Liquor Liability Insurance Policy Information
Liquor Liability Insurance. Liquor liability insurance is a type of insurance that covers a business that sells or serves alcohol. It protects the business against claims made by individuals who may have been injured or suffered damages as a result of consuming alcohol on the business's premises.
This type of insurance is often required by law for businesses that sell or serve alcohol, and it can help protect the business from financial losses in the event of a lawsuit. Some examples of businesses that may need liquor liability insurance include bars, restaurants, clubs, and event venues.
Liquor liability insurance protects your establishment or event from unlawful actions of intoxicated customers with rates as low as $37/mo. Get a fast quote and protect business now.
Below are some answers to commonly asked liquor liability insurance questions:
- What Is Liquor Liability Insurance?
- How Much Does Liquor Liability Insurance Cost?
- Who Needs Liquor Legal Liability Insurance?
- What Does Liquor Legal Liability Insurance Cover?
- What Doesn't Liquor Liability Insurance Cover?
- WAm I Covered If I Serve Alcohol Offsite?
- What Are Dram Shop Laws?
- What Are Liquor Liability Insurance Risks And Underwriting Considerations?
- What Does Liquor Liability Insurance Cover & Pay For?
What Is Liquor Liability Insurance?
Liquor liability insurance is a type of insurance that provides protection for businesses that serve, sell, or manufacture alcoholic beverages. It covers damages and legal fees incurred in the event that a patron becomes intoxicated and causes harm to themselves or others as a result.
This type of insurance is typically required by law for businesses that serve or sell alcohol, such as bars, restaurants, and liquor stores.
How Much Does Liquor Liability Insurance Cost?
The average price of a standard $1,000,000/$2,000,000 Liquor Liability Insurance policy for small businesses that serve alcohol ranges from $37 to $89 per month based on location, cost of drinks, hours opened, payroll, sales and experience.
Who Needs Liquor Legal Liability Insurance?
Any establishment that serves alcoholic beverages, since it's exposed to law suits charging that they served liquor to intoxicated persons who was later involved in an accident. Service businesses like restaurants, hotels, taverns, sports bars, package stores, halls and private and fraternal clubs, nightclubs, riverboat casinos, bowling alleys, special events and even bed and breakfasts, are common businesses than need liquor legal liability insurance.
What Does Liquor Legal Liability Insurance Cover?
Liquor liability is the vicarious liability of the entity who serves alcohol to a person for damages that the served person causes. Who has such liability and the extent of the liability varies from state to state and is based on dram shop, liquor control, or alcoholic beverage laws.
While the laws are different, most state that the owner of the liquor or alcoholic beverage business can be held liable for injury or damage an intoxicated person causes if the party that provided the liquor caused or contributed to the person's intoxication.
The Commercial General Liability Coverage Form specifically excludes liquor related losses if your business sells, manufactures, distributes, serves, or furnishes liquor. In addition, many insurance companies exclude liquor coverage by endorsement for any operation that regularly serves liquor on or off premises, even though they are not considered "in the business." If your business has a liquor exposure - Liquor Liability Coverage is a must.
This insurance provides coverage for bodily injury or property damage for which you may become legally liable as for causing or contributing to a person's intoxication, furnishing alcoholic beverages to persons under the legal drinking age or already under the influence of alcohol, or violating any statute, law, ordinance, or regulation with respect to selling, giving, distributing, or using alcoholic beverages.
This coverage is provided by a separate policy and will only cover establishments 'in the business of' manufacturing, selling, distributing, or serving alcoholic beverages for a charge.
The language of liquor liability insurance policies can vary, but in general - the insurance company agrees to pay amounts you become legally obligated to pay as damages because of liquor-related injury that this insurance covers. The liability must be imposed because of injury caused by someone to whom you sold, served, or furnished alcoholic beverages.
The insurance company also defends you against any suit that seeks damages but only if the coverage provided applies to the damages claimed. Payments are limited to the limits of insurance and the insurance company's right and duty to defend ends when the limits are used up paying judgments and settlements.
Insurance for bars, taverns, and night clubs require a more complex scope of coverages than your standard restaurant policy. When written incorrectly, there can be important coverages left out and possibly major exclusions, leaving your business and personal finances at risk.
