If you sell or serve alcohol, you need have a liquor liability exposure!
Damages resulting from the serving, sale or distribution of alcoholic beverages are covered by liquor liability insurance. Businesses of all kinds can have a liquor liability exposure if they:
- Host a party for employees, clients, vendors, etc. that makes alcoholic beverages available.
- Gift alcoholic beverages to clients, vendors or employees at holidays or special occasions.
- Sponsor an offsite trip or excursion that includes the consumption of alcoholic beverages.
Think of the company Christmas or Halloween Party or the group sponsored night at the ballpark or the bottle of wine your vendor brings by after a great quarter of sales. All of those events could generate bodily injury or property damage associated with:
- Causing or contributing to the intoxication of any person
- Furnishing alcohol to a person under the drinking age, even if done by accident
- Furnishing alcohol to a person already under the influence of alcohol
The Commercial General Liability (CGL) insurance policy provides Liquor Liability coverage to most businesses. However, the CGL policy contains an exclusion that removes Liquor Liability coverage if you are in the business of making, distributing, selling or furnishing alcoholic beverages. That means that restaurants, taverns, hotels, beer distributors, package stores, grocery stores or any other retail or service business that provides alcohol in the course of their primary operations needs to obtain a special Liquor Liability Policy in order to maintain proper liability protection.
Liquor Liability insurance policies provide coverage in a wide range of potential claims. Examples include, but are not limited to:
- A Six Pack shop that is sued by parents of minors who injure themselves perform backyard stunts after consuming malt beverages it sold to them.
- A hotel lounge that is sued by a guest who is injured by an intoxicated person that knocks them down while exiting the bar area.
- A sports bar that is sued by a customer who is injured by two intoxicated patrons that get into a fight over a football game.
- A restaurant owner who is sued by the family of a woman killed by a drunk driver that had visited the restaurant during happy hour.
The Liquor Liability policy does have a few important limitations. There is no coverage for injury caused by the actual alcoholic beverage such as alcohol poisoning for over-consumption or food poisoning from contaminated beer.
Some policies exclude Assault and Battery (example 3 above), please read your policy carefully. Also, there is no coverage for intentional or deliberate acts. An example of this would be lining up 21 shots for someone turning 21, or intentionally over-serving someone to see how much they could take.
In Pennsylvania, there is strict liability associated with the sale and serving of alcohol. This means that if your establishment is the first stop on a wild night of drinking, and someone is seriously injured as a result – you will be involved in the lawsuit no matter how little alcohol was actually consumed at your location. Pennsylvania Dram Shop laws are recognized as some of the toughest by insurance companies, and many providers will not offer liquor liability in the Commonwealth.
Some tavern owners don’t believe the benefit of a liquor liability policy justifies the cost. They structure their business so their personal assets are not at risk and roll the dice that they will never get caught up in a claim.
What they’re missing is that the liquor liability insurance policy also covers them personally if they are named in a lawsuit, as well as their employees. If a plaintiff attorney decides filing a lawsuit is worth it, even in the absence of a liquor liability policy, then the unprotected establishment will be facing large attorney’s bills and the threat of bankruptcy. The same could ALSO be true for the owner and employees depending on how the suit is filed.
Liquor liability insurance can be very expensive. It can cost many thousands of dollars a year, and if you never have a claim, that will be money “down the drain” so to speak. It’s a bad deal until you get sued and that same policy pays tens of thousands of dollars in attorney bills on top of the $1 million judgement.