Liquor liability insurance
If alcohol is sold to an intoxicated customer who then hurts another patron or damages their property, liquor liability insurance financially protects your small business by covering legal costs, settlements, and medical expenses.
Why do you need liquor liability insurance?
Although general liability insurance protects against most third-party bodily injury and property incidents, it does have some exclusions like alcohol-related liability accidents. This is where liquor liability insurance, also known as dram shop insurance, comes in.
This type of insurance policy covers liability and property lawsuits related to selling or serving alcohol. For instance, if your restaurant serves alcoholic beverages to a customer who then starts a fight and ends up hurting others and/or damaging property, liquor liability coverage would pay for any resulting legal costs.
State laws usually require any small business that carries alcohol to get liquor liability insurance in order to obtain a liquor license. In addition, you may also need to show proof of coverage before you can sign a commercial lease or an agreement with a lender.
Even in the extremely rare case where it's not required by law, liquor liability insurance is critical for financially protecting your business since dram shop laws in most states place the responsibility for damages caused by an intoxicated customer upon the business that served them.
What is covered by liquor liability insurance?
Liquor liability insurance coverage helps pay for liability claims submitted by a third party (someone outside your business) who holds your business responsible for harm caused by an intoxicated individual.
More specifically, a liquor liability insurance policy covers your legal defense costs, such as attorney's fees, if you're sued over a bodily injury or property damage resulting from an individual who was sold or served alcohol by your business.
This includes:
Bodily injuries
If an intoxicated person at your business injures another patron, liquor liability insurance would help cover the injured patron's medical bills, including ambulance rides and doctor's appointments. In addition, it would also pay for legal costs if the injured individual decides to sue your business.
The same is true for drunk driving incidents where the injured party places blame on your business for overserving alcohol to a patron.
Property damage
A liquor liability policy pays for the cost of repairing or replacing someone's property that was damaged or destroyed by an intoxicated patron at your business.
Legal expenses
If you find yourself facing a lawsuit related to an intoxicated customer at your business, liquor liability coverage will take care of any legal expenses up to the policy's coverage limits. It will pay for your attorney's fees, a court-ordered judgment or settlement, and court costs.
Related claims, such as assault and battery
You can customize your liquor liability policy to match your specific business needs. For example, a bar owner may want to include assault and battery coverage for extra protection.
How much does liquor liability insurance cost?
TechInsurance customers pay an average premium of $55 per month for liquor liability insurance.
Insurance companies will consider the following factors when calculating the cost of liquor liability insurance:
- Your profession's risks
- Location
- Your percentage of liquor sales
- Claims history
- Coverage limits and deductible
Who should get liquor liability insurance coverage?
Any business that sells or serves alcohol should get liquor liability coverage, both to comply with state laws and protect themselves against financial losses.
However, there are a few industries in particular that need this type of policy more often than others, such as:
Food and beverage companies
Liquor liability insurance offers critical protection to food and beverage businesses, including restaurants, bars, caterers, food trucks, and other kinds of establishments that serve alcohol. This coverage is required by most state laws if you serve alcohol beverages to customers.
For example, suppose an overserved customer at your bar or nightclub shoves another patron causing them to fall and break their wrist. If the injured patron decides to sue to recoup the resulting medical costs, your liquor liability coverage would pay for their ambulance ride and emergency room visit.
Retail businesses
In most states, any retailer that sells beer, wine, or liquor needs to obtain liquor liability insurance. This includes convenience stores, liquor stores, e-commerce and online retailers, grocery stores, taverns, breweries, and wineries.
For example, if an intoxicated customer buys alcohol from your convenience store and ends up breaking another patron's car window, your liquor liability coverage would cover the replacement expenses of the broken window. It would also pay any legal fees if the car's owner files a lawsuit.
Manufacturers and distributors
Every company that manufactures, distributes, or transports alcoholic beverages should not only carry liquor liability coverage, but product liability insurance as well. This is because even though you're not responsible for directly selling the product to a customer, you can still be held liable for any harm caused by your products.
For instance, suppose a customer who consumes a product made at your beverage manufacturing plant becomes intoxicated. They end up getting into an argument which results into physical violence. The injured party could then sue your company claiming that you're responsible for producing a product with a deceptively high alcohol content.