Ensure your policy includes 'Assault and Battery Coverage'. Many claims against bars and restaurants result from fights. Yet, some of these claims may be excluded by the expected or intended injury exclusion that appears in many liquor liability policies.
Fortunately, you can buy back this coverage by purchasing insurance for assault and battery claims. A liquor liability insurance policy that does not cover assault and battery has limited value for certain venues.
What Doesn't Liquor Liability Insurance Cover?
Liquor liability insurance exclusions must be reviewed carefully, because many of them have conditions, exceptions, limitations, or restrictions not shown below:
- Expected or Intended Injury - Coverage does not apply to injury that is either expected or intended by the insured. There is an exception for bodily injury that results from the insured using reasonable force to protect persons or property.
- Workers Compensation and Similar Laws - There is no coverage for any requirement or obligation of the insured that is imposed by any workers compensation, disability benefits, unemployment compensation, or similar law.
- Employers Liability - Bodily injury to an employee of the insured that is result of his or her employment or the performing of duties that relate to conduct of the insured's business is excluded. Bodily injury to relatives of that employee that are a consequence of the employee's bodily injury is also excluded. This exclusion applies whether the insured is liable as an employer or in any other capacity. It also applies if the insured must share damages with or repay someone else who must pay damages because of the injury.
- Liquor License Not In Effect - Coverage does not apply to injury if the required liquor license was not in effect at the time of the injury.
- Your Product - There is no coverage for injury that arises out of the named insured's product. However, this does not apply to the liquor liability exposures resulting from that product.
- Other Insurance - Insurance does not apply to any injury that other insurance covers or that it would cover except that its limits are used up. This exclusion does not apply if the other insurance also covers the insured's liability due to any act of providing alcoholic beverages.
- War - Bodily injury or property damage caused in any way by war, undeclared war, and civil war is excluded. This includes warlike action by a military force and actions a government takes to prevent or defend against attacks that involve military personnel or agents. It also includes rebellion, revolution, insurrection, or unlawful seizing of power and actions taken to prevent or defend against these acts.
Am I Covered If I Serve Alcohol Offsite?
This oversight is common when buying liquor liability insurance, so you should not assume that your policy protects you from liabilities resulting from liquor served offsite. Often, a catering add-on can be included to your coverage to give protection for offsite service. Before you pop a single beer away from your premises, you need to know for sure if your policy includes a catering supplement.
What Are Dram Shop Laws?
Dram shop laws hold bars, restaurants, and other establishments that serve alcohol liable for injuries or damage caused by patrons who became intoxicated on their premises. These laws vary by state, but generally, they make it possible for the victims of drunk driving accidents or other incidents caused by intoxicated individuals to sue the establishment that served the alcohol to the person who caused the harm. The name "dram shop" comes from the old measurement of spirits, a "dram."
What Are Liquor Liability Insurance Risks And Underwriting Considerations?
Seeing what insurance company underwrites consider when looking at a new policy can help you understand how to reduce your risk and get the lowest premium possible. Following are underwriting considerations for liquor liability insurance:
LIQUOR LICENSES
One of the first underwriting considerations is the type of liquor license the business holds. Neither of the liquor liability coverage forms provides coverage if the establishment does not have the appropriate liquor license. Every state has different rules and requirements concerning issuance of liquor licenses but the following are the most common licenses:
- Manufacturing
- Distributing and wholesaling
- Off premises consumption only-beer and wine
- Off premises consumption only-beer, wine, and spirits
- On premises consumption-beer and wine
- On premises consumption-beer, wine, and spirits
- Special events licenses
MANUFACTURING
Liquor and alcoholic beverage manufacturers are the farthest removed from consumers of all businesses in the liquor and alcoholic beverage business. As a result, their exposure to liquor liability is lower than other liquor-related businesses. Their primary exposure may be products liability that the Insurance Services Office (ISO) CG 00 01-Commercial General Liability Coverage Form covers, not liquor liability. However, manufacturers may still be involved in situations that require separate liquor liability coverage, such as the following:
- Tasting rooms or tours that include samples
- Direct mail order or Internet sales
Manufacturers engaged in direct sales should be underwritten as an applicant with off-premises consumption. The key element to consider is whether or not their procedures prevent or eliminate cyber sales to underage customers. Simple statements to the effect that underage drinkers are not permitted to purchase alcohol are insufficient. Will they stand up in court? Will they prevent lawsuits and other legal actions? The manufacturer must take responsible and credible actions to ensure that Internet or mail order sales are restricted to adult customers.
