Opening a restaurant is a huge undertaking. Going from concept to opening night will take a lot of time, planning, effort, and cash. What’s more, you’ll need to have all of your legal ducks in a row. That includes permits, inspections, workers compensation and — if you plan to serve liquor — a liquor license. And if you want to protect your investment and all of your hard work, you’ll need liquor liability insurance too.
What Is Liquor Liability Insurance?
If you have general liability insurance (as you certainly should) that policy includes coverage known as “host” liquor liability insurance. This coverage protects you in the event an alcohol-related mishap occurs at a company party or other event at which your company is the “host.” It does not, however, cover you when you are selling liquor to patrons in your business establishment and something goes wrong.
Liquor liability insurance protects your assets in the event of a third-party claim related to the sale, manufacture or distribution of alcohol ( for example, an intoxicated patron assaults another guest.) So if you are serving liquor in your restaurant, liquor liability insurance is a must.
What Does Liquor Liability Insurance Cover?
As with all insurance coverage, policies differ. So it’s important to look for the most comprehensive coverage you can afford. Some important considerations include:
Assault and Battery Coverage:
A lot of alcohol-related claims arise from — you guessed it — bar fights. Unfortunately, many liquor liability insurance policies contain an exclusion for “intentional or expected injuries.” What that means is that such policies will not pay a claim or reimburse your defense costs in the event an intoxicated customer punches another customer in the face, and you get sued.
When you speak to your insurance agent about liquor liability insurance, make sure assault and battery coverage is included, even if it will cost you a bit more.
Although you probably don’t allow your employees to drink alcohol while on the job, there’s no guarantee that they won’t. Who hasn’t seen a generous patron buy a good bartender a drink? More importantly, who hasn’t seen a bartender say “Sure, why not?”
An intoxicated employee is very bad for business. And their behavior can lead to third party injuries, an insurance claim, or even a lawsuit. That’s why including your employees as patrons on your policy is a must.
Virtually all liquor liability insurance policies include defense costs. But some policies include those costs within the policy limits, which can leave you holding the bag for legal fees. Let’s say, for example, that you have a $250,000 policy limit and the court orders a judgment of $200,000 on a legal claim. The remaining $50,000 may not be sufficient to pay attorney’s fees and other defense costs in the case. That means the remaining cost will fall on you.
When you choose a liquor liability policy, make sure that defense costs fall outside the policy limits. That way you’ll know that all of your costs are covered if you have to defend a difficult case in court.
Mental Pain and Suffering
As any attorney will tell you, not all third party lawsuits are associated with physical injuries. Depending on the circumstances, mental anguish, pain and suffering, and emotional distress are all compensable losses under the law. So protect your assets with a policy that covers both physical and mental injuries to be safe.
What Does Liquor Liability Insurance Cost?
The cost of liquor liability insurance is affected by a number of factors, including the laws in your state. Many states have put in place statutes known as “dram shop laws.” These laws impose liability for injuries caused by intoxicated patrons on the establishment that served them alcohol. However, in many states, the liability only applies if the server was negligent, either by serving alcohol to an obviously intoxicated patron or serving someone who was underage. In those states, the premiums for coverage are relatively low, starting at about $500 per year.
Some states, however, impose strict liability on the entity serving the alcohol, even if no negligence took place. In those states, you can expect your premiums to be relatively high.
Other factors that impact the cost of liquor liability insurance include:
- Types of alcohol sold
- Hours of operation
- Type of venue ( e.g. dance club, bar, bar/restaurant)
- Square footage of establishment
- Average price of drinks
- Happy hours and drink special
At The Carmoon Group, we specialize in helping small businesses grow. Whether you’re just starting out in the hospitality industry or are expanding your operations to include liquor sales, give us a call to discuss your needs. We’ll put together a comprehensive insurance package that provides optimal coverage at a price you can afford. No time to call? Contact us online and we’ll get back to you right away.