Liquor Liability Insurance Policy Information
Liquor Liability Insurance. Everyone knows that too much booze is never a good thing. It can result in you saying something you don't mean. Lead to you injuring yourself - or others. It can even result in death from alcohol poisoning or a serious accident.
In a legal case like an accident involving alcohol, the intoxicated person is usually held liable for their actions. What about the people who were serving them, though? Can they be held accountable for not cutting people off sooner? Can you hold them liable?
The answer is Yes. Most major events and entertainment hotspots that serve alcoholic beverages may be held responsible for the unlawful actions of intoxicated customers. To cover liabilities, the owners of these entertainment spots usually take measures to limit their risk of liability, but they will still need to protect their business with a suitable liquor liability insurance policy.
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:
- 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?
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?
Truly understanding what your current liquor liability coverage offers is a vital to the success of any establishment serving or allowing the consumption of alcohol on the premises. 38 US states carry a different set of laws for establishments that deal with alcohol, called Dram Shop laws. These are laws that make businesses that sell alcoholic drinks or hosts who serve liquor to individuals who are obviously intoxicated, strictly liable to other people who sustain injuries caused by the drunken individual.
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:
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:
- 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
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:
- 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.
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.
Manage Your Risk
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.
Types Of Small Business Insurance - Requirements & Regulations
Perhaps you have the next great idea for a product or service that you know will appeal to your local area. If you've got a business, you've got risks. Unexpected events and lawsuits can wipe out a business quickly, wasting all the time and money you've invested.
Operating a business is challenging enough without having to worry about suffering a significant financial loss due to unforeseen and unplanned circumstances. Small business insurance can protect your company from some of the more common losses experienced by business owners, such as property damage, business interruption, theft, liability, and employee injury.
Purchasing the appropriate commercial insurance coverage can make the difference between going out of business after a loss or recovering with minimal business interruption and financial impairment to your company's operations.
Insurance is so important to proper business function that both federal governments and state governments require companies to carry certain types. Thus, being properly insured also helps you protect your company by protecting it from government fines and penalties.
Small Business Insurance Information
In the business world, there are many risks faced by company's every day. The best way that business owners can protect themselves from these perils is by carrying the right insurance coverage.
The The National Association of Insurance Commissioners (NAIC) is the U.S. standard-setting and regulatory support organization. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight.
Commercial insurance is particularly important for small business owners, as they stand to lose a lot more. Should a situation arise - a lawsuit, property damage, theft, etc. - small business owners could end up facing serious financial turmoil.
According to the SBA, having the right insurance plan in place can help you avoid major pitfalls. Your business insurance should offer coverage for all of your assets. It should also include liability and casual coverage.
Types Of Small Business Insurance
Choosing the right type of coverage is absolutely vital. You've got plenty of options. Some you'll need. Some you won't. You should know what's available. Once you look over your options you'll need to conduct a thorough risk assessment. As you evaluate each type of insurance, ask yourself:
- What type of business am I running?
- What are common risks associated with this industry?
- Does this type of insurance cover a situation that could feasibly arise during the normal course of doing business?
- Does my state require me to carry this type of insurance?
- Does my lender or do any of my investors require me to carry this type of policy?
A licensed insurance agent or broker in your state can help you determine what kinds of coverages are prudent for your business types. If you find one licensed to sell multiple policies from multiple companies (independent agents) that person can often help you get the best insurance rates, too. Following is some information on some of the most common small business insurance policies:
|Business Insurance Policy Type||What Is Covered?|
|General Liability Insurance||What is covered under commercial general liability insurance? It steps in to pay claims when you lose a lawsuit with an injured customer, employee, or vendor. The injury could be physical, or it could be a financial loss based on advertising practices.|
|Workers Compensation Insurance||What is covered under workers compensation insurance? This type of insurance protects a business and its owner(s) from claims by employees who suffer a work-related injury, illness or disease. Workers comp typically provides the injured employee with benefits to cover medical expenses, a portion of his/her lost wages, rehabilitation costs if applicable, and permanent partial or permanent total disability.|
|Product Liability Insurance||What is covered under product liability insurance? I pays an injured party's settlement or lawsuit claim arising from a defective product. These are usually caused by design defects, manufacturing defects, or a failure to provide adequate warning or instructions as to how to safely use the product.|
|Commercial Property Insurance||What is covered under business property insurance? General liability policies don't cover damages to your business property. That's what commercial property insurance is for. It protects all of the physical parts of your business: your building, your inventory, and your equipment, giving you the funds you need to replace them in the event of a disaster. If you work from home, you might consider a Home Based Business Insurance policy instead.|
