April 30, 2003 Alcoholic Beverages Division - Board Room Ankeny, Iowa
Members Present in the Board Room:	Bob Cramer Shirley Daggett Mary Hunter Gayle Collins Dick Stoffer
Guests Present:	Sara Kellogg, Iowa State Substance Abuse Prevention Jim Clayton, University of Iowa - Stepping Up Scott Doll, Doll Distributing Dan McKay, McKay Insurance Agency, Inc. Sheila Douglas, Iowa Wholesale Beer Distributors Association Cheryl Sinclair, Iowa Wholesalers Beer Distributors Angela Burke Boston, Iowa Insurance Division Ardis Glace, Iowa Substance Abuse Program Directors' Linda Dedecker, Hickory Park, Inc. Jim Trager, First Western Insurance Bruce Braley, Iowa Trial Lawyers Association Hazel Woods, First Western Insurance Pat Breen, Dim Alley McGibbs Chris Kocke, Iowa Hospitality Association Doni DeNucci, Iowa Hospitality Association Alex Banesik, Down Under Bar & Grill Scott Brown, Iowa Trial Lawyers Association Paul Trostel, Iowa Hospitality Association Fred Taylor, Taylor Insurance Services Scott Carlson, Court Avenue Restaurant Brewing Company
Staff Present:	Lynn Walding Nicole Gehl Judy Seib Marty Deaton Jolene Eriksen	Gary Marker Karen Freund Phil Wedgwood Linda Cox Tami Tabor
Legal Counsel Present:	John Lundquist, Assistant Attorney General

Call to Order

Presentation of Awards

Lynn Walding introduced Scott Doll who was recently appointed to the Commission by the Governor and confirmed by the Senate. Mr. Doll will replace Commissioner Cramer whose term expires April 30th. Mr. Doll assumes his duties as Commissioner on May 1, 2003. The law allows the Commission to have one industry representative on the Commission. Mr. Doll, a wholesaler for Anheuser Busch in Council Bluffs, will be the industry representative.

Administrator Walding presented Commissioner Cramer with a certificate recognizing his service to the State of Iowa and thanked him for his 8 years of service on the Commission. Guests were invited to join in a reception for Commissioner Cramer following the meeting.

Minutes of Previous Meeting

Financial Report

Sales Report

Product Buyout

EFT

Mr. Walding pointed out that two-thirds of the retailers were already using EFT prior to initiating mandatory EFT.

Tobacco Enforcement

Counsel's Report

Mr. Lundquist reported the Attorney General's office could not provide a concrete answer to Mr. Walding's request concerning quantity discounts and other incentives. There is no prohibition against offering financial incentives of some nature as long as the incentives offered comply with federal regulations and state law. Relevant rules and statutes are cited in the Attorney General's Opinion letter; however, Mr. Lundquist stated a case-by-case analysis of each incentive program would be needed to determine legality of a promotional activity.

The issue arose last fall, according to Mr. Walding, when several suppliers questioned the legality of some suppliers offering discounts to different buyers. The law specifically states that the Alcoholic Beverages Division is required to sell at the same price regardless of quantity of purchase or distance of delivery. The question was raised whether the law applied to the industry and the Attorney General's reply was it does not; the industry can offer discounts. Cited were the federal requirements of what discounts are allowed. This opinion will probably be applied to a similar question posed by the beer wholesalers.

Legislative Update

The Native Wine Bill allowing native wineries in the state to purchase permits for $25 passed both houses and has been sent to the Governor.

The retail community, the Attorney General's Office, the Department of Public Health and this agency worked together on a compromise to the tobacco retailers bill that creates another step in the civil penalty process on the way to revocation, according to Ms. Gehl. It also creates a defense that the retailer can use one time in four years for server training. The bill was signed by the Governor on April 11, 2003 and became effective immediately. Ms. Gehl reported work is still being done on passage of a civil penalty fund. Any fines levied through the state prosecution will go into the civil penalty fund to fund the educational component of the retailer bill that was passed.

