Within the United Kingdom, any premises that sells alcohol, needs to have a licence to do so. There are two types of licence.
A premises licence applies to the particular address. It is concerned with that location and how and when it can sell alcohol.
There is then a separate, personal licence, issued to an individual. This can be the business owner/partner, director or member of staff. Once issued, it allows the sale of alcohol.
These licences needs to be applied for and are not automatically provided. The personal application is considered by the local authority and can be refused. The individual applying must be 18 years or older. In England and Wales, they need to hold a suitable licensing qualification. You may be excluded from the need for a liquor licence for a short-term, temporary, event. However this differs between Local Authorities and between England/Wales and Scotland. You should always check with your local authority whether there is a need for you to be licenced to sell alcohol.
The licence issued to the individual is referred to as a liquor licence. Without this licence, the premises cannot sell alcohol. If the licence is revoked or removed, the business premises may not be as valuable, if it cannot trade in alcohol.
If a premises loses it’s licence, this reduction in value can be insured against.
Loss of Licence insurance
This cover is in respect of the suspension, withdrawal, forfeiture or refusal to renew the licence, during the period of insurance.
The cover does not simply pay a lump sum, single value, amount. There needs to be a provable loss of gross profit (for the business). In addition, any reasonable expenses in maintaining the previous level of gross profit, may be included.
When does the cover apply?
As with all types of business insurance. Loss of licence cover only applies in respect of sudden and unforeseen events, which result in the liquor licence ceasing. For this reason, there are certain exclusions, which relate mainly to the actions of the licence holder. These exclusions vary by insurers. They may include compulsory acquisition of the premises, any town or county planning redevelopment or death of the previous licence holder. They can also be as a result of Police objections.
Local Authorities may choose to refuse to allow a licence, for many, many reasons. If it is due to the actions of the licence holder, these are not sudden and unforeseen and cannot be insured against. If a local authority simply decided that they were changing the number of licenced premises, or trying to move them to certain areas, this is something that could be claimed for.
Actions to take in the event of a claim
The reality is that there are very few claims for loss of licence. Local Authorities, and the Police, tend to keep a very close eye on licenced premises. They will try to address any issues as soon as possible.
For example, a pub may have a liquor licence and be allowed to open late two or three nights a week. Local residents may complain about the number of people queuing and noise made by people leaving the premises. The Local Authority is unlikely to revoke the liquor licence. What they may do is work with the licensee. They may suggest people are asked to queue in different areas and that staff are deployed to ensure patrons make as little noise as possible.
If it does get to the stage of a licensee having their licence removed or the process to remove has started, insurers must be notified immediately. Pub insurance is usually purchased through an intermediary or broker. The best action to take is to speak to them as soon as you are aware of the potential of a licence being revoked.
This note is only intended to provide general advice on loss of licence insurance. You are recommended to speak to your business insurance broker to clarify any aspects of your own cover, or in respect of a quotation you have received.