Liquor Liability Insurance Explained

Liquor liability insurance is a must if your small business serves, distributes, or manufactures alcohol. If your business doesn’t do any of those things but allows alcohol to be consumed on your premises, you should look into host liquor liability insurance.

Because alcohol consumption isn’t always linked to making the best choices (potential understatement of the century), your business may be held responsible if someone drinks at your establishment or consumes your liquor and then ventures off to cause some damage. One drunk fight on your property could result in more fees and liability claims than you can cover on your own. That’s where liquor liability insurance comes in.

Read on to learn what liquor liability insurance is, what it covers, who needs it, how much it costs, and how to get it!

What Is Liquor Liability Insurance?

Liquor liability insurance is a policy that small businesses should add to their existing general liability coverage if they profit from alcohol in any way. It can exist independently from another policy, but we recommend that all small businesses carry a general liability insurance policy with an added liquor liability endorsement.

Liquor liability insurance covers claims that arise because a client, patron, or consumer has had too much to drink and causes damage to another person or property. Property damage is not limited to your business but also the damage someone may cause once they’ve left your establishment. If your business sold or provided the alcohol, you may be liable for these damages. It might seem extreme, but the law doesn’t see it that way.

The bottom line: If you’re in the alcohol business, you may be sued for the way someone abuses your product, whether a patron is over-served or not. If you sold it, you’re responsible. 

What Does Liquor Liability Insurance Cover?

Liquor liability insurance covers a multitude of possible claims that could arise for your small business. The liquor liability insurance policy coverage is fairly self-explanatory, but there are several exceptions that you should note and find other ways to get coverage for.

What Liquor Liability Insurance Covers

Here are the things your liquor liability insurance will cover in the event of a claim against your business:

• Third-Party Bodily Injury Claims: A drunk patron punches another patron, gets into their car and injures someone on the road, or drunkenly slips and breaks their arm. Liquor liability insurance will cover a claim brought against your restaurant for damages and medical expenses for the injured parties in these types of scenarios.
• Third-Party Property Damage Claims: Imagine an intoxicated person leaves your business and vandalizes the property next door or causes damage to another patron’s property at your place of business. Liquor liability insurance will help pay for the replacement/repair of the damaged property and any legal fees.
• Legal Costs & Attorney Fees: Need to defend yourself in a lawsuit? Liability covers the legal costs associated with a liquor-based lawsuit.

What Liquor Liability Insurance Doesn’t Cover

Just like all insurance, your liquor liability protection will cover some, but not all, of the complications that arise from serving, selling, and manufacturing alcohol. Here are some things not covered by liquor liability insurance:

• Assault & Battery: Assault and battery coverage is not built into all liquor liability policies, but you may want to add this extra coverage depending on your business needs. Bars with a bouncer may want to add assault and battery coverage to protect against potentially punchy patrons.
• Libel/Slander: A general liability policy covers issues related to libel (publishing something that isn’t true and has malicious intent) or slander (saying things that aren’t true with malicious intent). The good news is that liability insurance doesn’t always have to be expensive.
• Employee Injuries: Injuries to an employee as the result of an alcohol-related incident are only covered under worker’s compensation insurance.
• Damage To Your Property: While damage to other people’s property is covered, you will need commercial property insurance to file a claim for assistance repairing your own damage after an accident or incident.
• Damage Caused By Underage Drinking: In general, insurance companies will not help you if you break the law. If someone under the drinking age is served in your establishment, you will have to carry the financial burden on your own.

Who Needs Liquor Liability Insurance?

If you sell, distribute, or manufacture alcohol of any kind, you should make liquor liability a mandatory part of your business’s risk management plan.

No matter how responsible you and your staff are, you cannot always control other people’s behavior. Since your business is liable for damage caused by people who consume alcohol at your establishment, it’s important to protect yourself from this ubiquitous risk. Any business that places alcohol into people’s hands needs this insurance.

If your state has Dram Shop Laws, liquor liability insurance may be a legal requirement for running your business. We’ll go over these laws later on in this article.

How Much Does Liquor Liability Insurance Cost?

