Liquor can affect people in different ways. Some have an extremely high tolerance for alcohol while others become intoxicated after one alcoholic drink. If your business revolves around alcohol, and you manufacture, sell, or serve liquor, it’s a good idea to have liquor liability insurance.
This is also sometimes called dram shop insurance. Liquor liability insurance gives you and your business extra protection from the risk involved with selling or serving alcohol.
An establishment does not have to exclusively sell alcoholic beverages, like bars and liquor stores, to need this type of insurance. Aside from these types of establishments, convenience stores, grocery stores, and restaurants that sell and serve alcohol should also avail of liquor liability insurance. While not all states require businesses to have this type of liability coverage, many of them do.
Liquor liability insurance coverage pays for medical costs, legal fees, and settlements that might arise from damage or injury caused by an intoxicated person you sold or served liquor to. For example, if a guy became intoxicated at your bar and then got into a fight with someone while under the influence of alcohol, you may be held liable for damages because it was your business that served him the alcoholic drinks that got him intoxicated enough to the point to cause harm to another person.
In the United States, forty-four states plus the District of Columbia have dram shop laws. Dram shop is a legal term that refers to bars and taverns, pubs, and other establishments that serve liquor and where liquor is consumed. These laws specifically hold the store or bar that served alcohol liable for the actions of the intoxicated individual who caused bodily or property damage due to his or her consumption of liquor.
Each state has a different set of dram shop laws so it is important to be aware of what laws apply to your business, depending on the state it is operating in. This is especially important for businesses who have different branches in different states, for example, a restaurant that serves alcohol currently opening different branches in multiple states, to make sure that they are following the specific dramshop laws of each state.
What does liquor liability insurance cover?
The coverage of liquor liability insurance varies depending on the insurance company and what kind of coverage you want, but coverage often includes:
- Legal costs – costs of hiring a lawyer, going to court
- Bodily injury
- Assault and Battery
- Mental or Psychological damage
- Property damage
- Employee coverage
- Specific incidents – such as shootings, sexual abuse, or stabbing
The following are not included in liquor liability insurance coverage:
- Libel and slander
- Damage to your business and property
- Incidents related to underage drinking
A basic general liability insurance policy does not include liquor liability insurance. This is a separate insurance policy that increases the overall coverage and protection of the business to cover for any unforeseeable events in the future. It can be added on as an endorsement to a general liability policy or it can be bought on its own.
How much does liquor liability insurance cost?
Like other types of insurance, the cost of a dram shop insurance policy varies depending on several factors:
1) Exposure – For example, a liquor store that gets 80% of its sales from alcohol will pay more than a convenience store that only has 15% of its sales come from liquor.
2) Profession – Rates also depend on the industry. For example, a grocery store is in a completely different industry from a bar, although both sell alcoholic beverages.
3) Claims history – If a business or establishment has a poor claims history, they can expect to pay more than another business that has a zero claims history.
4) Location – The state you are in, as well as the number of claims in your area, will also have an impact on the cost of your liquor liability insurance policy.
Aside from these factors, these also affect the cost of liquor liability insurance specific to your needs:
1) What kinds of alcohol are sold
2) Square footage of the bar, restaurant, or tavern
3) Average price of drinks
4) If there are any happy hour specials
5) Hours of operation
6) Food vs. alcohol receipts, if applicable
7) If the establishment is an entertainment venue, offers live music and entertainment
8) If there are bouncers and doorkeepers
9) Server training and certification
10) State where the business is located
All these factors affect how much your liquor liability insurance will cost. It is best to consult with a reliable and established insurance company regarding the kind of policy you need and how much it may cost.
In general, a basic dram policy usually starts at around $500 a year per policy for a small business to thousands of dollars a year for big businesses.
No matter how much liquor liability insurance will cost you and your business, it is well worth the price. It is usually more cost-effective to purchase liquor liability insurance with a general liability insurance policy or commercial insurance package compared to buying it on its own.
However, as mentioned above, it is a must that you educate yourself on the kind of liquor liability insurance the state you are operating in requires.
It is also important to remember that liquor liability coverage is different from host liquor liability coverage. The latter type of coverage protects businesses and establishments that don’t sell alcohol but do allow people to drink it on their property. This is already included in a general liability policy.
One more important thing to take note of is that there are 2 kinds of insurance companies – admitted carriers and non-admitted carriers. Admitted insurance carriers are those that are required by law to report and file rates with the state and are under the jurisdiction of a state’s Department of Insurance.
Non-admitted insurance carriers may or may not file rates with the state. However, these types of carriers have to prove to the state that they are financially capable of paying for claims and engage in the insurance business.
In some cases, it might be easier to find a non-admitted carrier to provide your establishment with liquor liability insurance. As long as you know that the provider is a reputable insurance company and is well-established, then this option works just as well as getting insurance from an admitted carrier.
The most important thing is that you have general liability insurance and liquor liability insurance to protect yourself and your business from being held liable for customers that may get into legal tangles, such as causing bodily injury or property damage, while under the influence of alcohol that he or she bought from you. Another way of mitigating the risk of serving alcohol is to train your employees to identify patrons or a customer that have had too much to drink.
Although this can be a slippery slope, (do you continue to earn from this patron and keep him as a happy and loyal customer, or do you stop serving him because he might get into a car accident or worse). In the long run, it’s better to stop serving the customer after a certain point rather than to have to face legal issues later on.
Many insurance companies now offer online quotes for liquor liability insurance, making it easy and convenient for businesses to shop around for the best policies that cover their needs and give them the necessary protection. In any case, liquor liability insurance is a definite must-have for any establishment that serves or sells alcohol.