|Business Owners Policy (BOP)||What is covered under a business owners policy (BOP)? This is a policy designed for small, low-risk businesses. It simplifies the basic insurance purchase process by combining general liability policies with business income and commercial property insurance.|
|Commercial Auto Insurance||What is covered under business auto insurance? This type of insurance covers automobiles being used for business purposes. This could include a fleet of business-only vehicles or a single company car. In some cases it might cover your car or your employee's car while they're being used for business. These policies have much higher limits, ensuring you can cover your costs if one of these vehicles gets into an accident.|
|Commercial Umbrella Policies||What is covered under commercial umbrella insurance? This type of policy is a sort of "gap" insurance. It covers your liability in the event that a court verdict or settlement exceeds your general liability policy limits.|
|Liquor Liability Insurance||What is covered under liquor liability insurance? It covers bodily injury or property damage caused by an intoxicated person who was served liquor by the policy holder.|
|Professional Liability (Errors & Omissions)||What is covered under professional liability insurance? This type of business insurance is also known as malpractice oe E&O. It covers the damages that can arise from major mistakes, especially in high-stakes professions where mistakes can be devastating.|
|Surety Bond||What is covered under surety bonds? Bonding is a contract where one party, the SURETY (who assures the obligee that the principal can perform the task), guarantees the performance of certain obligations of a second party, the PRINCIPAL (the contractor or business who will perform the contractual obligation), to a third party, the OBLIGEE (the project owner who is the recipient of an obligation).|
Who Needs General Liability Insurance? - Virtually every business. A single lawsuit or settlement could bankrupt your business five times over. You might also need this policy to win business. Many companies and government agencies won't do business with your company until you can produce proof that you've obtained one of these policies.
Business Insurance Required by Law
If you have any employees most states will require you to carry worker's compensation and unemployment insurance. Some states require you to insure yourself even if you are the only employee working in the business.
Your insurance agent can help you check applicable state laws so you can bring your business into compliance.
Other Types Of Small Business Insurance
There are dozens of other, more specialized forms of small business insurance capable of covering specific problems and risks. These forms of insurance include:
- Business Interruption Insurance
- Commercial Flood Insurance
- Contractor's Insurance
- Cyber Liability
- Data Breach
- Directors and Officers
- Employment Practices Liability
- Environmental or Pollution Liability
- Management Liability
- Sexual Misconduct Liability
Whether you need any or all of these policies will depend on the results of your risk assessment. For example, you probably don't need an environmental or pollution policy if you're running an IT company out of a leased office, but you would need data breach and cyber liability policies to fully protect your business.
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
- Beer Distributor
- Coffee Shop
- Concession Stand
- Farmers Market
- Grocery Store
- Liquor Liability
- Liquor Store
- Liquor Wholesaler
Bars, taverns, restaurants, cafeterias, and other eating and drinking places have significant insurance needs in three separate areas.
The first is property protection for physical damage to equipment, furnishings, building and supplies due to fire and other perils.
The second is premises liability coverage to protect customers due to slips, trips and falls on the premises, as well as for consumption of food products.
The final need is protection for employees due to frequent cuts, burns and other common employee injuries. Establishments that sell or serve liquor or other alcoholic beverages also need liquor liability coverage.
Slips and falls, along with customer illness due to being served tainted food or drink, are the primary liability exposures. The commercial general liability (CGL) is used to provide coverage for these exposures.
It is important to note that liquor liability coverage is excluded under the CGL form if a risk is in the business of serving alcoholic beverages. Many establishments in this category should therefore consider purchasing a separate liquor liability coverage form.
Restaurant kitchen equipment, inventory and dining room fixtures are common exposures for most eating and drinking places. Many of these establishments do not own the buildings they occupy but have long-term leases and have invested money in various improvements and betterments, including cooking equipment, dining room decorations and permanent fixtures.
There are major differences in the food service business and the very different exposures they present. There are many specific types of restaurants to cater to individual needs and tastes. There a several main commercial insurance classifications for food service.
Concessionaires: The most basic "eat on the run" type of restaurant is not classified as a restaurant at all but is referred to as a concessionaire. Class Code 11168: Concessionaires applies and the accompanying note states that all food and beverages must be sold through hawking or peddling. There can be no location to which customers walk up and purchase the food. This classification includes food sold at sporting events, exhibitions, and parks.
Caterers: Are very similar to restaurants with significant differences. The caterer prepares the meals at its own kitchen or commissary and then transports it to the locations where it will be served. Some final preparation may take place at the final location but the majority generally takes place at the caterer's location. The caterer's employees serve the meals and beverages and oversee the consumption of the food.
Restaurants: The way restaurants are categorized and classified uses the percentage of alcoholic beverage sales as the first criteria, followed by other features or operations.
Common to all of these categories is that entertainment-oriented venues such as nightclubs, cabarets, dance halls, discotheques, and comedy clubs must be separately classified and rated. This means that the sales that those entertainment activities generate must be broken out and rated separately from the sale or food and drink.
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.