Why You Need Liquor Liability Coverage for Your Small Business

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 patron 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. If you sell or serve alcohol to customers as part of your business, you need liquor liability insurance coverage.

Host Liquor Liability Insurance vs. 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 an annual Christmas party at which alcohol is served. Some incidents can be covered under your general liability policy vs. liquor liability insurance. Caterers or event organizers may need to temporarily get host liquor liability insurance for events.

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, the type of alcoholic beverages being served, how many people are in attendance, and so forth. 

How Does Dram Shop Law Apply?

Dram Shop Laws allow 3rd-party victims of assault and battery, sexual assault, 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 dram shop law, the suing parties can receive compensation from both entities if the intoxicated person is 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 coverage. 

Does Your Business Need Liquor Liability Insurance?

Any business(es) that serve alcohol need liquor liability insurance, including but not limited to:

• Bars
• Restaurants
• Breweries
• Liquor Stores
• Convenience Stores
• Wineries
• Grocery Stores
• Caterers
• Football/Hockey Stadiums

NOTE: Liquor liability is excluded from many general liability insurance policies and coverage must be purchased separately by the business (unless it's a temporary host liquor liability add-on).

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 are inebriated you are responsible to take away their keys and offer to call them a cab. 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 fistfight with another customer or leaves your bar and gets in a fight on the street, you can be held liable for the injured person's medical expenses, the cost of damages, as well as legal fees. 
• Sexual assault/harassment: If a drunk patron harasses or 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 in which case property insurance comes into play (see below). 
• Legal costs: Legal costs, fees, and settlements associated with any of the above incidents are typically covered under this insurance.

What is Excluded from Liquor Liability Coverage?

• Serving alcohol to underage kids: serving alcohol to someone 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. You would need a general liability policy to cover this occurrence.
• Damage to your property: Damage to your property is excluded from liquor liability coverage because it is covered under your commercial 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. If you sell alcohol you must have an active liquor license at all times.

How to Lower 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 event you’ll be held liable for:

• Encourage customers to avoid intoxication and stop serving them when they are intoxicated
• If you believe a customer has hit their limit, encourage them to leave their car keys and get a taxi or use a rideshare service to avoid an accident
• Offer customers a breathalyzer test 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 under 30 and the basics to look for with fake IDs
• If a customer is intoxicated and is stirring up trouble or refuses to leave their keys with you, call the cops. It not only gives you peace of mind but could protect your business—and other people—from harm.

How Much Does Liquor Liability Insurance Cost?

Liquor liability insurance costs vary widely depending on certain factors. So what influences the cost?

• Your Level of exposure: If the majority of your businesses' sales are from alcohol you could be at a higher risk of exposure.
• The industry you're in: Costs are typically higher for restaurants/bars versus catering businesses that occasionally serve alcohol.
• Location: If there is a history of more claims in your area it can bump your rates up
• Claims history: If 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. 

Another way to lower the cost of your annual premium is to look for insurance companies that offer business owners' policies. It can be a great way to save money and bundle the coverage you need. Most BOP's include general liability, property insurance, and business interruption insurance.

Get a Free Liquor Liability Insurance Quote

If your business serves alcohol connect with one of our agents to get a quote for liquor liability insurance. You can complete the form at the top of our page to start the process online and one of our specialists will reach out. Or you can give us a call at 877-907-5267.

Related Articles: Catering Insurance, Concession Stand Insurance, Event Insurance, Liquor Store Insurance