Nightclub Insurance – cost and types of policies

If you own or run a nightclub or similar establishment it is important that you have the proper Nightclub Insurance in place to ensure that you are fully covered. 

All businesses need to have insurance, and nightclub managers and owners may be thinking that by taking out standard liability, property and workers compensation insurance, they are adequately covering their risks.

But as we detail in the rest of this article, there are several special risks that are coming from the fundamental nature of your business, and you need to be aware of them when you decide which policies, and with which companies,  you take out your policies.

You will sometimes be offered a general or commercial insurance package, but you should take care to check that special features like live singers and bands, disk jockeys, rotating dance floors, bars, food and drinks service, on-site parking services and all the other features you offer are covered.

In some states or local jurisdictions, you may be required to take out some form of insurance in terms of the bylaws.

Usually, these will be in the form of liability insurance so that people injured on your premises will have some guarantee of redress.  

If you have taken out a business loan to establish the club, you may be required by the bank or lenders to take out several kinds of comprehensive insurances, including possibly some life assurance, accident and health insurance for yourself and any other key employees of the club.

If you rent the club premises, it will probably be written into the rental agreement that you will take out the relevant fire, liability, and commercial insurance.

If you employ workers at the club, whether full-time, part-time or casual, in almost all states, you are legally obliged to take Workers Compensation Insurance coverage for them.

What are the special risks that Nightclub owners should insure against?

Bars, restaurants and nightclubs sit in a unique position in terms of their exposure to risks and claims.

The following is just a short list of the situations in which some incident can lead to a legal claim against you as the owner or manager of a nightclub.

• Where an intoxicated person leaves your premises and crashes his vehicle, he can claim that he was overserved, or you did not exercise proper control over the volume of drinks
• If a fight breaks out in the venue, people who were sitting nearby could be hurt by bouncers or other staff going to assist, and claim liability
• If a claim is made that food or beverages served in your nightclub caused a customer to subsequently fall ill, insurance is your best protection
• Employing specialist staff to act as bouncers and security maintenance brings your business into an area of liability that’s completely absent in regular business, involving the possibility of allegations of drug-dealing, strong-arm tactics, and even use of fire-arms giving rise to claims against you for injury or damages
• If an altercation breaks out between some of your customers, any resultant injuries to others in the nightclub can be attributed to being your fault, and you can face claims for any resultant injury or damage
• Nightclubs regularly suffer from spilled drinks, producing wet and slippery floors. Add to that the scenario of slightly intoxicated patrons, plus the need for rapid movement toward the dance floor or the toilets, and you have a toxic mix that can result in slips and falls, followed by substantial lawsuits.

In addition to the risks that a nightclub owner carries, there are some similar kinds of businesses that work in adjacent areas of public entertainment, and that should pay the same sort of attention to whether, and to what degree, they are covering their special risks.

For example, snooker parlours and clubs are usually associated with liquor and food, so the particular elements mentioned above of slips and falls, or toxic food, or overindulgence in alcohol, all apply in the same way to you as they do to a nightclub proprietor. 

So, does a club need insurance?

The simple answer is that any nightclub, bar, pub, bingo club, trivia club, snooker hall, concert venue or entertainment center that operates without insurance is running at levels of risk that far exceed those of ordinary business.

We have written in another article about the basic need for business insurance.

Every business needs several basic kinds of insurance, to protect you in case something unexpected happens while you are working.

After outlining these, we’ll highlight the extras that are needed because of the special risks that come with the business of running a nightclub.

The most important kinds of basic business insurance are:

General Liability insurance / Public Liability insurance

To insure you in case some accident causes injury to a person, or damage to their property, while they are in the place where you are working, you need general liability insurance.

For clubs and bars, some of the most frequent examples are trips and falls because you have many tables, loungers, chairs and similar obstacles in the venue where the event is happening. 

As well, the lighting in the rooms is usually dim, so navigating around even large obstacles may be difficult.

