Liquor Liability Insurance Coverage: FAQs

Selling, manufacturing, and serving alcohol can bring about a certain amount of risk for any business. Intoxicated people can cause serious property damage and/or bodily injury to themselves or other people. It is essential that businesses that handle alcohol in any way have comprehensive liquor liability coverage to protect themselves from financial responsibility should an incident occur. Read on for FAQs associated with liquor liability insurance coverage.

What is Liquor Liability?

Liquor liability insurance provides coverage for companies that sell, serve, or manufacture alcohol. Generally, it covers legal fees, settlements, medical costs, and property damage caused by an intoxicated person who was served or sold alcohol by the policyholder. Any business, regardless of size, is exposed to liquor liability, and many are required to obtain coverage by law.

What is Host Liquor Liability?

Host liquor liability coverage is insurance under a commercial general liability policy for businesses that have incidental exposure to alcohol. An example of this would be a company holding an office party at which an employee becomes too intoxicated, drives home, and injures a pedestrian. In this case, host liquor liability coverage under commercial general liability policy may cover the expenses resulting from this incident. On the other hand, if a person became too intoxicated at a bar and assaulted another person, the bar would need liquor liability insurance to cover the incident.

Who Needs Coverage?

Any organization that handles alcohol in any capacity can benefit from the peace of mind afforded by liquor liability insurance. Examples include:
• Bars
• Breweries
• Restaurants
• Liquor stores
• Wineries
• Caterers
• Convenience stores
• Grocery stores
• Concert venues

Which Factors Influence the Cost of Coverage?

• Profession – Rates generally vary based upon industry. Certain organizations face risks that others do not. Costs depend upon level of risk, so certain industries can expect to pay a bit more than others. You can manage your workplace risks by providing alcohol service training, ensuring that your staff is checking IDs thoroughly, serving water alongside alcoholic beverages, and encouraging patrons to consume food along with alcohol by offering discounted menu items.
• Exposure – However much of a company’s overall sales and transactions involve alcohol will certainly influence coverage costs. For example, a convenience store with 5% alcohol sales will pay less than a business in which alcohol accounts for a large portion of sales, like a winery.
• Location – Location bears a significant impact on how much you can expect to pay for liquor liability insurance. Businesses located in areas with high numbers of total claims will generally have to pay higher insurance fees than those in areas with fewer claims.
• Claims History – Insurance companies view companies with negative claims histories as higher risk. Therefore, rates are typically higher for companies with poor claims histories than those that are claim-free.

What are Dram Shop Laws?

Dram shop laws are laws that hold businesses accountable if they serve patrons who are clearly intoxicated. These laws exist in 43 states and make it easier for businesses to be sued, especially if the intoxicated patron harms someone else. A business that does not have liquor liability coverage could be in serious trouble if an incident occurs. The likelihood of an intoxicated person committing an offense or causing damage or injury is obviously high, so it is important to be as prepared as possible.

Which States Have Dram Shop Laws?

• Maryland
• Virginia
• Delaware
• Nevada
• Louisiana
• South Dakota
• Nebraska
• Kansas

What is Covered Under a Liquor Liability Insurance Policy?

Liquor liability insurance is intended to protect businesses that handle alcohol in a variety of situations. Examples include:

• Assault and Bodily Injury – If an intoxicated person injured someone else or gets into a fight, you could end up liable for medical expenses. It is critical to have liquor liability coverage in place to protect yourself should someone file a lawsuit against your company.
• Sexual Harassment and Assault – Issues regarding harassment are common at events and businesses that sell alcohol. Sexual harassment and assault can lead to a mess of serious legal and/or medical expenses. Liquor liability coverage can protect you in the event of a sexual assault or harassment case.
• Third-Party Property Damage – Liquor liability insurance can cover the costs of repairing and replacing another person’s property that has been damaged by an intoxicated person. For example, if an intoxicated person vandalizes a building after leaving your establishment, coverage can pay for the damages and associated legal expenses up to the amount of your policy’s limit.
• Legal Costs – If a business is sued over an incident related to an overserved patron, liquor liability insurance can help cover settlements, attorney’s fees, and other court costs.

What are the Limits?

An insurance limit is the maximum amount of money an insurer will pay towards a covered claim. The higher your liquor liability limit, the higher your premium will likely be. Average median limits for liquor liability insurance are usually in the range of $2 million for bars and $1 million for restaurants. Some states set specific requirements for policy limits. For example, businesses located in South Carolina that serve alcohol after 5 p.m. are required to carry a minimum of $1 million in liquor liability insurance. Your location and its unique risks and hazards are a major factor in determining the limits of your liquor liability insurance, so it is important to work with an underwriter.

What is Not Covered by Liquor Liability Insurance?

• Libel
• Slander
• Incidents related to underage drinking
• Damage to your business property

Contact us

If you are interested in outfitting your business with comprehensive liquor liability insurance,, call 888-9OSPREY (888-967-7739) or get a free online quote today. OspreyWatch, powered by Osprey Underwriters can help select the best insurance products for your specific needs and safeguard your business against liquor liability claims.