The 2025 Tort Reform and Liquor Liability Compromise

• Citation: Vol. 37 No. 3
• Year: 2025

The 2025 Tort Reform and Liquor Liability Compromise

Vol. 37 Issue 3 Pg. 44

South Carolina Lawyer

December, 2025

FEATURE

While many important issues arose during the first half of 2025-2026 session of the General Assembly, no issue took more time or garnered more interest from the legal community than tort reform and liquor liability.

During the first quarter of 2025, mainstream and social media were flooded with complaints from South Carolina's hospitality industry - restaurants, bars, event venues, golf courses, hotels, and non-profits - over the disappearance of the market for liquor liability coverage and skyrocketing insurance premiums for available coverage. This crisis had the South Carolina hospitality industry in fight-or-flight mode, worried about their ability to survive and the insurance issue fueled a larger debate about broader tort reform. Victims' advocates, such as the South Carolina Association for Justice (SCAJ) and Mothers Against Drunk Driving (MADD), urged against reforms, contending that many of the proposed reforms would unfairly prejudice innocent parties in our judicial system.

This session's liquor liability reform began in the House as H. 3497, while the larger tort reform bill began in the Senate as S. 244.^[1] After months of daily effort by the General Assembly and many members of the South Carolina Bar, the General Assembly passed compromise legislation, H. 3430, on May 7, 2025. This article seeks to highlight the provisions of H. 3430, which will take effect on January 1, 2026.

Background: The Liquor Liability Crisis

The question of why the liquor liability insurance crisis exists is not addressed herein. Notably, Rep. Bill Herbkersman, Chairman of the House's Labor, Commerce and Industry Committee, has established the Insurance Rate Review Ad Hoc Committee. This Committee has continued its important work during the summer by conducting hearings and an investigation into the insurance crisis.

The insurance crisis is, however, an existential one for the Hospitality industry. Licensees under the South Carolina Department of Revenue's Alcohol Beverage Licensing (ABL) Division are required to show proof of liquor liability coverage as a prerequisite to conducting business. South Carolina does not regulate commercial insurance like it regulates personal lines of insurance. Moreover, South Carolina does not have any mechanism to control or provide a market for liquor liability coverage for ABL licensees. Further, commercial policy forms are not filed with the South Carolina Department of Insurance (DOI), and commercial rates are not approved by it. Much of the liquor liability written in South Carolina is through the surplus lines market and issued by brokers for non-admitted carriers about whom the DOI has little meaningful information. As a result, South Carolina was not equipped to respond to a crisis like the one facing the

Hospitality industry due to the collapse of the liquor liability market.

The mandate for liquor liability insurance resulted from a bipartisan bill (S. 116) that took effect in July 2017 and requires ABL licensees selling alcoholic beverages for on-premises consumption in South Carolina to maintain at least $1 million in aggregate coverage for liquor liability. The South Carolina Department of Revenue (DOR) requires applicants for these ABL licenses to submit proof of this coverage, and it requires insurers to notify the DOR if coverage lapses. The goal of this mandate, of course, is to ensure that irresponsible licensees or permittees have adequate insurance coverage if a dram shop judgment is entered against them.

Notably, a requirement to purchase and maintain commercial liability insurance (other than for auto and workers' comp), is rare under South Carolina law. Neither surgeons nor lawyers, for example, are required to carry any level of commercial liability or malpractice insurance. When S. 116 went into effect, ABL licensees joined the ranks of petroleum transporters, amusement ride operators, and pyrotechnic sellers as those required to maintain a certain level of commercial liability coverage as a prerequisite to doing business.

In the insurance industry, liquor liability coverage is classified as a sub-line of general commercial liability. The annual industry reports issued by the NAIC are an excellent resource

for those who are unfamiliar with the details of commercial and personal insurance lines^[2]. When a customer seeks to purchase liquor liability coverage, it may be offered as a part of the CGL coverage or a commercial package policy, or it may be offered as a stand-alone insurance product.

