Hotels, resorts and water parks in Michigan could soon be serving guests at “swim-up” pool bars thanks to new bills recently signed into law by Governor Gretchen Whitmer. The legislation, approved June 14, applies to establishments that already have a liquor license and requires them to have lifeguards on duty and adhere to specific guidelines on drink containers, building materials, and more.
“For summertime fun for so many hotels and resorts that are on the water, or have access to a body of water, I am sure that it is very exciting to contemplate having an additional way to welcome guests — and revenue, as it has been tough these past couple of years due to the pandemic,” said Yuri Petrasz, Underwriting Manager, Commercial Insurance, Burns & Wilcox, Chicago, Illinois. “Obviously, anytime water comes into play, that adds an additional layer of risk to think about.”
That is why you have insurance, to protect yourself for something that could potentially happen. It is peace of mind, knowing if something happens that your business is going to be protected.
From overconsumption and drownings to slip-and-falls on pool decks, the potential risks should be foremost for any establishment considering the addition of a swim-up bar. These hotels and resorts would also need to review their Commercial General Liability (CGL) Insurance, Liquor Liability Insurance, and Excess Liability Insurance to confirm coverage would apply to the new operations.
“The main concern with liquor liability is bodily injury,” said Patricia Sheridan, Director, Ontario Commercial Insurance, Burns & Wilcox, Toronto, Ontario. “That is why you have insurance, to protect yourself for something that could potentially happen. It is peace of mind, knowing if something happens that your business is going to be protected.”
Water attractions plus alcohol: a risky combination
Despite being a primary source of entertainment for guests, hotel pools have been associated with a wide range of accidents. A teen recently died after a near-drowning incident at a hotel pool in Phoenix, the Arizona Republic reported, and a man died in May after a “suspected drowning” at a hotel pool in Falmouth, Massachusetts, according to the Boston Globe. Other recent incidents include a possible chemical leak at a hotel pool in West Ocean City, Maryland, in late May that sent two guests to the hospital, WMDT reported. In March, a $100,000 lawsuit was filed against Walt Disney Parks and Resorts after a 2019 incident in which a woman was injured while using a resort water slide, according to Inside the Magic.
When alcohol is introduced to any scenario involving a water feature, these risks may be elevated, Petrasz said.
“You have everything from the safety factor of patrons to the safety factor in and around the water and the pool areas,” he said, pointing to important safeguards in Michigan’s pool-bar legislation, like requiring non-breakable drink containers and prohibiting the use of slides or diving boards in places with swim-up bars. “There is always concern around patrons who may overindulge, or who don’t even realize that they are overindulging on a warm day. There has to be some thought around safety measures and being able to ensure everybody stays safe while enjoying their time at a pool bar.”
Drownings and accidents linked to overconsumption or overserving are serious risks, and resorts that open pool bars may have a more challenging time obtaining Liquor Liability Insurance or CGL Insurance, Petrasz noted. “For the insurance carriers, anytime you have water and alcohol, there may be limited capacity from them and what they may be willing to offer,” he said. “Some may choose to put a water exclusion on their policy. It is going to be an evolving area for insurance carriers to really review and decide how they want to approach this in terms of coverage.”
There has to be some thought around safety measures and being able to ensure everybody stays safe while enjoying their time at a pool bar.
In the event of a liquor-related incident that leads to a lawsuit, a hotel’s Liquor Liability Insurance could cover medical expenses for the injured party, legal defense costs, and settlements. Other pool-related incidents could be covered under the property’s CGL Insurance, which can cover third-party bodily injury and property damage. Excess Liability Insurance may be needed to provide liability limits above and beyond these policies.
In Canada, CGL Insurance and Liquor Liability Insurance are typically combined into the same policy, Sheridan said. “There are no gray areas; it is all covered under the CGL Insurance,” she said.
Regardless of whether there is liquor or not, a pool is an additional liability hazard. Liquor liability exposure is increased around pools with hazards such as drowning, slipping on the pool deck or broken glass causing bodily injury.
Potential liability for alcohol-related incidents can vary depending on the state or province, Sheridan pointed out. “In Ontario, the establishment is held responsible. If they overserve someone and they drive, or any sort of fight breaks out, then that establishment is likely going to be pulled into a bodily injury lawsuit,” she explained. “They have that responsibility to their customers.”
