Liquor Liability ​

A Liquor Liability insurance policy 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.

Laws vary from state to state, however, most state that the owner of the liquor or alcoholic beverage business can be held liable for injury or damage to or that an intoxicated person causes if the party that provided the liquor caused or contributed to the person’s intoxication.

Also, most 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 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.

Who Needs Liquor Legal Liability Insurance?

If your business has a liquor exposure – Liquor Liability Coverage is a must.

Common Businesses that need liquor liability insurance are service businesses like:

  • Restaurants H
  • Hotels
  • Taverns
  • Sports Bars
  • Package Stores
  • Halls and private and fraternal clubs
  • Nightclubs Riverboat casinos
  • Bowling alleys
  • Special events, and
  • Bed and Breakfasts.
**The Commercial General Liability Coverage Form specifically excludes liquor related losses if your business sells, manufactures, distributes, serves, or furnishes liquor.  Also, 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.”

What Does Liquor Legal Liability Insurance Cover?

Although, the language in liquor liability insurance policies varies, the insurance company typically agrees to pay amounts your business is legally obligated to pay as damages because of liquor-related injury that this insurance covers. This liability must be imposed because of injury caused by someone to whom was sold, served, or furnished alcoholic beverages by your employee(s) or business.

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.

If this policy is not worded correctly, there can be important coverages left out and possibly major exclusions, leaving your business and you at personal finances at risk.

It is important to make sure the policy includes ‘Assault and Battery Coverage’. As many claims against bars and restaurants are a result of fights.

You may need to purchase insurance for assault and battery claims if not covered on the main policy. A liquor liability insurance policy that does not cover assault and battery has limited value for certain venues.

How much does a Liquor Liability Policy cost?

Understanding how Liquor Liability policies are rated (priced) will give you some valuable insight as to get the lowest premium possible, how to reduce your exposure and ultimately be more profitable in your business.

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.

The type of liquor license that your business holds greatly effects the cost of the policy.  Below are the most common types of liquor licenses.

  • On premises consumption-beer and wine
  • On premises consumption-beer, wine, and spirits
  • Special events license
  • Manufacturing
  • Distributing and wholesaling
  • Off premises consumption only-beer and wine
  • Off premises consumption only-beer, wine, and spirits
On Premises Consumption

Businesses that sell liquor and alcoholic beverages for consumption on premises present the greatest exposure to loss. These businesses are held to a higher standard due to the fact they are serving alcohol to customers as well as observing them.

Some of the underwriting (pricing) considerations are the ratio of food sales (including non-alcoholic beverages) to alcoholic beverage sales and what type of events held on premises that focus on alcohol sales / consumption such as Happy hour, ladies nights, two for one drink specials, live entertainment, etc.

SPECIAL EVENTS LICENSES

Special events licenses are issued for specific activities or events where alcohol is served.

Special events can face challenges with regard to liquor sales and consumption such as inadequate or lack of controls, and inexperience by the sponsor in handling alcohol-related situations.  The key element is control. Loss exposures can be minimized by the event coordinator / sponsor properly staffing the event with the right amount and age of employees as well as proper training in the following categories:

  • Monitoring 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.

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. Having proper procedures, protocols and employees in placed and trained is the key to avoiding claims and reducing risk.

Liquor and Alcohol Manufacturers

Manufacturers are the farthest removed from consumers, therefore, their exposure to liquor liability is lower than other liquor-related businesses. Their primary exposure is more likely to be products liability that is more often covered by a General Liability policy, rather than a liquor liability policy.

Some instances where a liquor liability policy may be required:

  • Tasting rooms or tours that include samples
  • Direct mail order or Internet sales

If a manufacturer is engaged in direct sales they should consider a liquor liability policy with off-premises consumption. One key factor to consider is whether or not their procedures prevent or eliminate cyber sales to underage customers. Statements to the effect that underage drinkers are not permitted to purchase alcohol are insufficient. Manufacturers must take responsible and credible actions to ensure that Internet or mail order sales are restricted to adult customers.

Distributing and Wholesale

Liquor liability exposure is relatively low unless, alcohol is being distributed directly to customers online, mail order, or warehouse customer pickup.

One important question that underwriters will ask is about direct sales to customers, what is the amount being sold (quantities), due to the possibility of the alcohol ending up in underage citizens.

Am I covered if I serve Alcohol off site?

Adding a supplemental catering endorsement to your policy should extend your coverage off-site.

What Are Dram Shop Laws?

These laws create a strict liability on the business that sells the alcohol to individuals that are intoxicated and cause injuries to other people, that are caused by the intoxicated individual.