Liquor liability is small percentage of the commercial liability insurance market in South Carolina. According to a January 5, 2024, DOI report, $17 million of premium was earned for liquor liability coverage in South Carolina in 2022.^[3] In comparison, the most recent data issued by the NAIC in April 2025 shows that, in 2023. insurers earned over $794 million in commercial multi-peril policies in South Carolina at more than an 11% return.^[4] Liquor liability is included in the catch-all commercial "other liability" NAIC category^[5]; insurers earned over $1 billion in premium at a 1% return in South Carolina in 2023 on this "other liability" category.^[6]

There is not a general commercial liability insurance crisis in South Carolina. Given the available numbers, insurers are profiting from commercial insurance business written in South Carolina at current rates, and the DOI has identified an adequate supply of insurers for the overall market. However, as it relates to the liquor liability subline, the DOI report described "a very troubled and challenged marketplace."^[7]The DOI determined that, between 2020 and 2022, dram shop claim severity - the ultimate average claim value incurred by the insurer - was roughly the same as surrounding states.^[8] However, during that same time dram shop claim frequency in South Carolina was more than double that of surrounding states.^[9]

Although it does not appear that the insurance industry gave a reason for declining to write new liquor liability insurance in South Carolina since 2023 while attending public hearings in the House or the Senate this year, such practice has become increasingly common according to those in the hospitality industry. Although insurers are usually more likely to offer renewal policies to their existing insureds, many licensees have been provided notices of non-renewal from their existing carriers. and the commercial market for new policies has now all but disappeared for ABL licensees. This development brought the crisis to a head.

The House and Senate approaches

In June 2024, the S.C. Department of Commerce noted that io°o of jobs in South Carolina are attributed to the hospitality industry, which contributes to a more than $29 billion economic impact on our state.^[10] Given the significance of the cost of inaction, leaders in both the House and Senate prioritized addressing the liquor liability insurance crisis this year.

The House and Senate approaches to addressing the insurance crisis were very different. The House bill was often characterized as a "rifle approach" in contrast to Senate's "shotgun approach." Following days of testimony in judiciary sub-committee hearings, the House unanimously passed H. 3497 on March 7, 2025, and the Senate passed S. 244 on March 27, 2025. An understanding of some of the key provisions of these bills provides context for the bill the General Assembly ultimately passed.

As it relates to modified joint and several liability and modified comparative negligence, the House bill sought to allow licensees to benefit from modified comparative negligence by removing alcohol from S.C. Gode Section 15-38-15 (F). In contrast, the Senate bill sought to remove Section F entirely, which, for most defendants, would end joint and several liability for noneconomic damages awards. Moreover, the Senate bill sought to abrogate Smith v. Tiffany, 799 S.E.2d 479 (S.C. 2017) (holding the South Carolina Contribution Among Joint Tortfeasors Act prevented settled parties from being added to a verdict form for allocation of fault). The Senate bill also provided that a licensee would remain 50% liable for a plaintiff's total damages even in cases where a drunk driver is found to be more than 50% at fault.

Dram shop liability in South Carolina is based upon a common law tort arising out of a licensee's violation of the prohibition provisions of Title 61. Hartfield v. Getaway Lounge &Grille, Inc., 607 S.E.2d 558 (S.C. 2010); Tobias v. Sports Club, Inc., 504 S.E.2d 318 (1998). The House bill sought to end any strict liability under the common law for the sale of liquor by adding "knowingly" to S.C. Code Section 61-6-2220, removing the statutory distinction between the sale of liquor and the sale of beer or wine. In contrast, the Senate bill proposed a comprehensive codification of the dram shop tort which would have preempted the common law tort and restricted liability to cases where the licensee knowingly serves alcohol to a visibly intoxicated patron. The Senate's bill would have also modified certain dram shop cases involving claims by passengers, and it would have provided a defense to liability in first party cases involving minors where a forensic digital ID scanner was employed.

Regarding alcohol server training and insurance requirements, the House bill included various premium mitigation provisions that would allow a licensee to substantially reduce the mandatory insurance aggregate. In contrast, the Senate bill mandated server training, and it reduced the mandatory aggregate coverage to three hundred thousand dollars for charities and five hundred thousand dollars for other licensees.

The Compromise Bill H. 3430 The debate and negotiations between the House and the Senate continued until the last week of this year's legislative session. The final product of this effort is H. 3430. The compromise shook out as follows.