In addition, people come to nightclubs to dance, so vigorous movement is to be expected. 

If anyone before, during or after an event has such a fall, they may claim that your table or a box was placed improperly or without proper supervision, in which case you could be held responsible for the injury, damage, or any other consequences.

Another possible problem for club owners is having elaborate hot lighting positioned around the venue, which could fall and hurt someone, or just cause a burn to a person touching up against it, or a fire if something inflammable comes into contact.

Also, there is the problem of improper electrical grounding starting a spark leading to fire.

But there is no clear borderline that can pinpoint the cause of an accidental slip or fall to what actually happened, so you can end up arguing in front of a judge, and even though you were right, you can still lose.

You can also be liable for legal costs of both parties if the judgement goes against you.

For this, you definitely need to insure yourself and your business, otherwise the judgement could ruin you. 

Make sure you are covered by your general policy.

Where regular general liability policies will fail to cover your specific business is in the “exclusions and exceptions” clauses.

For example, almost all general liability insurance policies have an exception clause that states that you are NOT COVERED against a claim for Assault and Battery. 

Explaining this will require dipping into some legal jargon, and if any of the terms we use here seem unfamiliar, please reference the same sorts of websites as we did, including Cornell Law School and FindLaw. 

Suppose an argument breaks out in the queue waiting to enter your busy nightclub.

If your doorman tries to intervene, and one of the people in the queue claims to have been assaulted and injured, then you can end up with a claim against your business.

This is because assault and battery has two different definitions, which are as a criminal offense, and/or as a tort (civil) claim.

While there’s nothing you can do about criminal cases besides to get a good lawyer, in civil cases, if you have the right insurance, then the problem is no longer yours – your insurance is there to step in and take over.

General liability insurance covers only occurrences that were not in any way deliberate or intentional, but that happened strictly by chance or accident.

They are referred to as fortuitous acts. Something like a customer stumbling at the entrance to your club over a broken step, and breaking her arm, is a fortuitous event, and normal general liability insurance covers it.

Suppose however, in the case of the fight in the queue, that the doorman pushes someone out of the way to get to the fight, and that person falls and breaks her arm.

This is now not a fortuitous claim, because the action of the doorman, your employee, was deliberate.

While there may be no criminal liability, there is still a civil liability, but your general liability policy’s exclusion clause will get your cover rejected.

Some of the other exclusion clauses that might be written into a general liability insurance policy are:

Liquor liability.

The exclusion of liquor liability is a standard clause in the Insurance Services Office, Inc. (ISO) CGL policy.

It’s a complicated subject, much too deep for us to go into here, but you need to make sure that if your standard general liability policy has this clause, you have taken steps to cover yourself.

Bouncer liability.

There is no single answer here that’s right for all situations.

Some jurisdictions interpret the same words differently.

But in general liability insurance policies, there may be an exclusion that states it applies to exclude coverage if it arose from an outcome that could be either expected or intended.

Valet parker liability.

Imagine this…You have noticed one of the customers overindulging in alcohol, and quite correctly managed to eject him from the nightclub before any damage can happen.

But now if his car was parked by your valet service, and the valet allowed the customer to drive-off, and the customer then crashes into another vehicle, you could be held liable for negligence, AND the exclusion policy of your general liability policy would take them out of the equation.

Professional Liability insurance / Error & Omission insurance

To cover you in the event that a customer claims that you were in some way negligent in performance of your job and they suffered some monetary damage, you need E&O insurance, sometimes called professional liability insurance.

An example is when you are engaged by a company to hold their annual awards night, in front of an audience and TV cameras.

On the night, if something has happened that stops the event from happening the customer could claim all of the run-up expenses for advertising, promotion, etc. plus damages for loss of reputation and other such ancillary losses.

In the same way as for general liability insurance, if a court decides against you, you will have to find the money out of your own pocket. 

Equipment insurance

A nightclub needs highly expensive and specialized gear for music, speakers, lights, cameras and a whole basket of other paraphernalia.

