Jim asked:

I am attempting to open a nightclub in London, Ontario and am having trouble getting insurance for the business. Is this an impossibility or is there such a thing? Any help you could give would be very appreciated. Thank you.

Larry Simoes answered:

Nightclubs are a problem because they serve alcohol. Whenever you have someone serving alcohol it becomes difficult to obtain insurance, because if someone leaves the club impaired and hurts someone the nightclub may be found liable.

There have been some large insurance awards in recent years, with a recent example being a case that was upheld in the Ontario court of appeal where Andrea McIntyre, a young McMaster student was seriously injured as she walked along a curve after leaving a student pub in 1996. Andrew Grigg, a football player for the Hamilton Tiger-Cat team, failed to stop at a stop sign, took a reckless wide right hand turn, sheared off a lamppost and struck the young student. At the time of the accident Grigg's blood alcohol level was twice the legal limit.

Ms. McIntrye was awarded $830,000 in total damages. The details of how this award was structured is quite intricate. What is important to note is that while Grigg was held 70% liable for the accident, the bar that had served him the alcohol was ordered to pay the remainder.

When insuring a nightclub crime can also be a big problem, especially in the Toronto area. Here the element of risk will change from location to location.

Since you are just starting the nightclub you may also run into the problem of having limited industry experience. Insurers will want to know how much you know about the business and how much experience you have, as this will also affect their evaluation of your business.

Underwriters will want to know whether your employees all have SmartServe, which is a special certification program that trains people who are involved in the sale and service of alcohol.

There are some markets that specialize in insurance for your industry, but they have very high premiums. Your best advise is to contact your local insurance brokers that offers commercial insurance to see what options are available. (Direct writers of home and automobile insurance do not provide this type of coverage, you are best to deal with brokers who specialize in commercial insurance and have contacts with markets that would consider this type of business.)

Also, if you have friends in the business who also own nightclubs see who they are covered by and approach those insurers.

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