Insurance Department: Iowa Dram Shop Rule Creating Confusion

The Iowa Department of Insurance reports that insurance companies and insurance producers may be in violation of an administrative rule issued by the Iowa Alcoholic Beverages Division (IABD) in relation to dram shop insurance.

Iowa Administrative Code rule 185-5.8 outlines the requirements for liquor license holders in Iowa to carry liquor liability insurance. This rule has been interpreted by the IABD to prohibit aggregate limits for liquor liability.

The IABD has stated that it will not accept certificates of insurance showing aggregate limits in support of an application for a dram shop license.

The insurance department warns that insurance producers and insurance companies are at risk for committing an unfair trade practice or error if they advise customers that a policy with aggregates is in compliance with the IABD licensing requirements.

The Iowa Insurance Division (IID) does not presently have in place any statute or regulation that forbids aggregate limits in dram shop polices. The IID has routinely approved such policy forms.

The IID has been informed that its practice has created confusion among insurers and insurance producers. The IID is aware that insurance companies who offer higher limits of liability typically have reinsurance requirements that require the companies’ policies to contain annual policy aggregates.

The IID is in discussions with the IABD about how to resolve this issue. In the short term, the IID does not have legal authority to disapprove dram shop forms that have aggregate limits.

Any insurer who issues such a policy in Iowa should use caution in issuing any such policy that may be used in support of a license application with the IABD.

The IID welcomes any additional comments on this issue. Comments may be sent to Assistant Commissioner Rosanne Mead at: Rosanne.mead@iid.iowa.gov. Parties who wish to submit comments to IABD should contact Judy Seib at: Seib@iowaabd.com.

Source: Iowa Department of Insurance