What is Liquor Liability Insurance?
Liquor liability insurance is a type of business insurance that can be defined as coverage for 3rd party bodily injury or damage caused by someone you (the policy-holder) served alcohol to. The insurance policy can provide coverage for settlements, legal costs, and medical expenses. Let's say, for example, you’re a bartender at a local business and a customer appears to be getting inebriated. You are responsible to cut them off. If you do not do so, you may be held legally liable for the actions they take.
The Difference Between ‘Host Liquor Liability Insurance’ and ‘Liquor Liability Insurance’
Host liquor liability insurance—also referred to as dram shop insurance—is an endorsement under a general liability insurance policy meant for businesses and/or companies that occasionally serve alcohol. For example, your company hosts a Christmas party at which alcohol is served. Some incidents can be covered under your general liability policy vs. liquor liability insurance.
Do I need to Purchase a ‘One-time’ Liability Policy?
Another type of ‘host liquor liability’ can be purchased for one-time events such as weddings, family reunions, fundraisers, etc. The cost for covering a one-time event depends on whether or not there is an open bar, type of alcohol being served, how many people are in attendance, and so forth.
How ‘Dram Shop Law’ Applies
Dram Shop Law allows 3rd-party victims of bodily harm or property damage to bring civil lawsuits not only against the individual that inflicted the damage, but also the establishment and/or person who served the alcoholic beverages. Under law, the suing parties can receive compensation from both entities if found guilty.
43 states have Dram Shop laws. Those that don’t include: Nevada, South Dakota, Nebraska, Kansas, Delaware, Maryland, Virginia, Louisiana. Even though these states may not require liquor liability coverage, your financial institution or landlord may require you purchase this insurance.
Does Your Business Need Liquor Liability Insurance?
Any business(es) that serve alcohol need liquor liability insurance, including but not limited to:
- Liquor Stores
- Convenience Stores
- Grocery Stores
- Football/Hockey Stadiums
NOTE: Liquor liability is excluded from many general liability insurance policies and coverage must be purchased separately by the business.
What Does Liquor Liability Cover?
- Drunk driving: As stated earlier, if you’re serving someone alcohol and they appear to be preparing to drive, you must cut them off before they’re inebriated. If they get in an alcohol-related car accident, you can be held liable for allowing them to leave in their vehicle while drunk.
- Assault and battery: If a drunk customer gets in a fist-fight with another customer or leaves your bar and gets in a fight on the street, you can be held liable for medical expenses, cost of damages, as well as legal fees.
- Sexual assault/harassment: If a drunk customer harrasses or otherwise sexually assaults anyone after being served at your establishment—you could be liable. Make sure this is included in your coverage.
- Bodily injury: Bodily injury (that is also included in drunk-driving accidents, assault and battery, etc.) incurred by a third party is covered.
- Property damage: This is covered by a liquor liability policy except when it’s done to your establishment (see below).
- Legal costs: Legal costs, fees, and settlements associated with any of the above incidents is typically covered under this insurance.
What is Excluded from Liquor Liability Coverage?
- Serving alcohol to underage kids: serving alcohol to someone who is underage is against the law and coverage under these circumstances is excluded in a liquor liability insurance policy.
- Slander and libel: If a drunken customer slanders anyone in their inebriated state, it is not coverage found under liquor liability.
- Damage to your property: Damage to your property is excluded from liquor liability coverage because it is covered under yourcommercial property insurance.
- Expired liquor license: If your liquor license has expired, your liquor liability will NOT provide coverage for any claims against you or your business.
How to Mitigate the Risk of a Liquor Liability Claim
There are a few ways that you can protect yourself and your business and mitigate the risk of an occurrence you’ll be held liable for:
- Encourage customers to avoid intoxication and stop serving them
- If you believe a customer is inebriated encourage them to get a taxi or use a rideshare service
- If the customer refuses, you can administer a breathalyzer to make sure they’re not over the legal limit to drive
- Make sure your servers and bartenders are properly trained to recognize that someone is drunk and make decisions accordingly
- Train your employees to ID anyone who looks over 30 and the basics to look for with fake IDs
Liquor Liability Insurance Cost
Liquor liability insurance costs vary widely depending on certain factors. So what influences the cost?
- Level of exposure: If your business makes the majority of its sales from alcohol you are at a higher risk exposure
- Industry: Costs are typically higher for restaurants/bars versus catering businesses
- Location: If there is a history of more claims in your area it can bump your rate sup
- Claims history: If you/your business has had numerous claims filed against you, your rates will be higher.
- Level of Coverage: Cost also depends on the policy limits you choose for your business.
Can I Lower the Cost of my Liability Insurance?
If you provide alcohol awareness training to your employees you may be offered a discount on your insurance costs. Consult with your business insurance carrier to see if that’s an option for lowering coverage costs.
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