Liquor Liability Insurance – What Is It?
From fine dining restaurants to the corner liquor store, certain businesses need liquor liability insurance, which covers legal fees, settlements, bodily injury medical costs, and property damage caused by an intoxicated patron who was sold alcohol or was served liquor by the policy holder.
Businesses that need liquor liability insurance include:
- Grocery stores
- Convenient stores
- Liquor stores
These kinds of establishments run the risk of being sued when a patron had too much to drink while there. Plaintiffs can be:
- The person who was injured because of an intoxicated patron
- The server who provided too much alcohol to the patron
- The owner of the establishment that supplied the alcohol
Commercial General Liability vs. Liquor Liability Insurance
Most businesses are insured with a commercial general liability (CGL) policy, which includes coverage for bodily injury, property damage and more, but specifically excludes liquor liability. A GCL policy excludes:
- Causing or contributing to an individual’s intoxication
- Providing alcohol to a minor
- Providing alcohol to someone who is already intoxicated
- Violating a liquor ordinance or regulation
For protection for these incidents, a business involved in making, selling or serving alcohol needs liquor liability insurance as a rider on a commercial general liability policy.
Note that it is important that the business’s liquor license is current. Liquor liability insurance does not cover a related injury if the license is not in effect.
What Liquor Liability Insurance Covers
As a business owner, if the establishment is sued because of actions taken by an inebriated customer, liquor liability insurance can pay your legal expenses including defense attorney bills, damages if found liable in court and settlements.
A common issue many of us are aware of is the possible ramifications of driving drunk. The establishment must stop serving or selling alcohol to a patron who is legally too drunk to drive. If the business does nothing to keep the customer from getting too drunk, and the person ends up being in a drunk driving accident the business can be held liable.
Some liquor liability policies offer coverage for assault and battery if a fight occurs between customers or between a customer and bouncer. Other possibilities include coverage of bartenders who drink while they work and serious incidents such as sexual assault, shootings, stabbings and other such events.
Get to Know a Policy’s Exclusions
As a business owner looking for liquor liability insurance, be sure to look for exclusions you might need.
Assault and Battery – Although many claims against liquor-related businesses result from fights, some insurance policies list assault and battery exclusions. Do not purchase a liquor liability policy that has an assault and battery exclusion.
Mental Injuries – Claimants can seek compensation for mental injuries such as stress, psychological injury or mental anguish. Look for a policy that specifically covers these kinds of injuries.
Safety and Training – An insurer may offer policyholders and their employees risk management training. Policyholders who take advantage of this kind of training may be rewarded with a premium reduction.
Dram Shop Laws
Most states have dram shop laws. The name heralds back to the first establishments during the 18th century in England. The term “dram” refers to how some shops sold gin by the spoonful, a practice known as a dram.
At this time 44 states and the District of Columbia carry dram shop laws, which hold liquor-related businesses liable for actions by intoxicated customers who were sold or served alcohol. Third-party victims can file civil lawsuits against the alcohol-related business and sue the intoxicated individual. Dram shop laws vary greatly from one state to the next.
Depending on a state’s dram shop laws, it can be difficult to prove fault. For instance, how can a bartender tell just how inebriated a patron will be. Is she drinking on an empty stomach? Did he come into the business already drunk?
Proof might include:
- Sale of alcohol to the individual
- The customer’s injuries
- Third-party damages due to the intoxicated individual
Liquor Liability vs. Host Liquor Liability
Hosts of private events where liquor is served can be sued under social host liability laws. They are liable for injuries or death due negligence in serving alcohol or failing to stop an intoxicated guest from driving. According to International Risk Management Institute, most host liquor liability social exposures, can be included in a general liability policy, but liquor liability coverage requires a stand-alone policy, or an endorsement of coverage added to a liability policy.
Lower Your Liquor Liability Risk
If your business serves or sells liquor, it’s best for everyone — you, your employees and patrons — to do what you can to lower the risk of a customer having too much to drink. You can:
- Provide training and education for servers.
- Let patrons know you offer the option of non-alcoholic drinks.
- Encourage customers to not become intoxicated.
- Suggest alternate transportation (a taxi or rideshare) rather than being a danger on the road.
Want to learn more about liquor liability insurance and other business recommendations, visit EINSURANCE.