Standard Industrial Classifications (SIC) do not list nightclubs separately from bars. This map illustrates that bars and nightclubs operate in every region. The vast majority are single-location enterprises with fewer than 49 employees and are located throughout the country.

The forecasted growth in the number of these enterprises from 2008 to 2012 is 1.1%. Significant growth is forecast in Virginia, moderate growth in Connecticut and Oklahoma, and steady growth in Alabama, Indiana, Louisiana, Maine, Oregon and Texas. No change or slight increases are forecast in 26 other states. The forecast in 11 states is for a slight decrease while larger decreases are projected in Montana and Nevada.

The all lines premium (which does not include liquor liability) averages $3,750 per enterprise nationwide, but this varies by region. The western average is $5,520; $4,060 in the east; $3,890 in the southeast; $2,980 in the midwest; and $2,960 in the southwest.

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Liquor and fire is a deadly combination. Any company that insures nightclubs must work hard to keep the two far apart. However, nightclubs are susceptible to more than just catastrophic exposures. Security-related activities, slips and falls, and theft are examples of frequency-type losses than occur regularly. Nightclubs also employ people and are subject to employment-related practices issues along with employee injuries.

Nightclubs have many difficult but controllable exposures. Risk management is the essential element in keeping nightclubs prosperous and their clientele safe.

Here is a possible loss scenario:

Grace and Jane were dying to see the Milli Vanilli reunion tour. The group was scheduled to perform at the Greatest Last Band nightclub on one evening only. The show sold out immediately but Grace and Jane were not discouraged. Jane bought a ticket from a scalper and was admitted. She then went to an exit and let Grace in. A security guard witnessed the activity and asked both of them to leave the area immediately. Both refused. Another guard arrived on the scene, but Grace and Jane did not budge. They were finally picked up and physically carried through the crowd to the exit.

Jane was furious! She sued the Greatest Last Band nightclub for assault and battery, false arrest and public humiliation. Unfortunately, the nightclub's liability policy had an assault and battery exclusion and the carrier refused to even defend.

Mick Kroll, CPCU, ASLI, senior vice president and binding authority manager at AmWINS Insurance Brokers of California, LLC, provides an important starting point. He explains, ”It’s important to distinguish the ‘nightclub’ class from the ‘bar/tavern’ class. The line between the two can often be fuzzy and many carriers will write a nightclub by classifying it as a ‘bar/tavern’ with entertainment.” This Cybercast concentrates on nightclubs and the brokers and carriers actively writing them. Mr. Kroll says that Arch Specialty, Colony National, Crusader, First Mercury Insurance Company, Liberty Surplus, Nautilus, Steadfast, and United National are all markets for nightclubs.

Dan Djordjevic, president and CEO of AXIOM Insurance Managers Agency, manages a book of business on behalf of Capitol Specialty Insurance Co. Patricia Roth, executive vice president of S. H. Smith & Co., Inc., lists Admiral, Naxos, Aspen, Capital, Scottsdale and Great American E&S as some of the markets they use.

The marketplace for nightclubs is limited and is almost exclusively nonadmitted, according to our experts. Gregory Gold, CIC, CISR, field underwriting/marketing for Atlantic Specialty Lines of Florida, Inc., adds, “The complex nature of these multi-peril enterprises requires detailed underwriting.”

Seth Amendola, assistant vice president of S.H. Smith & Co., Inc., explains that typical GL premises exposures and life safety issues are key exposures and adds, “Insureds in this class of business need to address their liquor liability as well as their assault and battery exposures.”

Mr. Kroll expands on these exposures. Concerning liquor liability, he comments, “Having formal liquor training is a key underwriting qualification for most carriers.” On assault and battery, he cautions, “Remember, security personnel are entrusted with the public’s welfare. If they are not skilled at handling a nightclub's customer base, the insured will be on the wrong end of many ugly lawsuits.”

Additional exposures, according to Mr. Gold, are theft and vandalism. He adds, “Most important, however, may be the professional liability coverages, such as EPLI for HR issues, and crime for employee acts of dishonesty.”

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