What is Liquor Liability Insurance?
Underage Drinking, Over-Service and Fights Can Create Liability
Liquor liability insurance is a type of insurance for businesses that sell alcoholic beverages. For example, a convenience store, a night club, bar/tavern or country club. Organizers of special events may, too, want or need liquor liability insurance.
Why would a business obtain this insurance? Because selling alcoholic beverages is inherently risky. The greatest (but not the only) risks are service to underage or obviously intoxicated patrons—and fights (assault and battery). Some businesses are at greater risk than others, based upon the type and size of the business and their alcohol-serving policies and practices. For example, a huge night club with live entertainment that caters to a young crowd has more risk than a café.
Liquor liability insurance is designed to defend a business against a lawsuit due to an injury, death or property damage from negligent and/or illegal alcohol service.
Having insurance doesn’t prevent liability, though. Licensed businesses are only insured to a certain level of coverage. Beyond that, the licensee is responsible for paying the claim.
In applying for liquor liability insurance, an insurance company may ask you about these or other issues:
- Entertainment (live band, etc.)
- Dance floor
- Gross annual revenues of food vs. alcohol
- Square footage of business
- Average age of patrons
- Drink promotions and happy hours
- Responsible beverage service training for all employees
- Age verification procedures
- Type of clientele (local workers vs. college students, etc.)
- History of alcohol-related problems at the business
Liquor liability insurance is important, but a business needs more to guard against liability. Implementing responsible business practices is the best protection against liability. The main responsible business practices include:
- Discouraging intoxication
- Promoting non-alcoholic beverages and food
- Promoting safe transportation alternatives
- No drinking on duty
- Responsible promotions and marketing
- Implementing comprehensive training
- Maintaining adequate number of employees to properly monitor patrons
- Having a standard hiring system
- Having a system for rewarding and disciplining employees
- Implementing and enforcing written alcohol management policies and signage
Some insurance give discounts up to 20% for businesses that implement training and responsible business practices. A qualified insurance professional can provide you with details, such as cost, discounts and coverage.
March 5th, 2013 at 10:18 pm
Cab, thanks for your question. Normally, a social host (as opposed to a commercial vendor) who provides alcohol to an adult guest is immune from liability when third persons are injured due to that adult guest’s intoxication. Still, the host has a duty to not serve an obviously intoxicated or underage guest. Whether a licensed establishment or a private, unlicensed social event, it is vital to control the drinking environment with drink limits, offering alternatives to alcohol, serving food to slow intoxication, designating drivers, checking IDs on anyone who looks under 30 years old, and not over-serving alcohol. These are the best ways to reduce risk of liability. “Liability,” of course, being lawsuits or arrest and prosecution for violating state liquor laws. Venue owners can stipulate these types of event policies in their rental agreement with the host.
March 4th, 2013 at 12:24 am
We have a very large home (used to be a clubhouse in CA). We occasionally rent out the auditorium and I request liability insurance (with us as additional insured). In this case it will be a bereavement memorial. There will be no charge to attendees, except I will be charging the host for use of the venue. They wish to provide wine. It looks low risk, but I am fearful about liability. Might venue owners be held responsible for host alcohol?