Kentucky, a dram shop state with a several liability statute (rather than joint and several), minimum annual premiums typically start at $35,000; in Alabama, prior to the passage of 2023 legislation requiring a plaintiff to “knowingly” serve a visibly intoxicated person for liability purposes, only three insurers provided policies, often at a cost of more than $35,000 annually. “Insurers are forced to increase liquor liability premiums because plaintiff attorneys target alcohol-related accidents and fatalities, resulting in ever-larger jury verdicts and settlements,” Hartwig says.

Rising premiums are still not high enough in some states for insurers to profit or break even. A 2023 study by the South Carolina Department of Insurance found that insurers in the state lost an average $1.77 for every dollar of premium earned on liquor liability insurance from 2017 to 2022. The study further stated that insurers’ average combined ratio—a measure of underwriting profitability calculated by comparing the money the company spends on claims and expenses to the premiums it earns—in some years was as high as 360%, representing a severe and unsustainable financial loss.

In Kentucky, insurers selling liquor liability coverage are so unprofitable that only a handful are left to provide the policies. Remaining carriers have reduced their limits to minimize losses. An insurer in Montana, testifying to the state Senate’s business and labor committee in 2023, described market conditions as “very volatile.” The few insurers offering coverage in the state have reduced their liquor liability capacity, meaning bars with high-risk profiles, such as an establishment that experienced recent litigation or was found to have served minors, may be unable to get insurance.

Other states like Texas report similar conditions. “In Texas, we’re seeing a dwindling of insurance markets willing to put up the limits [needed by establishments], in addition to more restrictive coverages, with exclusions or sublimits for firearms and assault and battery,” says Connor Farquharson, commercial lines manager at Burns & Wilcox, a global insurance brokerage specializing in the E&S market.

Insurers are at a loss to do much else than kick up premiums. “How bad is it out there for bars? Let me just say that annual $10,000 to $56,000 liquor liability premium increases are not an outlier,” says Randi Harwood, senior director and North American food and beverage segment leader at insurance broker WTW.

In the seven states without dram shop laws—Delaware, Kansas, Louisiana, Maryland, Nevada, South Dakota, and Virginia—liquor liability insurance premiums are rising but nowhere near the heights of other states. The reason these states don’t have these laws is due to their common law statutes, which shift the liability burden to consumers of alcohol, not servers. Louisiana law, for instance, states that the consumption of alcohol “is the cause of injury, not the serving of it.” This principle—individuals are responsible for their own actions while under the influence of alcohol— has long been upheld in the United Kingdom and most other countries.

“Plaintiff attorneys in common law states are limited to seeking compensation only from drunk drivers in an alcohol-related accident,” says Hartwig. “In such cases, a driver may have minimum auto insurance limits like $50,000—a drop in the bucket—and possibly few personal assets to seize. There’s much less financial incentive for trial lawyers to take on these cases.”

Liability Insurance Exits

The problems confronting bar survival in South Carolina began in 2017, when the state legislature passed Senate Bill 116. The new law required bars and restaurants that serve alcohol after 5 p.m. to carry a minimum of $1 million in liquor liability insurance. Previously, there was no statewide requirement to carry a specific minimum. Critics contend the ruling and the preexisting joint and several liability regulation from 2005 are responsible for the skyrocketing increases in liquor liability insurance premiums shuttering many bars.

“The bill turned South Carolina into a Wild West of lawsuits and trial lawyers into ambulance chasers,” says Asheton Reid, community director at SC Venue Crisis, a grassroots movement formed to raise awareness and advocate for legislative change on liquor liability. “When the lawsuits came, they were a plethora.…Even if you had no claims on your insurance, premiums went up astronomically. Responsible business owners were pushed out of business.”

She adds: “In my personal opinion, the legislation was shaped by people who stand to benefit,” referring to the high percentage of practicing lawyers in South Carolina who also serve in the state’s General Assembly.

