The Importance Of Liquor Liability Insurance

Selling or serving alcohol opens your business to many types of unforeseen liabilities. In the event that an inebriated customer injures their self or others, it's your business that ends up on the hook for medical bills and other damages. It's important to have the right type of insurance coverage that protects you against these liabilities.

How It Protects Your Business

Imagine an intoxicated patron leaves your bar in their vehicle and subsequently becomes involved in a serious or even fatal accident with another vehicle. Now imagine the family of the victim recovering the losses they've suffered by filing suit against your bar or restaurant, even if you weren't directly responsible for the accident itself.

For many establishments, a single lawsuit can have devastating effects on its survival and the livelihoods of the owners and employees. Out-of-pocket expenses for a typical lawsuit can reach the tens of thousands of dollars, in many cases. If you have general liability coverage, you'll find that your policy specifically excludes liquor-related damages, making a liquor liability policy a necessity.

Such policies offer significant financial protection against liquor-related lawsuits. With a typical liquor liability policy, your insurer handles the costs of your defense at trial. If you're found liable for damages, your insurer may also cover the compensation as long as it's within your policy limits. While most liquor liability policies are sold separately, insurers can bundle them within a general liability policy.

It's not out of the ordinary for a business to skip on liquor liability coverage or reduce their coverage amounts to more affordable levels. However, a lack of coverage or even inadequate coverage can leave your business financially exposed.

Covered Circumstances

Drunk driving isn't the only circumstance that your establishment could be held liable for. Most liquor liability policies cover a broad spectrum of incidents fueled by intoxication and alcohol-related impairment:

  • Assault and battery – Most liquor liability claims stem from fighting among restaurant and bar patrons. In addition to the actual combatants, the witnesses may also be able to sue your establishment for mental anguish and other damages.
  • Slip-and-fall while intoxicated – In some states, your establishment can also be found liable if an inebriated patron injures their self while tripping, slipping and falling on the premises.
  • Alcohol poisoning – Your establishment may also face civil and even criminal liability if a patron is injured or dies due to a severely elevated blood-alcohol content.
  • Sexual harassment and/or assault – Victims may also be able to sue your establishment if they are attacked by an inebriated patron.

Key Factors to Consider

There are plenty of factors that influence the amount of coverage your business needs. These factors include:

  • The type of establishment you operate
  • The civil liability and criminal penalty statutes in your state and municipality
  • The types of claims to be covered in your policy

Most liquor liability policies are tailored to the states they're sold in. Dram shop laws vary throughout the states, with some states imposing stricter guidelines on alcohol sales and service than others. As a result, a policy's monetary liability limits often depend on the dollar amount set by the establishment's state.

Some states set maximum amounts that victims can receive for damages and injuries in a lawsuit against alcohol retailers and restaurants. For instance, Illinois' dram shop laws limit judgment and recovery to a current maximum of approximately $65,000. Nevertheless, it's common to see liquor liability policies with primary limits ranging from $250,000 to $2,000,000 or more.

Also, keep in mind that the protections offered by your liquor liability insurance policy do not apply if your establishment violates local and state regulations concerning alcohol sales and consumption. For instance, your coverage won't be effective if your store or restaurant sells or serves an underage drinker.