Why You Need Liquor Liability Coverage for Your Small Business
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Liquor liability insurance is a type of business insurance that can be defined as coverage for 3rd party bodily injury or damage caused by someone you (the policy-holder) served alcohol to. The insurance policy can provide coverage for settlements, legal costs, and medical expenses. Let's say, for example, you’re a bartender at a local business and a patron appears to be getting inebriated. You are responsible to cut them off. If you do not do so, you may be held legally liable for the actions they take. If you sell or serve alcohol to customers as part of your business, you need liquor liability insurance coverage.
Host liquor liability insurance—also referred to as dram shop insurance—is an endorsement under a general liability insurance policy meant for businesses and/or companies that occasionally serve alcohol. For example, your company hosts an annual Christmas party at which alcohol is served. Some incidents can be covered under your general liability policy vs. liquor liability insurance. Caterers or event organizers may need to temporarily get host liquor liability coverage for events.
Another type of host liquor liability can be purchased for one-time events such as weddings, family reunions, fundraisers, etc. The cost for covering a one-time event depends on whether or not there is an open bar, the type of alcoholic beverages being served, how many people are in attendance, and so forth. This coverage ensures protection against potential claims arising from alcohol-related incidents during the event.
Dram Shop Laws allow 3rd-party victims of assault and battery, sexual assault, or property damage to bring civil lawsuits not only against the individual that inflicted the damage, but also the establishment and/or person who served the alcoholic beverages. Under dram shop law, the suing parties can receive compensation from both entities if the intoxicated person is found guilty.
43 states have Dram Shop laws. Those that don’t include: Nevada, South Dakota, Nebraska, Kansas, Delaware, Maryland, Virginia, Louisiana. Even though these states may not require liquor liability coverage, your financial institution or landlord may require you purchase this coverage.
Any business(es) that serve alcohol need liquor liability insurance, including but not limited to:
NOTE: Liquor liability is excluded from many general liability insurance policies and coverage must be purchased separately by the business (unless it's a temporary host liquor liability add-on).
There are a few ways that you can protect yourself and your business and mitigate the risk of an event you’ll be held liable for:
Liquor liability insurance costs vary widely depending on certain factors. So what influences the cost of liquor liability?
If you provide alcohol awareness training to your employees you may be offered a discount on your insurance costs. Consult with your business insurance carrier to see if that’s an option for lowering coverage costs.
Another way to lower the cost of your annual premium is to look for insurance companies that offer business owners' policies. It can be a great way to save money and bundle the coverage you need. Most BOP's include general liability, property insurance, and business interruption insurance.
Protect your business from the risks of alcohol-related incidents by connecting with one of our agents to get a quote for liquor liability insurance. You can complete the form at the top of our page to start the process online and one of our specialists will reach out. Or you can give us a call at 877-907-5267.
Reviewed By: Sarah Reid, Licensed Agent
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