Rising insurance rates add to climbing costs for Alberta restaurants and bars

Mike Clark has been running Mikey's on 12th, a bar and music venue in Calgary, since 2007. In those 14 years, he says he has never made a substantial insurance claim — but he still saw his annual liquor liability insurance spike from $7,800 to over $26,400 this year.

"I would think that our business is pretty safe, but who knows?"

Brennen Wowk, owner of Bo's Bar and Stage in Red Deer and vice-president of the Alberta Hospitality Association, is in the same boat. He says liquor liability insurance rates were increasing before the pandemic, and they're only continuing to rise.

Last year, his insurance spiked 150 per cent — and it increased another 30 per cent this year.

"I went through insurance carriers that were quoting me over six figures for a year's worth of coverage," said Wowk.

He says Bo's was almost at risk of not being able to get insurance at all at the beginning of the pandemic, and many operators are still facing this issue.

"I had to go pretty much throughout Canada to try to find [an insurer] that would cover me."

Alberta's hospitality industry is seeing liquor liability insurance rates double and triple, hitting live music venues harder than others. These costs are on top of already-climbing food costs, global supply chain issues, labour shortages and ever-changing COVID-19 restrictions. This could see menu prices at bars and restaurants in the province rise.

Mark von Schellwitz, western region vice-president with Restaurants Canada, says it isn't just insurance. Costs across the board are going up for restaurants and bars.

"And of course that's really difficult with the pandemic restrictions still in place to even generate pre-COVID revenue, nevermind the extra revenue that they're going to have to generate to pay for these increased costs."

Live music venues getting hit hard

Wowk says establishments that are more liquor intensive, such as bars, live music venues and nightclubs, are often seeing quotes of $50,000 to $100,000 a year for proper liability insurance.

"Specifically live music venues — they've spent the majority of the last few years completely shut down, not earning a single dollar of revenue. These companies are still having to fork out incredible amounts of money just to get their insurance," said Wowk.

Ernie Tsu, president of the Alberta Hospitality Association, says the association is trying to figure out why live music venues are being hit so hard.

"Remember, those live music venues are supporting our local musicians, DJs and the arts community," said Tsu. "It's going to be a very tough go coming into 2022."

When they reopened, many late night venues weren't allowed to sell liquor after 10 p.m., adding to their financial stress, von Schellwitz adds.

"How likely is it with the extra debt that these surviving businesses are actually going to be able to pay their premiums and survive?"

This is what insurance companies are likely taking into consideration, he says.

High risk during pandemic, frequent claims

Ultimately, these insurance costs all come down to risk.

Even now, 80 per cent of Restaurants Canada members are losing money or just barely breaking even, says von Schellwitz.

"They look at all these COVID restrictions and they look at the decrease in sales and they think that there's more risk involved, obviously. And therefore, some of them even choose not to offer that insurance, and those that are are offering it at a premium."

Chris Hewitt, owner of Dickens Pub in Calgary, says he was hit by a quote 600 per cent higher than what he usually pays for, specifically because the establishment hires security and has a dance floor. Otherwise, he was told it would be cheaper.

"You'd think that it would make things safer, but their view is that because you employ security, you feel that there might be something that could go down. It's almost a backwards sort of logic," said Hewitt.

He was ultimately able to get a lower cost, still 60 per cent higher than the original price.

Aaron Sutherland, vice-president of the Insurance Bureau of Canada's Pacific region, says rates are also going up because of a trend across Canada of more lawsuits and higher payouts.

Commercial liability claims increased by 108 per cent between 2013 and 2020, according to the bureau.

Another trend the bureau is seeing is when someone is injured or charged for driving while intoxicated, they'll make a claim against the person or establishment that served them the liquor, he says.

"When someone becomes intoxicated at their business, they're being held liable for that and for any injuries — or at least a portion of any injuries — that intoxicated individual then gets into," said Sutherland.

Liability insurance claims in Alberta totalled $608 million in 2019, following $537 million in 2018 and $337 million in 2017.

Clark from Mikey's on 12th says he also wonders if the climbing costs have to do with the subsidies restaurants and bars have been receiving from the government during the pandemic.

Menu prices expected to rise

A survey by Restaurants Canada received 747 responses representing 5,926 restaurants in the country. 

Of those who participated in the survey, nearly 60 per cent said they're expecting to raise their menu prices by four per cent or more, and 23 per cent said they're expected to raise menu prices by more than seven per cent.

The restaurants CBC Calgary spoke to say they're constantly evaluating whether to raise their menu prices.

"We don't want the public perception to be that restaurants are just finding a way to raise their prices," said Tsu. "Backs are up against the wall. I'm still trying to fight out of this two-year pandemic, I'm trying to get out of debt, coupled with the massive rise in insurance."

"They'll have to look at every way possible to try to break even."

Moving forward, Wowk says he would like to see insurance companies look at the histories of individual operators to determine their risk and increase their insurance, rather than increasing costs for the entire industry.