Key professions that need liquor liability coverage
Don't see your profession? Don't worry. We insure most businesses.
What isn't covered by liquor liability insurance?
Even though liquor liability insurance offers protection against the most common claims related to selling, serving, or manufacturing alcoholic beverages, it doesn't provide full protection. For complete coverage from all risks, you will need to get additional small business insurance policies.
For example, a liquor liability policy has the following exclusions:
Libel and slander
For protection against claims of libel and slander, you'll need a general liability insurance policy. Be sure though that it doesn’t contain an exemption for alcohol-related claims.
Business property damage
If an intoxicated customer damages your business property, your liquor liability policy wouldn't provide protection. Instead, you'd need commercial property insurance which helps pay for the cost of repairing or replacing your business property when it’s damaged or stolen.
You can bundle your property insurance with general liability coverage at a discount in a business owner's policy (BOP).
Situations related to underage drinking
Incidents related to underage drinking cannot be covered by any type of business insurance policy.
Without insurance protection, you can easily find yourself in legal trouble if a minor had a realistic-looking fake ID and commits a harmful act. For this reason, you should educate your employees on fake IDs and train them to card every customer, as well as to be on the lookout for fake IDs.
Other common questions about liquor liability insurance coverage
Review answers for frequently asked questions (FAQs) about liquor liability coverage.
Is liquor liability the same as general liability?
Even though both liquor liability and general liability policies provide protection against the most common risks associated with alcohol, they each offer their own unique coverage.
General liability insurance protects small business owners against lawsuits related to third-party injuries or property damage. You'll often see that host liquor liability coverage is included in a general liability policy.
This specific type of coverage helps pay for claims related to a guest who consumed too much alcohol at a business-hosted event, and engaged in third-party property damage or physically harmed someone else due to such intoxication.
On the other hand, liquor liability insurance covers businesses that sell or serve alcohol for profit. It protects them from lawsuits related to intoxicated customers who cause bodily harm or property damage. This coverage is usually required for any business that manufactures, serves, or sells alcohol by most states' dram shop laws.
Is there a difference between liquor liability insurance and host liquor liability insurance?
Liquor liability insurance is intended for any company that sells alcohol. However, other businesses can often face the same alcohol-related risks if they serve alcoholic beverages at a company event.
This is where host liquor liability insurance steps in. Often included in a general liability policy, this specific coverage protects businesses during corporate functions, fundraisers, and other events where alcohol is served.
If your business is hosting an event with other specialized risks, you should consider special event insurance. This policy is necessary for such cases as your general liability coverage only provides protection during your business's normal operations.
If my state doesn't have dram shop laws, do I need liquor liability coverage?
Even if your state doesn't have dram shop laws requiring insurance coverage, it's still highly recommended that you get a liquor liability policy. The reason being is that you are still very much at risk for lawsuits related to selling or serving alcohol. In fact, just about anyone can sue your small business if they believed it was liable for the actions of an inebriated customer.
In such lawsuits, chances are that the court will likely rule in your favor. However, even in a frivolous lawsuit, you would still be left responsible for paying for attorney's fees, court costs, and other legal fees. These expenses can get very expensive, especially without insurance coverage.
In addition, even if your state doesn't require liquor liability insurance by law, you may still need to show proof of coverage to get a liquor license, sign a lease, and/or qualify for a loan.
It is for these reasons why it's imperative for any business that sells, serves, or manufactures alcohol products to get liquor liability coverage, regardless of the laws in their state.
What other kinds of liquor liability coverage does my business need?
You can personalize your liquor liability insurance policy to include additional coverages that match your business's specific risks. For example, those with an unpredictable customer base can easily add coverage for assault and battery claims or mental damages.
In addition, if you need a short-term or seasonal policy, then you can also customize your policy's duration. For instance, this might be appropriate for a bartender serving a wedding.
Depending on your unique business needs, you may be able to include this coverage as an add-on to your general liability insurance policy or simply purchase it as a standalone policy.
TechInsurance's licensed insurance agents are available in all 50 states to answer your questions, and help you figure out which coverage options you need for your business based on your unique risks and budget. You can apply for free insurance quotes today with our easy online application.