Liquor Liability Insurance
In this article, we will try to explain a few of the most important reasons why any businessman or company needs Liquor Liability insurance when they are engaged in serving, selling, providing or promoting alcohol products.
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They should take immediate action to ensure that they have not become liable for severe risks.
IMPORTANT: This is a highly complex subject. Before you decide whether you need this insurance, you should discuss the subject with a qualified insurance agent or broker who is familiar with all aspects of this specialized area of insurance.
You can also get quotes from insurance companies for coverage costs for casual events like weddings, parties, end-of-year company events, conferences and any other kind of general costs for insurance cover of your risks coming from serving alcohol.
We are not advising any specific insurance for liability, supplemental insurance, host l insurance, stand alone insurance, assault and battery coverage or any other sort of insurance.
Please read the disclaimer of liability at the foot of our web page.
What does liquor liability insurance cover?
The point at which to start to discover whether you have a that needs special insurance coverage is to define a few basic facts, according to the following topics:
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- Where do you conduct your liquor-related business? Every state has its own laws and regulations that govern the serving, sale or supply of liquor, so there are no general laws or conditions that apply to all businesses
- What kind of business do you run? There can be many differences in your liability depending on the legal definition of your type of commercial activity. Also, this is very much dependent on which state, and even which county or city, you are working in
- Does your existing General Liability insurance cover have a ‘Liquor Liability Exclusion’ clause? Most insurance companies have a specific exclusion of liability for claims associated with liquor in their General Liability cover. It would be best if you started here by examining the policy you already have for anything that would allow the insurance company to deny liability in case of any injury or damages that would normally be covered. For example, suppose a visitor to your shop trips over a loose tile, falls and breaks a leg. In that case, they can sue you for negligence and the insurance company that issued your General Liability cover would have to defend you in the case and meet any negotiated or awarded amount. But you will not be covered if there is a clause that says something like “the insurer will not be held liable for bodily injury or property damage for which they may be liable if he or she:
- Contributed to or caused intoxication
- Served or sold alcohol to someone already under the influence, or under the legal drinking age
- Violated any regulation about the sale, gift, distribution or use of alcohol.”
The liability exclusion applies to any business such as bars, wineries, and taverns that is manufacturing, distributing, selling and serving alcoholic beverages.
In other words, the exclusion is directed at businesses whose primary operations involve alcoholic beverages.
- Does your General Liability insurance policy include a “Host Liquor Liability Exception”? Suppose your business serves alcohol as an ancillary service, such as at catered functions, parties or hosted events. In that case, you may also lack liability cover. For example, suppose you are the caterer for a company holding an end-of-year function, and one employee of the company gets drunk and drives away, knocking over the parking attendant. In that case, you can be sued for the damages, hospital costs, loss of income and all other consequences, but your general liability insurance will not cover you for this if your policy includes this exclusion clause.
What levels of insurance must a restaurant or bar carry against claims of liability when they serve alcoholic drinks?
In some states, any business involved in the supply of drinks containing alcohol is required by state law to carry specific insurance that covers liability claims relating to liquor.
There may even be stipulations about the minimum level of cover a type of business must take out before qualifying for a vendor license.
For example, in Michigan, the Licensing Authority stipulates that it is the responsibility of the applicant or licensee to ensure that the MLCC has received the required proof of the insurance.
The law requires restaurant and bar owners to have insurance with a minimum level of $250,000 for bodily injury or death of one person and $500,000 for any one incident involving bodily injury or death.
The levels depend on the legal jurisdiction, but dram shop laws generally cover service venues such as restaurants, bars or tavern owners.
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This means that they owe a legal ‘duty of care’ to their customers and to the general public to exercise proper care in their practice of serving alcohol.
Both criminal and civil action can be taken against anyone distributing alcohol when their customers cause damage to themselves or to third parties.
Statistics show that assault and battery claims from customers and staff account for the majority of claims against business owners that sell alcoholic beverages.
Special liability cover relating to liquor suppliers aims to protect you and your business from the consequences.
Your business could face civil lawsuits if there is a claim for breach of duty to oversee beverage service properly.
Usually, a claim would arise when a victim is injured or killed by the actions of a drunk person who has been served in your establishment. The result can be massive awards in civil suits in monetary damages to compensate victims.
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What will liquor liability insurance cost?
As we initially said, liability claims relating to liquor suppliers is a very complicated subject.
It isn’t possible to give any general rules that will be followed by insurance companies when they make a quote.
The two main conditions affecting the quote for your own liability coverage will be whether you require Host Liquor Liability insurance or more general cover.
A “host” is defined as a business engaged in the incidental selling of alcohol.
It is not meant for bars, nightclubs, and other such locations that are in the business of selling liquor regularly.
Host insurance against claims coming for incidents involving liquor covers you when you are serving alcohol in a social setting, like a wedding, a company picnic or a party.
Full insurance is required if you are primarily in the business of supplying alcoholic drinks such as pubs, bars, beer halls.
It also applies to restaurants that serve wine, beer and spirits.
Insurance for hosts is generally cheaper than full liability cover.
Still, the relative costs depend very much on the size of your business, the claims history of the business, the level of training of you and your staff and many other factors.
For this reason, you should engage the services of a qualified insurance broker or agent.
They will both get you the best possible cover and the cheapest possible rates, and also make sure you have not missed out on essential covers.
Is it possible to get single-day liquor liability insurance?
Insurance for one day events that are serving alcohol is offered by many insurance companies, especially for short-term events like parties, weddings, year-end gatherings, conferences and similar time-bound periods of liability.
This coverage definition will stipulate the specifics of the planned event, like the number of days that it is being held, the location, the number of people attending, the level of training of the staff and a whole bunch of other questions.
These need to be specified so that the insurance company can state its policy exclusions and limits during the period of cover.
Costs for one-day or limited-time events will be significantly higher than for the equivalent daily rate if you were to be taking out full-year cover with the same company.
The reason is that the insurance company loads the premium up-front with the administrative costs involved in all liquor liability insurance quotes.
So any quote starts off with several hundred dollars in set-up costs, plus a daily rate.
This can mean that the average per day insurance cost for a one-day event will be much higher than for a five-day event.
What is Dram Shop Liability?
In more than half of all the States, some laws allow any business establishment that sold alcohol to someone who then drove a vehicle negligently and injured another person to be sued for the consequences. These are known as ‘dram shop’ laws.
The terms of the legislation vary between the different states.
Still, usually, they will declare that bars, restaurants, beer halls and wine bars can be held liable for continuing to serve alcohol to someone who was already intoxicated, when alcohol is served or sold to minors or when you sell to someone known to be addicted to alcohol.
The injured party can sue you and the drunk driver, and any damages awarded may be divided.
If the driver doesn’t have the means to meet his share, you may have to make up the difference yourself.
Does ‘strict liability’ apply in liquor liability cases?
Strict liability is a legal principle that says you can be held legal responsibility for damages or injuries even if you did not act with fault or negligence.
It means that in some states where strict liability is the law, you can’t defend yourself by saying you did not do anything wrong.
For example, suppose it is claimed that you sold alcohol to an underage person, who subsequently drove a car and caused a fatal crash. You can’t defend yourself by saying that the underage person showed you a false identity, and his parents who were with him verified his age.
Local authorities such as counties, cities and towns can also set Dram Shop liability regulations.
Many cities and towns have enacted their own rules that establish additional liability for serving alcohol to any minor – drunk or not.