In response to a question by Commissioner Cramer, Ms. Gehl verified that retailers who have trained their employees could use the "defense" one time in four years.

The retail community, the Attorney General's Office, the Department of Public Health and this agency worked together on a compromise to the tobacco retailers bill that creates another step in the civil penalty process on the way to revocation, according to Ms. Gehl. It also creates a defense that the retailer can use one time in four years for server training. The bill was signed by the Governor on April 11, 2003 and became effective immediately. Ms. Gehl reported work is still being done on passage of a civil penalty fund. Any fines levied through the state prosecution will go into the civil penalty fund to fund the educational component of the retailer bill that was passed.

Iowa Liquor Quarterly Update

"Ladies Night" Specials

Walding reported that the Supreme Court case Ladd vs. Iowa West Racing Association looked at the practice of "ladies night" specials as offensive to men, derogatory to women and contrary to the Iowa Civil Rights Act. Unfair and discriminatory practices are not allowed in public accommodation and therefore cannot be provided differently based on race, creed, color, sex, national origin, religion or disability.

John Lundquist researched the Supreme Court case to determine its applicability to liquor licensees. Mr. Lundquist stated that the Iowa Civil Rights Act prohibits certain activities by entities that provide public accommodations. Mr. Lundquist commented that most liquor licensees would fall within the definition of a public accommodation. Within that context, the Supreme Court interpreted the provisions against discrimination based on sex and determined that offering specials to women alone, or "ladies day" type of event, did violate the Iowa Civil Rights Act. The statute that was interpreted in the 1989 case has not been amended. Mr. Lundquist's opinion is that the reasoning of the Ladd case is still valid, and that it is a violation of the state's Civil Rights Act for bars to offer these "ladies night" specials and not offer the same prices and advantages to their male patrons as well. Mr. Lundquist stated liquor licensees under the state's alcoholic beverage code do have a responsibility to follow all rules and regulations that would be applicable to the operation of their business. There are provisions in the Iowa Alcohol Code that prohibit licensees from knowingly violating the law. The statutes could subject licenses and permits to administrative sanctions for purposefully violating the Civil Rights Act. Mr. Lundquist also stated that a knowing violation of these unfair practices and prohibitions in the Civil Rights Law could negatively reflect upon a licensee's good moral character which could be a basis for denying or revoking a license. The law is clear in Iowa that bars should not be offering the specials in a gender discriminatory way.

Lynn Walding said the practice has gotten widespread and he does not want to just start pulling licenses. The Division will send a notice, either directly to the bars or perhaps included in the next issue of the Iowa Liquor Quarterly notifying licensees and permittees of the law and giving them a period to discontinue the practice. After that, the Division will implement disciplinary action if the licensees and permittees continue to offer the specials. A press release will also be issued fairly soon letting the bar owners know that the practice is not allowed. Ultimately, complaints by citizens can be brought to the Civil Rights Commission under that law.

Dram Shop Reform

Lynn Walding opened the public forum by explaining that the Dram Shop Administrative Rule passed by the Commission went before the Administrative Rules Review Board and was approved. The Rule was given a general referral, which means it can be a target for discussion during the next legislative session.

During the process of drafting the Dram Shop Administrative Rule, it became apparent, due to misunderstanding and misinterpretation, that there is potential for improving the dram shop rule. In an effort to gain a clear understanding and work toward improving the dram shop rule, the Commission will hold a series of public forums throughout the state over the next few months. The Commission will gather input on insurance rates, explore the possibility of expanding the dram shop requirement to include off-premises accounts and other issues.

Mr. Walding presented a slide show detailing the dram shop limits for the past 30 years and the amounts that become effective with the passage of the new Dram Shop Administrative Rule. Commissioner Cramer asked that the information be posted to the website.

