Uncovered

Rising insurance rates threaten Vermont bars, clubs and restaurants

BY CHRIS FARNSWORTH • farnsworth@sevendaysvt.com

When Emily Morton and Karyn Jacobs decided last year to buy the 126, the small Burlington nightclub where they worked, they had a carefully thought-out financial plan. The first-time business owners meticulously researched staffing, music booking and other operational costs.

“There were so many things to take in consideration and budget for,” Morton said recently, as she and Jacobs sat in their office at the 126. “But insurance was one of the things we weren’t worried about.”

As it turned out, finding insurance for their bar was a big problem. Their landlord initially demanded they take out a million-dollar liquor liability policy, in case a drunken customer of the club later caused an accident or injuries to someone. Vermont’s so-called Dram Shop law allows the landlord, as well as the bar itself, to be sued in such a case, making many landlords trepidatious when it comes to their tenants’ insurance coverage.

So Jacobs and Morton went shopping, expecting to pay similar rates as the previous owner had for coverage. But despite submitting more than 25 applications to different brokers, at the national and state levels, the women had no luck.

“It wasn’t about how much the coverage would be,” Jacobs said. “We couldn’t even find coverage. No one, not a single insurer in the state, could offer us a plan.”

The women also discovered they were not alone: Vermont bars, nightclubs and other establishments that serve alcohol were facing sharp, often unaffordable, increases in the cost of insurance — if they could find a company to provide it at all.

The cost of liability insurance, including liquor liability, has been rising steadily across the country. A recent survey by the Council of Insurance Agents & Brokers found that in the final quarter of 2021 alone, medium-size businesses saw an average insurance premium increase of 10.6 percent; small businesses saw an average 6.3 percent rise. The council attributed the increases to inflation, bigger lawsuit awards, an uptick in cybercrime and other factors.

But Vermont’s difficulties are compounded by the state’s own liquor liability law, passed in 1987. Its provisions mean Vermont is one of the states where insurers run the greatest risk of big payouts in liquor liability lawsuits, according to the Insurance