DISTRIBUTING AND WHOLESALING
Liquor and alcoholic beverage distributors and wholesalers have liquor liability exposures that fall somewhere between those of manufacturers and package stores. However, their liquor liability exposure is usually comparatively low unless, like manufacturing, they are involved in direct sales to customers by the following:
- Online
- Mail order
- Customer pickup at the warehouse
Direct sales to customers or pickup at the warehouse are important in underwriting, especially if those direct sales involve large volumes of liquor or alcoholic beverages. These customers may be purchasing liquor or alcoholic beverages for underage drinkers, and the distributor may be the only link in the chain of events with available assets to pay for a serious loss.
OFF PREMISES CONSUMPTION ONLY
Businesses that sell liquor and alcoholic beverages for consumption off premises experience losses that are mainly due to having lax and/or inadequate procedures for screening customers. It is best to have strict procedures such as requiring customer identification every time an alcoholic beverage purchase takes place. Underage employees should never be allowed to ring up alcoholic beverage sales because:
- It may not be legal in the particular state
- They may not follow identification procedures for their peers
- They may purchase liquor or alcoholic beverages for themselves or friends
The ratio of alcoholic beverage sales to sales of all other products is important. Establishments that have high alcoholic beverage sales ratios usually have greater exposure to loss.
ON PREMISES CONSUMPTION
Businesses that sell liquor and alcoholic beverages for consumption on premises present the greatest exposure to loss. They are more accountable and are held to a higher standard than any other business because they observe their customers in addition to serving them.
These businesses must deal with two important conflicts of interest. Their profits depend on sales to a steady stream of regular customers. However, the same elements increase the likelihood that an alcohol or liquor-related loss or incident will take place. As a result, it is both difficult and essential that these businesses balance the risk of customer alienation by refusing to serve customers who are already intoxicated or about to be against the need to increase profits in order to remain in business.
Underwriting businesses like these begins with analyzing the ratio of alcoholic beverage sales to food and non-alcoholic beverage sales. Higher alcoholic beverage sales mean a higher exposure to a liquor liability loss. The underwriting analysis must also evaluate other activities that may occur on the premises to encourage and increase the amount of alcohol consumed. Examples are:
- Happy hour
- Free drinks for women/ladies nights
- Two for one drink specials
- Featured drink specials at reduced prices
- Drinking contests promoted by bands and other live entertainment
- Similar and related activities
Each of these activities increases the possibility of a loss because customers are encouraged to drink more. On the other hand, activities that encourage consuming food have the opposite effect. Food actually reduces the amount of alcoholic beverages consumed and the possibility of loss because it absorbs some of the alcohol consumed and reduces the level of inebriation and impairment.
Proper training is the key to controlling exposures. Bartenders should keep track of the number of drinks they send to each table to try to prevent excess consumption. Servers must be trained to always request proper identification for everyone they serve.
Training by TIPS* or similar groups is the proper way to handle customers and should be required along with establishing a specific set of procedures and adhering to them. Designated driver incentives and arrangements with local taxi companies should also be developed and be available if and when the need arises.
*TIPS is an acronym for Training for Intervention Procedures. This is a training program that Health Communications, Inc. offers. Information on TIPS can be found at gettips.com.
Loss experience and background information on the business owner is important. A vital piece of information is the status of its liquor license and whether it was ever revoked or suspended.
SPECIAL EVENTS LICENSES
Special events licenses are issued for specific activities or events where alcohol is served. These events are usually for only a few days or even just a few hours, but the exposure may be greater than the exposure for a regular business operation. Special events are usually characterized by inadequate or complete lack of controls and the event sponsor's inexperience in handling alcohol-related situations.