Doni DeNucci - President, Iowa Hospitality Association (IHA)

Ms. DeNucci stated the association understands the need for increased dram shop limits. Most association members already carry more than the required minimums and will not necessarily be affected by the increase in requirements; however, some smaller operators who carry only the minimum requirements will be adversely affected. Since 9/11 the hospitality industry has faced shrinking bottom lines on an already small profit margin according to Ms. DeNucci. The association wants to explore: 1) how to minimize their risks to help improve their bottom lines; 2) how insurance premiums are assessed and whether they should be assessed in another way; and 3) incentives for operators who train their employees.

Lynn Walding stated that the division is conducting a training program in Iowa City in August and September to be used as a test model. The program, similar to the tobacco program, will offer an incentive similar to a “get out of jail free card” to licensees whose employees have taken the training program.

Ms. DeNucci suggested the IHA work with the Iowa ABD and law enforcement agencies to secure grant money to conduct the training programs.

Mr. Walding commented that the Commission has spent a great deal of time focusing on underage consumption and little time on intoxication. He questioned whether the focus needed to shift to over-serving. Walding also asked if bar owners would support a crackdown on "all-you-can-drink" specials if it would help drive down the insurance premiums by reducing the number of claims.

Ms. DeNucci responded that she would let the bar owners respond for themselves; however, she would think they would support it if it would drive down insurance premiums and help minimize their risks.

Paul Trostel, Chairman of the Board of the Iowa Hospitality Association and Business Owner

Mr. Trostel stated that the association thinks the Iowa Alcoholic Beverages Division provides a great service and they do not want the state to get out of the business. He commented that Mr. Walding told him in a previous meeting that 20% of all alcoholic beverages sold in the state are served at on-premises accounts. One of the association's concerns is that with the enactment of .08, it will become more difficult to recognize an intoxicated person in a busy establishment, even though employees have been through the TIPS training. The IHA advocates shared responsibility in that anyone who sells ready to drink (RTD) beverages should share in some kind of insurance fund for the general population. He cited the many times a patron, who is sober when he leaves the bar or restaurant, stops at a convenience or grocery store to purchase and consume more alcoholic beverages on the person's way home. If that person has an accident, the only person who can be sued under the dram shop law is the restaurant or bar owner - not the convenience or grocery store. Mr. Trostel also commented that as a businessman he is not in favor of "all-you-can-drink" specials.

In addition, Mr. Trostel suggested a 5¢ tax or user fee on the sale of cold beer and malt beverages. The fee would be invested in a fund that, once established, would be used almost like a grant to pay dram shop claims.

Operators that have a lot to protect carry much higher limits than required so the new minimum dram shop requirements will not adversely affect them, according to Mr. Trostel. However, Mr. Trostel commented that the dram shop rate is based on sales per thousand of alcoholic beverages. Although he dispenses less alcohol, Mr. Trostel pays more for dram shop insurance based on his higher gross sales. He stated that if dram shop was rated correctly, it would be based on how much product the operator sold (example: how many fifths of tequila were sold - not how much money the operator made off the sale of the tequila.)

Bruce Braley, Waterloo attorney and president-elect of the Iowa Trial Lawyers(ITL)

Mr. Braley commented that his firm defends dram shop cases; however, he worked his way through college tending bar so he does have an appreciation of what the bar and restaurant owners were saying. The ITL wants to help the industry put together the tools to effectively train the young people hired in the college communities to understand the risks the bar owners face when they pay those dram shop premiums. When the dram shop law was developed in 1873, there were no on-premises sales of any type. Mr. Braley commended the Commission on taking action to change the minimum requirements that have been in place for a long time. If inflation were adjusted to the original dram shop limits that were in place, according to Mr. Braley, they would be closer to $100,000 per person instead of the $50,000. Mr. Braley also commented that when speaking with legislators about the dram shop statute, the legislators did not know that the ABD sets the limits for dram shop insurance. The legislators thought they set the limits.

In response to a question by Commissioner Collins, Mr. Braley stated that a very intense investigation occurs to find where, what and how many alcoholic beverages the individual responsible for the accident consumed at each site. Sometimes law enforcement officers will do the investigation; however, frequently the lawyers have to find the information on their own.

