Update 07/03: This story has been updated with comments from the Office of Risk Management and reaction from an Adams Morgan business owner.
It will be quick and easy, they said. When the Bowser administration rolled out its plan for expanded outdoor dining to help more restaurants and bars participate in Phase One of reopening, it sounded simple enough. Businesses looking to add a few tables to their existing sidewalk café area had to complete an online registration form. If they sought to add a table or two in front of an adjacent business, they had to obtain permission from the building owner.
But there’s more to it. “The Office of Risk Management is requiring exorbitantly steep insurance coverage that goes well beyond what has always previously been needed to insure a patio or a whole bar,” says Showtime Lounge owner Paul Vivari. He wants to add a single table in front of the residential building next door to his Bloomingdale bar. Doing so would increase his annual insurance premiums by $16,000.
Historically, restaurants and bars have only been required to have a $1 million general liability policy to operate a sidewalk café. The policy protects the District should an incident like a slip and fall happen in a restaurant’s outdoor seating area that extends into public space.
“That’s been on the books forever and is pretty straightforward,” says The Veritas Law Firm attorney Andrew Kline, who frequently represents hospitality industry businesses. “When temporary use of public space was allowed by executive order, somehow Risk Management got into it. They imposed more onerous requirements.”
Specifically, ORM is requiring bars and restaurants to have a $1 million liquor liability insurance policy and $3 million in umbrella liability. Liquor liability insurance typically protects businesses that sell alcohol should they need to pay legal fees, settlements, or medical costs related to any injuries or property damage caused by an intoxicated person who was served by the policyholder. These policies are expensive and haven’t been required to have sidewalk seating in the past. “It seems like the absolute wrong time to be putting bars through this and over additional hurdles so insurance companies can make more money,” Vivari says. “All I’m asking is that insurance that was good enough to open my patio six years ago be enough to insure this new table. It’s the exact same operation.”
Showtime Lounge is a small dive bar. Vivari isn’t comfortable opening up inside even though D.C. has entered Phase Two of reopening. Outdoor seating is his main revenue-earning opportunity. As spikes of COVID-19 cases are being recorded in cities across the country, more and more jurisdictions are closing down indoor dining and drinking. Outdoor seating will only become more desirable and necessary for the survival of small businesses.
Kline agrees and has been talking with stakeholders to see if the additional insurance mandates can be relaxed. “The requirements that have been on the books are adequate,” he says. “I’ve been doing this longer than I want to say. I’ve never seen the District brought into a suit as a result of something that happened in public space. This seems like overkill. We’ve made the inquiry and are waiting to hear back. We’re hopeful that reasonable minds will prevail and take another look at this.”
The city was already willing to look the other way once, according to Madam’s Organ owner Bill Duggan. “They waived it for last weekend,” Duggan says. His bar is on 18th Street NW in Adams Morgan, which became a pedestrian-only zone from Friday, June 26 through Sunday, June 28. Duggan says he participated in a call with the Mayor’s office and the Office of Risk Management on Thursday afternoon where he laid out why no one was in a position to get insured to the level required, especially with little notice. Insurance policies take time to craft.
“They waived the requirement at 11:15 p.m. on Thursday night and said they’re only waiving it for that weekend,” Duggan says. “If it was going to go forward they wanted everyone to have that insurance.” 18th Street NW will not be a pedestrian zone again this holiday weekend, so business owners in the neighborhood will have to wait and see if the additional insurance will be mandated for the weekend of July 10 through July 12.
Madam’s Organ is only looking to add three outdoor tables. Getting the additional insurance currently required to do so would cost him $30,000 a year in additional insurance. “I appreciate the work, but I think we’re in one of those situations where too many cooks have spoiled the broth,” Duggansays. “All these different agencies are doing their due diligence, but if the final product is unworkable it all for nought.”
To Duggan’s point, Vivari has been trying to get in touch with the city to talk about the insurance requirements but says he’s been shuffled back and forth between the Department of Transportation, ORM, the Mayor’s Office of Nightlife and Culture, and the Alcoholic Beverage Regulation Administration.
Some bars don’t even want to bother. Grand Duchess co-owner Rory Adair has calculated that it’s not worth it. “We could maybe add two tables, but we were told by our insurance provider that we’d have to triple the amount of insurance,” he says. His bar is also located on 18th Street NW. “We don’t have liquor liability insurance. It’s prohibitively expensive to get that. It doesn’t make any sense for a small bar.”
The real kick in the pants is that neighboring counties, including Montgomery County and Arlington County, have not required these insurance policies. “That’s why they’ve been successful,” Duggan says. “Here it’s just the opposite. While they’re saying they want to help, the government is asking us to insure the government.”
The Mayor’s office and the Office of Risk Management did not respond to City Paper’s request for comment prior to publication. After the story published a representative from the Office of Risk Management, Robert Preston, issued a statement on behalf of the D.C. government containing promising news for business owners—at least in the short term:
“In 2018, the District of Columbia Government implemented various insurance requirements (depending on activity/permit type) for public space permit applicants. The requirement was enforced on new applicants since that time, typically requiring additional types of insurance coverages beyond a basic general liability insurance policy—such as liquor liability, umbrella, etc. As we rolled out streateries, we discovered renewal applicants were not being held to the 2018 insurance standard. Therefore, for the remainder of 2020, we will require all applicants — new or renewal—to meet the prior insurance standard (before 2018).”
ORM’s statement means business owners should be able to successfully apply to expand their existing sidewalk cafe seating through December so long as they are insured to the levels required before 2018. Preston tells City Paper “the District will work to notify current applicants and BIDs about this change via DDOT, our Office of Nightlife and Culture, and ORM.”
Preston says “he believes” those pre-2018 requirements are:
$1 million per occurrence/$2 million aggregate for general liability
$1 million/$2 million Automobile Liability Coverage
$500,000 for Workers’ Compensation Coverage
ORM’s statement continues: “It remains the District’s position that if you sell alcohol you should obtain liquor liability coverage to protect your business, your employees, and District residents. This and the other 2018 requirements will go into effect and be enforced on January 1, 2021. We will continue to require all current and new applicants to indemnify and hold the District harmless in the event of an incident or claim.”
When the new insurance requirements take effect in January, they will be more expensive than what’s described in the chart at the top of this story. In Phase Two of reopening the city lowered the umbrella coverage requirement from $5 million to $3 million. “When working to comply with the 2018 requirements in January of 2021, businesses should use the $5 million umbrella requirement as their guidepost,” Preston says.
Songbyrd Record Cafe and Music House co-owner Joe Lapan, who has been in conversation with various agencies about the heightened insurance requirements, reacted positively to the news.
“We very much appreciate how all of the District agencies have worked with us on this,” he says. “There have been ongoing good faith efforts on working with small businesses and neighborhoods. This is another show of good faith to appreciate what small businesses are going through.”
Lapan continues: “Small businesses and the District are getting together to determine the right balance of cost and liability. As small businesses, we continue to be here and accept our responsibilities, and we appreciate having partners in the city coming from the same point of view.”