Bars need to be stocked and kitchens fitted out with utensils, plates and raw materials.

You need equipment insurance to be able to replace the losses.

It represents a big outlay of your money, or a big liability if you are renting or hiring the equipment, and so you must insure it against the possible risks, such as theft, malicious damage, fire, water damage and much more.

Not only do you have to replace the stuff in the case of a loss, but your business could freeze completely because without the right equipment, you can’t operate so you need to be able to replace it without delay.

Commercial property insurance

Jazz clubs, nightclubs, event locations and snooker halls require a significant amount of property and physical assets.

This coverage protects you against loss and damage of assets caused by events such as fire, smoke, wind and hail storms, or riots and vandalism.

Unless you own the property outright, a mortgage lender policy, or tenant policy, is probably part of the financial deal.

The only advice we can add is to carefully check the exclusions for the special risks we listed above, so that you are not left holding the bill in case a claim does arise and gets rejected.

Workers Compensation insurance.

In most states, it is mandatory to have worker’s compensation insurance if a business has one or more employees.

Worker’s compensation insurance covers the business against any costs that arise if an employee experiences an injury or becomes sick as a result of work. “Employee” is a very broad term and it means anyone who works full time, part-time, casual or as a contractor for you.

Currently, workers’ compensation legislation provides for specific benefits to any workers who suffer work-related illness or injury.

If you wish, you can include yourself under the workers compensation policy, which means you have the benefit of such health and lost wages cover.

The benefits include medical expenses, death benefits, lost wages, and vocational rehabilitation.

Failure to meet a state’s regulations in this regard can leave you as the employer exposed to fines, penalties that could include jail time, as well as having to pay the whole claim out of your own pocket.

Are there any specialist nightclub insurance programs?

As we said before, nightclubs, jazz clubs, bars, dance clubs and the rest carry several special risks, and so many insurance companies have seen this as an opportunity to market specialized insurance policies that address these gaps in regular insurance.

Some of these are tailor-made by nightclub insurance carriers to cover the whole spectrum of what a nightclub insurance application should have.

A simple search on the internet should bring up dozens of companies that at least partly cover your business in the areas where you are vulnerable.

Alternatively, you could search for specific areas, if your general liability policy covers some but not all of your needs.

to purchase separate policies, but in our view, it’s easier to get them all covered through a single nightclub policy that packages them together. 

Restaurants, bars, taverns, event halls and snooker halls may need several of the coverages that nightclub policies offer, so it could be a good place to start before branching out into individual policies.

FAQ

What insurance does an association need?

Most of the risks that we spoke about in this article apply equally to non-commercial venues offering the same sort of facilities as a nightclub, possibly restricted to members, but maybe also as fundraisers and so on.

The main difference is that any liability that is not covered by insurance transfers over to each of the members individually, which means that you as a member of the association could in the end be held liable for the total of any claim all on your own.

This makes the need for having proper insurance even greater.

Do community groups need public liability insurance?

We can only give the same answer as for the FAQ above.

Liability doesn’t change just because the nature of the person or organization responsible is different, so any community group looking to hold such events should make sure that they are covered before they even think of going ahead.

What could nightclub insurance cost?

We can’t even begin to answer this, because the amount depends on a large number of specifics like 

• the size of your club
• the annual turnover
• the number of customers you typically serve etc. 

Other things like 

• the location of the club
• how long you’ve been in business 
• whether you offer live entertainment 

also have an effect on the total.

As well, your prior history of claims and your personal history may affect the rates.

You should get the help of qualified brokers or agents to find the nightclub insurance coverage your business needs.

They should be able to identify which insurers cater to your needs, with affordable and sufficient protection that’s within your budget.

Final thoughts

Owning or running a nightclub or similar location can be one of the best business ventures available for you, but it’s good to become aware up-front of the possible risks that being in this field carries, and to proactively take out all the necessary insurance so that in the event of some accident or outbreak, you have the necessary protection in place.

related article: DJ Insurance