Mr. Braley presented a slide show depicting the inadequacy of the $10,000 per person dram shop limits in a serious accident caused by a drunken driver. According to the National Highway Transportation Safety Administration's 1999 figures: in cases where there was a blood alcohol content of .10 or above, there were 16,500 crashes that killed 119 people and injured 5,300; in cases where the blood alcohol content was between .08 and .10 there were 300 crashes that killed 13 and injured 200. Alcohol is a factor in 20% of Iowa's crash totals resulting in almost a billion dollars in expenses related to monetary costs and quality of life losses. What frequently happens in a serious accident is that the taxpayers have to pick up the burden when the accident victim has to go on Title XIX for long-term medical care. It is a very important public safety issue and the ITL wants to help educate the association members and the people working in the establishments about the consequences.

In response to a question by Commissioner Collins, Mr. Braley stated that a very intense investigation occurs to find where, what and how many alcoholic beverages the individual responsible for the accident consumed at each site. Sometimes law enforcement officers will do the investigation; however, frequently the lawyers have to find the information on their own.

Lynn Walding stated that he and Judy Seib recently partook in a national teleconference sponsored by OJJDP in which the topic was source investigations. Mr. Walding said it is his intention to work with Iowa law enforcement to do source investigations on a more systematic approach to ask the questions of the consumer about where, when and how much did you drink. Currently, the source is not tracked. Often the officers don't ask the question or explore it further once the individual is already determined to be intoxicated and the officers have what they need for court.

Commissioner Collins asked if there was any other source of insurance protection available to victims. It was pointed out that Iowa has financial responsibility laws. Automobile liability insurance would cover; however, that has also become an increasing problem for the uninsured drivers.

Mr. Walding asked Mr. Braley if it is true, as many bar owners complain, that lawyers settle cases too quickly and if so, why that is so with the limits at 10 and 20. Mr. Braley replied it has not been his experience in representing the injured or deceased person; however, with small limits of liability, its an economic decision for the insurance company to decide whether to put the money into defending the case or settle it and move on to other claims. Mr. Braley went on to explain that in a medical liability case, the physicians have a "consent to settlement clause" so a medical liability claim against them can not be settled without the physician's permission. The trade-off is that the insurance companies have a "hammer clause" which, if they think the case can be settled for a reasonable amount and they inform the insured physician of that fact, the physician has the option of whether the attorney can settle. Anything that is recovered over and above that amount, the physician can be held personally liable for.

Scott Carlson, Court Avenue Restaurant Brewing Company

Scott Carlson complimented the division on the new Iowa Liquor Quarterly magazine. He suggested that the division include an article about dram shop insurance in the next issue. He asked that the article be written in layman's terms and highlight points of interest concerning bar and restaurant owners. In addition, he suggested including educational information on what dram shop really is, what it dictates, and why it is important, as well as what may be changed and why the changes should occur. On the front cover, he suggested listing phone numbers of available TIPS classes.

In response to a question by Mr. Walding, Mr. Carlson commented he was not in favor of mandatory server training because it loses its relevancy when the individual takes it because of the mandate. He suggested the division work with the IHA and other associations to facilitate voluntary server training classes. Mr. Carlson would like to see some incentive offered to operators who offer the classes to their employees. He stressed the incentive could be as little as covering the cost of the classes.

Fred Taylor, Taylor Insurance Services, wholesale broker with exclusive for C N A Insurance Co.

Mr. Taylor commented that the Iowa dram shop law is a bad law from both a legal and sociological standpoint because it makes another party responsible for the acts of a third individual. The dram shop law included carryout businesses that were rated at a very low rate applied to a large volume until 1994 when the courts ruled that the law was only applicable to on-premises businesses.