The South Carolina Insurance Department cannot address joint and several liability on its own, and trial lawyers’ influence means the General Assembly is unlikely to do so, Hartwig says.

Things are not much better in Kentucky. “I handle most of the bars and taverns here, from small hometown bars that are the only establishment in town to some of the bigger well-known ones,” says Sallie Howerton, underwriting team leader at CRC Specialty in the state. “Retail insurance agents representing these establishments continually call to ask if there are any markets available for their customers. It’s not even a question about rising premiums, it’s about availability.”

According to the 2024 CRC report, over the last two years, three liquor liability insurance markets have exited the state, leaving only a handful of insurers that may provide premium quotes. While markets are available if revenue from alcohol sales is less than 50% of total sales, if it rises above that figure, it’s extremely challenging to find coverage; if it’s above 75% of revenue, it’s nearly impossible, the CRC report explains. “There’s been some hard conversations with some establishments about them staying in business or calling it quits,” Howerton says.

Tort Reform or Illusion?

In 2023, Reid and other community organizers formed SC Venue Crisis to advocate for changes to South Carolina’s liability laws.

“Following a massive social media blitz, we hit the road and did over 30 town halls across the state in eight months, meeting with state legislators at most every stop,” she says. “We explained that these independent businesses, the cornerstones of their communities, were forced to shut down not because they weren’t successful but because of the unaffordable cost of liquor liability insurance.”

The effort provoked a strong reaction. In March 2025, the legislature introduced changes to the state’s 2017 liquor liability law, which were signed by Gov. Henry McMaster in May. The Tort Reform and Liquor Liability Act is scheduled to take effect on Jan. 1, 2026. One key change is overhauling the joint and several liability rule that held any responsible party potentially liable for 100% of damages in a drunk driving incident, lowering the threshold to no more than 50%. Juries must now determine the percentage of fault for all parties involved.

The law also offers options to reduce the requirement that bars and restaurants serving alcohol carry a $1 million liquor liability insurance policy. Bars that stop selling alcohol at midnight, for instance, can lower the coverage limit by $250,000. Establishments whose employees complete an approved alcohol server program within 60 days of hiring can reduce it by $100,000 and pare it down by another $100,000 by using a digital ID system to electronically verify a patron’s age. Other reductions are available for businesses that increase the ratio of food sales to alcohol sales.

Reid says the tort reforms are a step in the right direction, but more needs to be done. “I’d love for the law to change in ways that make people responsible for their own actions. Bartenders, owners, and waitstaff can’t police everyone, asking ‘Have you had anything to drink, have you eaten today, did you take prescription drugs?’ The person who consumes alcohol needs to take personal responsibility.”

Hartwig calls the new law “mostly an illusion of reform”—risk management measures already used as underwriting criteria by insurers, he says. “A big concern is that a bar that lowers its liquor liability premium by reducing the limits of financial protection is potentially more exposed to loss, not less. If the bar has a $500,000 limit instead of a $1 million limit and is hit with a verdict or settlement beyond that limit, it will have to finance the rest through its own pocket.”

Hartwig insists the underlying problem in South Carolina and other states remains joint and several liability, since trial lawyers still could seek financial damages from multiple establishments when the new law comes into effect.

“A 50% threshold for a bar is better than a 100% threshold,” he says. “But paying any amount above actual fault can result in a bar and/or its insurers paying hundreds of thousands, or even millions of dollars, in damages beyond a pure contributory standard of negligence, whereby each defendant pays no more and no less than implied by their actual degree of negligence.”

It is extremely unlikely that legislators in South Carolina and other states with dram shop laws will significantly change their joint and several liability laws, Hartwig says. He agrees with Reid that the only way to reduce insurance costs and keep neighborhood bars in business is to eliminate dram shop regulations that hold establishments serving alcohol disproportionately responsible for drunk driving incidents.

“It’s absurd to think a bartender should know—or could know—the alcohol level of what may be hundreds of patrons,” he says.