The key element is control. Loss exposures are minimized when the sponsor arranges for and has enough people to do the following:
- Monitor the activity of attendees
- Check every attendee's identification
- Observe drinking behavior and count drinks
- Observe the serving and wait staff and support their activities
- Open or self-serve bars should be prohibited. Serving and wait staff should be trained and experienced in dealing with persons that consume alcoholic beverages.
BRING YOUR OWN ALCOHOL ESTABLISHMENTS
Restaurants and other establishments may not actually provide alcohol. However, they can provide an environment where alcohol consumption is not only permitted but is encouraged. They may provide the non-alcoholic set-ups, entertainment, and other furnishings and arrangements for drinking. Underwriting this exposure is difficult because the liability laws are not as explicit as to when licenses are required.
It is very important to carefully examine the activities that take place at the establishment, the age of patrons, and hours of operations. It is also very important to determine if the named insured chooses to not serve alcohol or is forced into this activity because its liquor license was revoked.
LIQUOR LIABILITY GRADES
ISO developed a scale for each state that grades the extent of liability it imposes on operations that supply or sell liquor. States that have lower numerical grades means that establishments involved with liquor or alcoholic beverages present lower exposures:
- 0: States with this grade do not have a cause of action against any party that supplies, furnishes, vends, or sells liquor for bodily injury, property damage, or death that an intoxicated person causes. Manufacturers, wholesalers, and distributors are always graded as 0.
- 1-9: States with this grade range impose varying degrees of moderate liability on parties that supply, furnish, vend, or sell liquor. Causes of action in these states can be brought against the liquor vendor for bodily injury, property damage, or death that an intoxicated person causes under certain circumstances.
- 10: States with this grade impose strict liability on parties that supply, furnish, vend, or sell liquor. Simply furnishing liquor in these states is considered the proximate cause of the bodily injury, damage, or death.
What Does Liquor Liability Insurance Cover & Pay For?
Liquor Liability Insurance is a type of insurance that provides coverage for claims arising from the serving or selling of alcoholic beverages. Here are some examples of Liquor Liability Insurance claims and how this type of insurance can help pay for the lawsuit:
- Drunk Driving Accidents: If a patron at a bar or restaurant becomes intoxicated and causes a car accident, the victims of the accident may sue the establishment that served the alcohol. Liquor Liability Insurance can help pay for legal expenses, settlements, or judgments.
- Assault and Battery: If a customer becomes drunk and causes harm to another patron or employee, the establishment may be held liable for the damages. Liquor Liability Insurance can help cover legal expenses and damages awarded to the victim.
- Underage Drinking: If an establishment serves alcohol to a minor, it can face significant fines and penalties. Liquor Liability Insurance can help cover the costs associated with legal fees and fines.
- Over-serving: If an establishment continues to serve alcohol to a patron who is visibly intoxicated, and that person causes harm to others, the establishment may be held liable for the damages. Liquor Liability Insurance can help pay for legal expenses and damages awarded to the victim.
- Dram Shop Lawsuits: Some states have "dram shop" laws that hold establishments liable for damages caused by patrons who were served too much alcohol. Liquor Liability Insurance can help pay for legal expenses and damages awarded to the victim in these cases.
In summary, Liquor Liability Insurance can provide coverage for a variety of claims arising from the serving or selling of alcoholic beverages, helping to protect businesses from potentially costly lawsuits.
Common Types Of Businesses That Need Liquor Legal Liability Coverage
Following are some business types that usually need liquor liability:
- SIC Code: 2082 Malt Beverages - Establishments primarily engaged in manufacturing malt beverages including: Ale, Beer, Breweries, Brewers' grain, Liquors, malt, Malt extract, liquors, and syrups, Near beer, Porter, and Stout.
- SIC Code: 5181 Beer and Ale - Establishments primarily engaged in the wholesale distribution of beer, ale, porter, and other fermented malt beverages.
- SIC Code: 5182 Wine and Distilled Alcoholic Beverages - Establishments primarily engaged in the wholesale distribution of distilled spirits, including neutral spirits and ethyl alcohol used in blended wines and distilled liquors including: wines, liquors, premixed cocktails and spirits.