Mr. Taylor has been writing dram shop insurance in Iowa for C N A Insurance since 1986. The dram shop insurance has been very competitive whereas the rest of the insurance industry has been in a rate-raising mode. Consequently, from 1986 until 2001 the rates for dram shop insurance have decreased about 25% across the board. Mr. Taylor's company did raise the rates about 10% in 2001. He pointed out the price of drinks has increased while volume has remained about the same allowing the insurance rates to remain about the same. With regard to losses, Mr. Taylor stated that his company evaluates the reason for a loss. If the insured is a good operator whose loss could have happened to anyone, Mr. Taylor will rewrite the policy with a possible slight surcharge. If the insured is a bad operator and did something wrong, Mr. Taylor would either charge a 25 - 50% surcharge or he would not rewrite the policy following a serious loss.

The insurance industry encourages TIPS and Mr. Taylor has given a 10% credit for TIPS training; however, he has found it doesn't work very well because of the high turnover in the bar and restaurant industry. A better alternative would be to make sure that bar and restaurant owners record accurate receipts. The insurance companies base their rates on receipts - the amount of alcoholic beverages sold in the establishment. Problems associated with basing the rates on receipts include: 1) those who charge more for their drinks pay more for premiums than the individual who charges less for a drink with the same amount of alcohol poured; 2) those who charge a cover and let people drink all night for free do not report any receipts to the insurance company; and 3) those who under-report. If everyone reported accurately, rates would probably go down according to Mr. Taylor.

Commissioner Cramer asked why the insurance companies would base rates on receipts rather than on the bar and restaurant owners' purchases. He pointed out the alcoholic beverages industry is highly regulated and the information could be retrieved from beer, wine and liquor wholesaler records. A great deal of discussion ensued regarding basing rates on receipts, purchases, wholesale purchases, volume of alcohol sold and gross receipts based on volume sold, as well as the definition of these terms. Commissioner Cramer counseled to keep it simple and charge a tax or surcharge of 1¢ a quart or 1¢ a gallon to be put in a separate trust fund that can be used only for the purpose of paying dram shop claims. He suggested establishing a representative board similar to IPERS to represent the bar association, restaurateurs, wholesalers, etc. to oversee the fund.

Linda Dedecker, Hickory Park, Inc., suggested a need for consequences for those who do not report correctly to the insurance company.

Fred Taylor commented that under-reporting receipts results not only in stealing from the insurance industry but also from their counterparts. If the decision is made to charge a surcharge or tax, the industry will have to self-police itself. Currently, the insurance industry charges based on the whole drink, not just the amount of liquor in the drink. According to Taylor, if the industry charged only on the alcohol they would probably have to charge the same amount for the ounce as for the whole drink because if a person is going to cheat, they will do it on any method of rating.

Commissioner Cramer commented that a lot of the problems come out of the college bar environment; Mr. Taylor disagreed. Mr. Taylor stated that the laws are on the books; however, they are no good if they are not enforced. He suggested putting more teeth in the laws such as losing the license for four to six months rather than getting a slap on the wrist for serving minors.

Angela Burke-Boston, Iowa Insurance Division

Ms. Burke-Boston stated that rating factors vary from company to company but they must be actuarially sound. The Iowa Insurance Division reviews rates but does not set insurance requirements. That is left to the division to determine the adequate amount.

Ms. Burke-Boston commented that the insurance industry is not necessarily innovative and basing rates on receipts "is how it has always been done". She commented that it would be easily verifiable for the insurance company if they want to conduct audits. Mr. Trostel stated he could obtain a printout of everything he bought in the last year from his alcoholic beverages distributors so it shouldn't be difficult for insurance agencies to obtain the information.

Dan McKay, McKay Insurance Company

Insurance rates are based on historical data, according to Dan McKay. He questioned whether there was historical data on the amount of liquor poured versus the amount that is sold. He stated the insurance companies do not have data available on ounces of alcohol sold. Until credible data is available, they will not be able to set a rate. He stated that the rating all boils down to losses and the dollar amounts that are paid out.

Fred Taylor commented it would take years and a great deal of money to get the information. Paul Trostel and several commissioners argued that the information was available and retrievable. Mr. McKay agreed that the data could be generated. The problem, however, is whether the insurance company is willing to spend the time and energy to retrieve it. Another factor to consider is whether the effort will be cost effective to the ultimate purchaser because the cost will be passed on. Commissioner Cramer pointed out that if the hospitality association and bar and restaurant owners decide to start their own dram shop pool and be self-insured, they will not need the insurance companies.