The average cost of liquor liability insurance depends on the type of business you run. Specifically, your rate depends on what percentage of your income is made from the sale of alcohol. Your policy limits also influence your liquor liability insurance rates.

Some states may require specific policy limits, which will impact your coverage’s overall cost. Higher limits cost more but provide more protection for your business.

Insureon breaks the average annual cost down by the following industries:

• Bars: $2,060 annually
• Caterers: $775 annually
• Nonprofits: $615 annually
• Restaurants: $545 annually
• Associations & Clubs: $270 annually
• Retail: $255 annually

Looking for ways to save on liquor liability insurance? Some businesses may receive discounts on their insurance if they regularly educate their employees about the dangers of alcohol use.

If you qualify for a business owner’s policy (a policy that typically bundles a general liability policy and commercial property policy) you can add a liquor liability endorsement to your existing policy. Budgeting ahead of time and paying your entire premium at once can also help save you some cash if your insurance provider offers discounts on full annual premiums.

How To Get Liquor Liability Insurance

The process of finding a great policy boils down to research. Knowing the averages for your industry and comparing competing rates will help you make the best decision for your business. Start with an idea of the risks your business might face.

Ask yourself:

• How many locations do you have?
• Where are you located?
• How much alcohol is on your premise(s)?
• Do you need liquor liability or host liability?

You can be well-equipped for your first meeting with an insurance company by answering these questions.

Now, go shopping for the best policy! Many sites, such as Coverwallet, Coverhound, and Insureon, will do the comparison shopping for you and walk you through the steps required to make an insurance purchase. And an insurance company like Nationwide can provide you with liquor liability as part of its Business Owners Protection plans.

Additional Types of Liability Insurance

Most companies will need a solid general liability insurance policy in addition to their liquor liability insurance policy. However, even with those two protections, there are things your insurance doesn’t cover.

Other insurance policies will help provide you with the coverage you need. General liability is the foundation, and once you’ve started with that policy, it’s easy to add other and bundle your policies with other insurance options. So what options do you have in addition to liquor liability?

Here are several liability policies you should consider as a small business owner:

What Are Dram Shop Laws?

Thirty-eight states have enacted the Dram Shop Act, which makes a business legally responsible if they serve someone alcohol who might already be intoxicated.

A recent case involving Dram Shop Laws comes out of Arizona. The Arizona Court of Appeals recently reversed an $800,000 judgment against a bar that served a man before kicking him off their property. The man left the bar in question and caused a car accident that killed the occupants of another vehicle.

Which States Have Dram Shop Laws?

The majority of states in the United States have Dram Shop Laws. Take a look at CoverWallet’s handy map to see if the state where you conduct your business is included. If your state does have Dram Shop Laws, it may be a legal requirement to show proof of liquor liability insurance before you can receive a license from your state’s government to serve alcohol.

Source: CoverWallet

Liquor Liability Insurance VS Host Liquor Liability Insurance

Liquor liability insurance is needed for any establishment that routinely and regularly serves wine, beer, or spirits, such as a bar or restaurant. Liquor liability insurance is also for businesses that sell, manufacture, and distribute alcohol. That means restaurants, bars, grocery stores, food carts, liquor stores, breweries, and wineries need a liquor liability insurance policy.

However, let’s say you’re a manager of a company and you are throwing a holiday party that will involve an open bar, or your catering business only serves alcohol occasionally on request. Your company might want to invest in a host liquor liability insurance certificate, which might be covered under your existing general liability policy. Host liquor liability insurance protects against bodily injury or property damage claims as a result of an intoxicated guest at an event hosted by a company or an individual.

Some renter’s insurance, commercial property insurance, or homeowner’s insurance plans cover some alcohol-related claims, but not all. Acquiring host liability is basic protection for those who may have alcohol consumption on their property but not regularly or may sell it only occasionally.

Every year, employees and businesses are held liable for things out of their control, and no matter how diligent you are, mistakes happen, and people can be over-served. Don’t risk your business because of someone else’s poor decisions. Protect yourself with liquor liability insurance or host liquor liability insurance, and take the time to review the liquor laws in your state.

Liquor Liability Insurance FAQs