Eat, Drink, & Be Merry: Liquor Liability Insurance Explained
It’s safe to assume that if your business serves, distributes, or manufactures alcohol, you will want and need some extra insurance protection. Because alcohol consumption isn’t always linked to making the best choices (I mean, right?) your company 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 — and that’s where liquor liability insurance comes in.
Since we want alcohol consumption to be safe and fun, insurance for your small business will help protect you from liability in the case of liquor-based shenanigans.
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What is Liquor Liability Insurance?
Liquor liability insurance is an endorsement small businesses should add to their liability coverage if they profit from alcohol. This type of insurance covers liability claims that arise because a client, patron, or consumer has had too much drink and causes damage to a person or property. This is not limited to property damage at your business but also damage that person may cause once they’ve left your establishment, too. If you were the business that sold the alcohol, you may be liable, and while that might seem extreme, 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 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, or gets into their car and injures someone on the road, or drunkenly slips and breaks their arm! This would cover a claim brought against your restaurant for damages and medical expenses for the injured parties.
- Third-Party Property Damage Claims: Imagine an intoxicated person leaves you and goes and vandalizes the property next door, or causes damage to another patron’s property at your place of business. This will help pay for replacement and legal claims. (True Story Time: Halloween 2004, my husband and I witnessed a drunken brawl between a man dressed like Jesus and a man dressed like John Lennon. The John Lennon man had his nose broken and he came up to our table asking if his glasses were broken. They were. And they’d totally be covered in a claim against the restaurant, if Lennon needed to go that route.)
- 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 and selling alcohol. Here are some things not covered:
- Assault & Battery: Assault and battery coverage is not built-in to 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 punchy-obstinate patrons.
- Libel/Slander: 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) are covered under a general liability policy.
- Employee Injuries: Injuries to an employee as the result of an alcohol-related incident are 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 out 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 the behavior of other people and since your business is liable for damage caused by people who consume 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. And if your state has Dram Shop Laws, liquor liability insurance may be a legal requirement of running your business.
What Are Dram Shop Laws?
The Dram Shop Act was enacted by 38 states, and it makes a business legally responsible if they serve someone alcohol who might already be intoxicated. The most recent case involving Dram Shop Laws was in Texas where a bartender was held responsible for serving an already intoxicated man who left that establishment and committed murder. The bartender was held liable and could be faced with a year in jail in addition to a fine.
Which States Have Dram Shop Laws?
The majority of states in the United States have Dram Shop Laws. See 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 before you can receive a license to serve alcohol from your state’s government.
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 (or if you live in Portland, Oregon a business where axe throwing + beer drinking is a sport). This is for people who sell, manufacture, and distribute alcohol of any kind — that means restaurants, bars, grocery stores, food carts, liquor stores, breweries, and wineries.
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. Your company might want to invest in a host liquor liability insurance certificate. (Host liquor liability might be covered under a general liability policy.) Host liquor liability 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.
Buying Liquor Insurance
The process for 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?
- What’s your exposure to alcohol rate?
- Do you need liquor liability or host liability?
By answering these questions, you can come equipped to your first meeting with an insurance company with the knowledge of what you need.
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 abuse.
Additional Types of Liability Insurance
Most companies will need a solid general liability insurance policy in addition to their liquor liability insurance endorsement. However, even with those two protections, there are things your insurance doesn’t cover. There are other insurance policies that 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 your business should consider:
|Insurance Type||What It Does||Who It's For|
Often called "slip and fall" insurance, this insurance protects your business from the threat of a lawsuit.
Directors & Officers Liability
This insurance protects the company and its directors from frivolous lawsuits.
A business with figureheads that could attract legal attention
Protects your business from the costs of a data breach or hacking or other cyber crimes.
Businesses that gather information about clients and store it online
Protects your buildings and things inside your buildings from damage and accidents.
Businsses with a physical property site and products located in those physical locations
Protects a business from a lawsuit related specifically to the product it sells.
Any business that manufactures, sells, or distributes a product
Pays your workers salary and medical bills in the event of an on-the-job accident or injury.
All businesses with one or more employees
If your business has to stop because of property damage, this will cover the cost of moving your business to a new location.
Businesses that need a specific location to keep open
Starting a restaurant, bar, or food cart may be your dream. Maybe you’ve gone through all of the hard work: you’ve acquired your small business loans and already picked the best point of sale system. You’ve spent hours planning a menu and hiring the best employees. But if you haven’t thought about being properly insured against alcohol claims, you’re not ready to open those doors.
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 and take the time to carefully review the liquor laws in your state.