Smith v. Tiffany is abrogated for claims arising or accruing after January 1, 2026 except for asbestos cases or actions commenced by the State and other governmental entities. In cases where H. 3430 applies, defendants will have the ability to add most non-parties to the verdict form. The tortfeasors that cannot be added to the verdict form ("excluded tortfeasors") are those immune from suit; those who acted willfully, wantonly, recklessly, or intentionally; those for whom a defendant is vicariously liable; and those involving strict liability.

Under H. 3430, settled parties and non-party tortfeasors are treated differently. Any settled party, except excluded tortfeasors, shall be added on the verdict form. S.C. Code Section 15-38-15 provides that, for non-party tortfeasors to be added:

(1) a defendant must "disclose" the non-party tortfeasor within 180 days of commencement of the case (or later for good cause shown).

(2) A plaintiff may then add the tortfeasor (no time frame specified) as a party defendant via an amended pleading, and that amendment will be deemed to satisfy the "relation-back" doctrine for statute of limitations purposes.

(3) If the plaintiff does not add the tort-feasor as a party, the defendant bears the burden of proof to show that the tortfeasor's breach of duty was a proximate cause of the plaintiff's injury, and the plaintiff may summary judgment and directed verdict to challenge the sufficiency of the Defendant's evidence.

After much debate and negotiation, the only change the General Assembly made to joint and several liability was to strike "gross negligence" and the "use, sale or possession of alcohol'' from S.C. Code Section i5-38-i5(F). Defendants, other than licensees, who have failed to exercise slight care now benefit from the modified comparative negligence provisions of S.C. Code Section 15-38-15(A). However, H. 3430 adopted the Senate's requirement that a licensee found to have dram shop liability possesses joint and several liability for 50% for the actual damages awarded to a plaintiff even if the drunk driver is found to be more than 50% at fault.

The General Assembly further adopted a modified version of the House's approach to mandatory minimum liquor liability insurance coverage. As a result, SC Code Section 61-2-145 is amended to mandate that charities purchase a $500,000 aggregate and to include various other mitigation provisions; the mandatory aggregate decreases: by $250,000 if service stops at midnight; by $100,000 if the licensee complies with the mandate to use a forensic digital ID scanner after midnight; by $100,000 if all employees are trained; and by $100,000 if less than forty percent of total sales are from alcohol. The minimum aggregate, however, is $300,000, and the per claim coverage for liquor liability must be 50% of the applicable aggregate.

However, H. 3430 did not adopt the Senate's comprehensive codification of the dram shop tort. Instead, the General Assembly adopted the House's approach of simply deleting "knowingly" from S.C. Code Section 61-6-2220 to remove any strict liability.

Like the Senate bill, the General

Assembly included mandatory penalty provisions for licensees in H. 3430. Specifically, SC Code Section 61-4-580 is amended to provide that violations of the prohibitions therein will result first in a $2,500.00 fine, then in a 14-day ABL license suspension, and finally in an ABL license revocation.

Additionally, H. 3430 created Chapter 3 to Title 61 and adopted the Senate's mandatory alcohol training provisions. DOR is responsible for approving alcohol server training programs that satisfy H. 3430's list of training standards. Licensees will have 30 days from employment to ensure that each manager and server has completed training, and licensees are responsible for keeping copies of their employee's server training certificates.

The General Assembly included a new statute regarding the sale of alcohol in collegiate sporting venues. Because the DOR was required to develop an alternative procedure and penalty structure for sporting venues by August 31, 2025, this portion of the H. 3430 takes effect upon the Governor's approval. The bill specifically prohibits sales of alcohol in designated student sections or to customers with vertical identification cards. In addition to complying with mandatory alcohol server training, SC Code Section 61-4-523 will require permittees to use random sales checks and a forensic digital ID scanner.

Licensees in collegiate sporting venues are not the only ones required to use a forensic digital ID scanner. S.C. Code Section 61-2-145 (F) will require any licensee in South Carolina who sells alcoholic beverages for on-premis-es consumption after midnight to use a forensic digital ID scanner after January 1, 2026.