- SIC Code: 5812 Eating Places - Establishments primarily engaged in the retail sale of prepared food and drinks for on-premise or immediate consumption. Caterers and industrial and institutional food service establishments are also included in this industry including restaurants and others.
- SIC Code: 5813 Drinking Places - Establishments primarily engaged in the retail sale of alcoholic drinks, such as beer, ale, wine, and liquor, for consumption on the premises. The sale of food frequently accounts for a substantial portion of the receipts of these establishments. Thus include: Bars, Cocktail lounges, Night clubs, Saloons, Tap rooms, Taverns and Wine bars.
- SIC Code: 5921 Liquor Stores - Establishments primarily engaged in the retail sale of packaged alcoholic beverages, such as ale, beer, wine, and liquor, for consumption off the premises.
- SIC Code: 8641 Civic, Social, and Fraternal Associations - Membership organizations engaged in civic, social, or fraternal activities including: Business persons clubs, civic and social, Fraternal associations, Fraternal lodges, Social clubs and others.
Liquor Liability Insurance - The Bottom Line
In addition to purchasing liquor liability insurance insurance, businesses need to be proactive in reducing their liquor induced claims.
From instructing employees to decline serving alcohol to obviously intoxicated individuals, to demanding strict measuring of all mixed drinks, to pushing for use of designated drivers or taxis, you can lower your likelihood of suffering liquor liability claims by implementing and imposing safe alcohol-serving practices.
Additional Resources For Food Service Insurance
Learn about restaurants, bars, liquor stores commercial insurance coverages. See how small business food service insurance help protect against accidents, oversights and lawsuits resulting from business operations.
- Bagel Shop
- Bakery
- Bar
- Brewery
- Catering
- Coffee Shop
- Concession Stand
- Delicatessen
- Farmers Market
- Grocery Store
- Ice Cream Shop
- Internet Cafe
- Liquor Liability
- Liquor Store
- Nightclub
- Restaurant
- Sandwich Shops
- Supermarket
- Tavern
- Winery
- Specialty Food And Restaurants
The food service industry is a vital part of the economy and plays a crucial role in providing food to individuals and businesses. However, it is also a high-risk industry that is prone to numerous potential liabilities and risks. That's why it's important for food service businesses to have insurance in place to protect themselves against financial losses and legal issues.
One of the main reasons the food service industry needs commercial insurance is to protect against liability claims. When running a food service business, there is a risk of someone getting sick or injured due to food poisoning or food allergies. Insurance can provide coverage for these types of claims, helping to cover the costs of legal fees and damages.
Another reason the food service industry needs insurance is to protect against property damage. This can include damage to the business's physical location, such as from a fire or natural disaster, or damage to equipment, such as kitchen appliances. Commercial insurance can help cover the costs of repairs or replacement, ensuring that the business can continue to operate smoothly.
Additionally, commercial insurance can provide coverage for losses due to unexpected events, such as theft or vandalism. This can be especially important for food service businesses, as food products and equipment can be expensive to replace.
The bar and liquor industry is highly susceptible to accidents and injuries. With the presence of alcohol, there is a higher risk of slip and fall accidents, fights, and other mishaps that could result in serious injuries to employees or patrons. Insurance can provide coverage for these types of incidents and help protect the business from financial liability.
In summary, business insurance is essential for the food service industry due to the numerous risks and liabilities that can arise. It can provide financial protection against potential losses and legal issues, helping businesses to operate safely and securely.
Minimum recommended small business insurance coverage: Business Personal Property, Business Income and Extra Expense, Spoilage, Equipment Breakdown, Employee Dishonesty, Money and Securities, Computers, Valuable Papers and Records, General Liability, Employee Benefits, Umbrella, Hired and Nonowned Auto & Workers Compensation.
Other commercial insurance policies to consider: Building, Earthquake, Flood, Leasehold Interest, Real Property Legal Liability, Accounts Receivables, Bailees Customers, Fine Arts, Cyber Liability, Employment-related Practices, Environmental Impairment, Liquor Liability, Business Automobile Liability and Physical Damage, Garagekeepers and Stop Gap Liability.