Mr. McKay became involved with the dram shop insurance when he was elected chairman of the RAGBRAI overnight stop in Knoxville and they were unable to find dram shop insurance. Working together with a friend they were able to develop a loss control program for the overnight towns, where if they did certain things, the company would write the insurance. (Exhibit B) He announced that this year, with the support of the Iowa Highway Patrol, there would be stepped up enforcement. They will work with retailers and wholesale distributors who have not supported the program and have encouraged sales beyond the hours of the support and the event. Pass through towns will be required to sign an agreement with RAGBRAI that they will close by 4:30 PM if it takes an hour and a half for a bicyclist to get to the overnight town. RAGBRAI wants the cyclists in the overnight town by 6:00 PM because that is when the ambulances, patrol, sag and repair vehicles, etc. come off the road. There are 10,000 official riders on RAGBRAI with about 1,000 riders who are problems. When asked if the problem people were from the official 10,000 riders or those who trail, Mr. McKay responded it was about 50% from each.

Jim Clayton - University of Iowa Stepping Up Project

Four of the bars in Iowa City account for 50% of the cases for possession of alcohol under the legal age and eight of the bars account for 75% of the cases, according to Jim Clayton. These bars collect a cover charge at the door that is used as cash money to buy various things and to pay people. The money does not get rung up and it is not added to the financial statement that goes to their accountant. Mr. Clayton relayed that in Iowa City on Wednesday night after class, a person could buy a pitcher of beer at a local bar for 50¢ whereas a pitcher of beer at a pizza place cost $6.00. Mr. Clayton liked the idea of basing insurance rates on the raw materials that come in the back door so that everyone pays an honest rate. Mr. Clayton also commented that research shows there is a distinct relationship between the price of alcohol and how much people consume. If the increased limits in dram shop insurance cause the retail price of alcohol to increase, it will reduce access for some people to alcohol.

General Discussion

C N A Insurance Company likes to write insurance in states where there is a statute mandating dram shop insurance because company officials feel if it is not mandated only the people that really think they need to buy insurance will buy and it is hard to rate. The average cost on all business Mr. Taylor writes in Iowa is about $2,000 with taverns considerably higher. Mr. Taylor pointed out that his company probably has some of the highest rates in the industry in Iowa because they try to keep a stable market. In addition, his company includes assault and battery, which makes the policies higher.

Mr. Taylor said he does not anticipate the rates will change much if the limits are raised because the company will interpolate them. Those who were carrying only the minimum limits rates will increase to the rate for the higher coverage carrying the same value. There was some disagreement over whether the overall rates would move up or down over the long term. Mr. McKay commented they would probably move down because there are more premium dollars while Mr. Traeger countered that the rates would probably go up because the payout on losses would be greater. Mr. Trostel relayed that the dram shop rate for his Greenbriar restaurant last year was 6.901 cents per $100 of sales and 8.616 cents per $100 of sales at the Chips restaurant resulting in a total premium of over $6,000 for dram shop insurance last year for the two locations.

C N A Insurance has seen no effect in states where the BAC has been reduced from .10 to .08; the payout has remained about the same. People with higher BAC limits that drink more regardless cause the majority of the problems with automobile accidents.

Commissioner Cramer pointed out that, as addressed in the White Paper, there seems to be no central pooling of information in the state of Iowa relating to associated assault and battery, OWI and other violations. The Commission could make better recommendations if they had better information available.

Paul Trostel commented that the insurance writers have the discretion as to whether they will write insurance for a business that has had problems. If the insurance company refuses to write the policy, the business owner is out of business. Creating the fund to pay losses, might give this owner an opportunity to stay in business. Several people questioned why that person should be in business if he was cutting corners and acting irresponsibly.