Finally, H. 3430 includes several notable provisions relating to insurance regulation. First, it creates S.C. Code Section 38-73-550, which reflects the Senate's robust annual reporting requirements for the DOL Second, the General Assembly adopted the House's requirement that insurers offer "reasonable premium discounts" to insureds who comply with liquor liability mitigation measures that insurers must establish under S.C. Code Section 61-2-145. Third, the captive insurance article was amended to prohibit a captive insurance company from issuing liquor liability coverage to an ABL licensee with limits that erode by the cost of defense.

Reserved for 2026

South Carolina's legislative sessions last two years. Under the current rules of the General Assembly, any bills not passed before May 8, 2025, carry over into the second half of 2025-2026 legislative session beginning in January 2026. In the meantime. Rep. Herbkers-man's ad hoc committee will continue to investigate the insurance crisis.

The House bill included numerous sections that increased penalties in DUI cases. Several DUI bills were also pending in the Senate this year, and a compromise on DUI reform was not reached before May 8, 2025. There are several vehicles that continue to include the DUI provisions of the H. 3497 for consideration in 2026.

Likewise, the Senate bill addressed numerous matters that were not addressed in H. 3430. These include provisions that would provide for: (1) venue in the county where an accident occurred involving a "John Doe'' nonresident defendant; (2) admissibility of a plaintiff's failure to wear a seatbelt in auto torts; (3) removal of mandatory insurance coverage for punitive damages, but including a requirement that such coverage be offered as optional; (4) a more limited definition of "occurrences'' in medical malpractice actions; (5) an increase in the tort claims caps to $500,000 and $2 million in physician cases; (6) removal of the gross negligence and medical record fraud exceptions to the noneconomic damages award caps in medical malpractice cases; (7) an increase in the statute of repose for construction to ten years and repealing the exceptions to it; and (8) a doubling of the minimum auto insurance limits. S. 244 and H. 3497 are both active vehicles for further legislation on these issues in 2026.

H. 3430 represents a compromise crafted by the effort of many dedicated Legislators and members of this Bar. However, this bill will not be the final word on many of the issues highlighted during the tort reform and liquor liability debates this year, so expect more to come in 2026.

d Shaun C. Blake is a I lead attorney with Mann. Blake &Jackson

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Notes:

^[1] When the bills were introduced, I became intimately involved in tills debate as I was retained by the Responsible Hospitality Reform Alliance, a taskforce of the South Carolina Restaurant and Lodging Association, to advise and assist the hospitality industry in responding to these bills and to attempt a fair compromise that would provide some relief from the insurance crisis while continuing to protect the public from irresponsible business practices.

^[2] National Association of Insurance Com inissioners, Insurance Industry Snapshots &Analysis Reports, NAIC, https://content.naic.org/ Indus try/insurance-industry-snapshots-analy-sis-reports (last visited Sept. 15, 2025)

^[3] South Carolina Department of Insurance, Status Report on the South Carolina Commercial Liability Insurance Market (Jan. 5, 2024). https://www.doi.sc.gov/DocumentCenter/ View 14574/Status-Report-on-the-South-Caroli-na- C ommercial-Liability-Insurance- Market.

^[4] National Association of Insurance Com inissioners, Profitability by Line by State in 2022, NAIC, at 60, https://content.naic.org/sites/ default files/publication-pbl-pb-profitabili-ty-line-state.pdf (last visited Sept. 15, 2025).

^[5] National Association of Insurance Commissioners, Property/Casualty Annual Statement Instructions - 2022, NAIC, https://content.nalc. org/sites/default/files/property-casualty-pcm_o. pdf (last visited Sept.15, 2025).

^[6] National Association of Insurance Com inissioners, Report on Profitability by Line by State in 2023, NAIC (Apr. 22, 2025), https: / content.naic.org/article/naic-releases-2023-prof-itability-report.

^[7] South Carolina Department of Insurance. Status Report on the South Carolina Commercial Liability Insurance Market, supra note 2, at 4.

^[8] Id. at 9.

^[9] Id.

^[10] South Carolina Department of Commerce.

Hospitality and Tourism Industry Overview, S.C. Commerce, https://www.sccommerce.com/ja/ node/8109#:':text= One%20in%20io%20jobs%20 is,busmesses%2C%20from%201aunch%20to%20 legacy (last visited Sept.15, 2025).

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