“Regardless of whether there is liquor or not, a pool is an additional liability hazard,” she said. “Liquor liability exposure is increased around pools with hazards such as drowning, slipping on the pool deck or broken glass causing bodily injury.”
Ongoing labor shortage may make self-serve taps more appealing
A separate bill expected to become law in Michigan would allow self-serve taps, or “beer walls,” in the state, letting customers pour their own drinks from self-serve dispensing machines. It is part of a growing self-serve trend in the U.S., NPR reported in 2019. States including Connecticut and Oklahoma got approval for the taps in 2021, according to reports, and some see the beer walls as a way to cope with the ongoing labor shortage, Bridge Michigan recently reported.
Like swim-up bars, a change in operations to allow self-serve alcohol would likewise come with its own new set of risks for establishments to consider. “Controlling how much individuals are consuming would be a concern,” Sheridan said, noting that this oversight could be more challenging in places with staffing shortages. “Restaurants are still struggling with staffing in Canada.”
While Petrasz has yet to see an uptick in interest for insurance coverage that would apply to self-serve taps, he is aware that more establishments are turning to the self-service option. These bars would still be required to have food service staff on hand to ensure things run smoothly, he said.
“I think the industry focuses on the fact that it reduces waste and it controls overhead,” Petrasz said. “For a very beleaguered industry these past couple of years, it introduces something new for patrons to be able to take advantage of. I think there is a lot of focus and excitement for the restaurant and hotel association on this.”
Overserving is a major risk, Sheridan emphasized. In August of 2021, a Texas man won $5.5 million in a lawsuit that alleged he was overserved by a restaurant, leading to a fight that left him with serious injuries, Newsweek reported. In 2017, a court found a Vancouver, British Columbia, pub partially at fault for a drunk-driving crash that injured a pedestrian; the judge found that the business failed to prevent the driver from becoming overly intoxicated, according to a CBC News report.
Beyond the immediate impacts of a liquor liability incident, “it could also affect their reputation,” Sheridan said. “Even though it may not have a direct effect on their business, if it is publicized and in the news, individuals may not want to go there anymore,” she said.
Discuss insurance before changing liquor operations
Other insurance policies, such as Special Events Insurance, may be needed in some situations that involve a swim-up bar, Petrasz noted. “That is coverage specifically focusing on a particular event,” he said. “A resort could have a swim-up bar, but if someone wants to have a party where they rent out that area or a company decides to have an event for their clients, that could be considered a special event.”
Any hotel or restaurant considering a change to the way they serve alcohol should always discuss it with their insurance broker before taking on any modifications, Sheridan and Petrasz agreed. “Depending on the changes, it could certainly affect their policy, so it is always recommended to let them know,” Sheridan said.
Business owners should also regularly review their insurance policies with their broker, paying special attention to risk management strategies that may be recommended, such as education for staff on recognizing the signs of overconsumption. This may be especially important in places where public alcohol consumption is allowed in places like parks — a trend currently being seen in many Canadian cities, CBC reported in June.
Anytime you look to change up how your operations are being utilized by the public, you want to make sure you have those conversations with your insurance broker.
“It does not always mean that they overserved them; they could have been drinking before they came in,” Sheridan said. “That education around identifying it and knowing how to handle those situations is very important.”
Standard risk management procedures like quickly cleaning up spills, keeping walkways clear, and having proper lighting on stairs are also important. “They should also make sure there are protocols in place for individuals who are being served liquor to get home safely,” she added.
From pool bars to self-serve beer walls, every establishment that serves alcohol will have its own unique risk management considerations, Petrasz said. “Each facility is going to have different needs based on their operations,” he said. “Anytime you look to change up how your operations are being utilized by the public, you want to make sure you have those conversations with your insurance broker.”
Unfortunately, not all accidents can be avoided, he added. “A lot of times it is an unfortunate incident and there is nothing they could have done better to prevent it, and that is why they need insurance,” Sheridan said.
From loss of life to injuries, these claims can be “catastrophic,” Petrasz said. “Everyone has to maintain a safety outlook to ensure that no one gets hurt,” he said. “With the increase in travel we have heard about in the last few months, with individuals wanting to get out and do things, the industry is kind of reawakening in a sense. These changes are a really big thing for the Michigan resort industry coming into summer.”