Fred Taylor commented that the loss of means of support angle of the dram shop law has been substantially extended from the original intent and it is costing everyone a great deal of money. Mr. Taylor cited an example where the bar owner acted responsibly in getting a gentleman home; however the man continued drinking pure vodka in his home until he passed out and died. The insurance industry paid a huge claim to the widow and children. Ms. DeNucci commented the IHA introduced legislation two years ago to eliminate such cases and were told by the trial lawyers association that it was not happening. John Lundquist agreed that the insurance company had to pay the claim under the law as it is currently written.

Lynn Walding asked what effect it would have on on-premises accounts if off-premises accounts were required to carry dram shop insurance. Mr. Taylor replied that it would put more money in the pool. When off-premises accounts were required to carry dram shop insurance there rates were low; however, there was a large volume of business so they paid high dollars for the coverage.

New research shows that 20% of the alcohol consumed in this country is consumed by people under the legal drinking age, according to Mr. Clayton. He pointed out that many times alcohol is bought in the afternoon, consumed at home and then the young people go to the bar where they pay the cover charge but do not drink. He would like to see everyone who sells alcoholic beverages participate in a pool.

Lynn Walding asked if it was possible to obtain information on how many claims are submitted each year and the amount of payout on those claims. He pointed out it would be helpful as a society to know the progression from year to year, especially with the BAC going to .08 if claims were going down. Ms. Burke-Boston replied that the company's annual statement would show losses for the year; however, dram shop information is not listed as a separate line of insurance so it would not be possible to pinpoint dram shop losses. The information would have to be released from the insurance company. In addition, Ms. Burke-Boston pointed out that the division would never get complete information because some surplus lines companies writing insurance in Iowa do not domicile here and are not obligated to report to the Iowa Insurance Division. The ABD could propose legislative changes to make it a mandatory reporting item; however, the division would probably be taking on the insurance industry at that point according to Ms. Burke-Boston.

Mr. Taylor stated the information would be difficult to get from the company because the information is confidential. The two main things the insurance industry looks at are frequency of loss and the severity of loss according to Mr. Taylor. The insurance companies can kind of control the frequency of loss in most lines of insurance; however, severity is the problem. If they write a million dollar policy, they have some million dollar claims.

Fred Taylor pointed out that insurance companies are required to submit a certificate that states they are abiding by the Code and all the rules and regulations of the department. Once the certificate has been signed and verified by the insurance company that they are complying with Iowa Code and law, the certificate overrides what is written in their policy; however, it is not being enforced. He asked if the ABD has criteria for determining that the insurance company is actually providing the coverage certified. He stated that his rates are higher because he provides the coverage with no deductibles, no deposit rate and no aggregate on his policies because that is the way he interprets the Code. He wants a level playing field where everyone is held to the same standard which should help the rates in the whole industry.

Mr. Walding answered: 1) The ABD does not check; however, the signed certificate warrants that the company knows the statutes and rules and is providing the mandatory coverage and 2) The ABD fought to put the assault and battery clause in the new rules because there has been confusion among the insurance companies about the issue. Mr. Walding relayed that an attorney has contacted him recently on behalf of an insurance company regarding a certificate of insurance. The company was being sued for an assault and battery injury. Mr. Walding told the attorney that the client signed the certificate and is therefore on the line to pay the claim even though the policy contained an exemption for the assault and battery. If the insurance company signs the certificate, the company is warranting to the ABD that they are providing the coverage required by rule or by statute. The administrative rule will clarify that. Mr. Walding stated that Mr. Taylor's point was well taken. The ABD will explore doing occasional spot checks of policies to make sure they are providing the coverage the ABD expects them to offer.

In closing, Commissioner Cramer encouraged the people in attendance to have supervisors who are above the age where they can be manipulated or pressured to supervise the 21-year old bartenders. Additionally, he asked the people in attendance to encourage their members to attend the other hearings and give their input. The Commissioners want to help fix the problems associated with dram shop as well as make the system better for the entire state and its citizens.

Meetings

Adjournment