Liquor Liability Insurance Basics

“Drinking makes such fools of people, and people are such fools to begin with that it’s compounding a felony.” -Robert Benchley

You see it at sporting events, the company Christmas party, college campuses, bars, restaurants, weddings, concerts, tailgate party’s, birthdays, BBQ’s, everywhere! The list goes on. Booze is everywhere! The problem is, where there is alcohol being served or sold, there are always those who have had ten too many.

Those who get “over-served” often do dumb things which can be harmful to themselves and/or other innocent parties whom they encounter. That’s why businesses which manufacture, sell, serve, or facilitate the use or purchase of alcohol need to purchase liquor liability insurance.

Liquor liability insurance is a form of commercial insurance that protects businesses against loss or damages claimed as a result of a patron becoming intoxicated and injuring themselves or others. It provides coverage for bodily injury or property damage resulting from:

  • Causing or contributing to the intoxication of any person;
  • Furnishing alcoholic beverages to a person under the legal drinking age or under the influence of alcohol; or
  • Violating any statute, ordinance, or regulation relating to the sale, gift, distribution, or use of alcoholic beverages.

Liquor liability is either sold as an add-on to a commercial liability policy or as a totally separate policy.

Liquor Liability laws vary by state. Some states have passed “Dram Shop Liability” laws which make it possible to hold those who serve alcohol to an intoxicated or underage customer responsible for damage or injury caused by these individuals. Most of these laws offer an injured person, such as the victim of a drunk driver, a method to sue the person who served the alcohol.

Originally, Dram Shop Liability laws were intended to apply to taverns, bars, and other establishments selling and serving alcohol. However, “social hosts” (such as those hosting a holiday party) also have some exposure to the risk of liability for serving alcohol.

When business owners host a holiday party and serve alcohol as part of the festivities, liquor liability would most likely be covered by their commercial general liability policy, but that is not a guarantee. It is best to check with your insurance agent first.  Host liquor liability is a coverage under a commercial general liability insurance policy for businesses not ‘in the business of’ serving, manufacturing, distributing, selling, serving or providing alcohol.

Although damages in liquor liability lawsuits can be substantial, businesses often lack adequate liquor liability coverage. This exposes them to a substantial degree of liability. No matter how many measures a business owner takes to limit their liquor liability exposures, there’s no guarantee they won’t be dragged into a suit.

Drinking makes fools of people. Don’t allow their foolish actions ruin your business.


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About Jimmy Kinmartin - Business Insurance & Risk Management

Jimmy is a California licensed Property & Casualty AND Accident & Health insurance agent working at the Olson Duncan Insurance brokerage based in Torrance and Irvine, CA. He grew up in Fullerton, CA and graduated from Servite High School in Anaheim and Loyola Marymount University in Los Angeles and currently lives in Tustin, CA. Have questions? Just ask! Or, follow Jim on Twitter at @JimKinmartin

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