Testimony Of Larry Magill, Kansas Association of Insurance Agents, In Opposition To HB 2114
(Feb. 9, 2005) Thank you mister Chairman and members of the committee for the opportunity to provide comments today in opposition to HB 2114 that creates what is commonly referred to as dram shop liability in Kansas. My name is Larry Magill and I represent the Kansas Association of Insurance Agents. We have approximately 425 member agencies across the state and another 125 branch offices that employ a total of approximately 2,500 people. Our members write roughly 70% of the business property and liability insurance in kansas.
HB 2114 creates a new cause of action for trial lawyers to pursue, not just in automobile accidents, but any time someone is hurt or there is property damage and there's an allegation that alcohol was a contributing factor.
According to information that the KLBA gave the Committee last year that they found on Rough Notes website, Kansas is among 13 states that currently do not have dram shop liability. There are another 21 states where moderate liability is imposed, 10 states with strict liability and 6 states with special requirements. Thus the liability varies all over the board. According to a conversation with the Insurance Services Office (ISO) today, they dropped their A-D classification system in favor of numerical ratings from 1-10 with 1 being states with no dram shop act and 10 being states with "strict" dram shop acts. They classify about 10 states at each end of the scale and the rest in between. Kansas would be a 1. MADD claims that there are only 9 states that do not impose dram sop liability.
In Kansas, many businesses do not choose to carry liquor liability since our supreme court has said that establishments selling liquor do not have liability for their customers' actions. If a business does buy the coverage on the chance that they would be the case that overthrows the Supreme Court decision and to cover defense costs if someone chooses to pursue a claim despite our supreme court rulings. The cost in Kansas is quite low compared to a state with dram shop liability. In other words, Kansas' rates reflect our law and our claims experience. According to one wholesaler member of ours, Kansas' current liquor liability rates are 30-40% less than Missouri, who has a very limited dram shop law, and 80% less than Iowa who has a full dram shop act.
HB 2114 would change all that. Most likely businesses would be forced to buy the coverage from non-admitted carriers, if they choose to buy it. Non-admitted carriers are not subject to the Kansas Insurance Department's oversight of rates, claims practices or virtually anything else and are not covered by the guarantee fund if the carrier becomes insolvent. In other words, they are the high-risk, high-cost marketplace.
We urge you to oppose the bill for the following reasons:
While the burden of proof is on the plaintiff to show that the establishment served them, memories can be faulty and it is virtually impossible for retailers to prove someone did not purchase liquor from them.
There are no standards for "incapacitated", either mentally or physically -- its safe to say that anytime there's a bad result (injuries) the person was "incapacitated" but short of a breathalyzer test and "walking the line" every time a drink is ordered, the retailers can't defend themselves. It is quite likely that bars would need to prohibit anyone from getting a drink for someone else since they might be hiding the fact that the other person is "incapacitated". A standard like "obviously, physically inebriated" would be a clearer standard.
This bill makes the retailer pay for someone else's actions -- the customer who bought and consumed the alcohol.
Even if the retailer is found innocent, the costs of defense will be significant.
The current law places the burden on the person who consumes the alcohol to act responsibly. We encourage you not to create a new cause of action and leave present law in place and not act favorably on HB 2114. We would be happy to answer questions or provide additional information at the Committee's request.