Liquor liability insurance insures against loss or damage originated by an intoxicated person, who causes bodily injuries or property damages as a result of liquor served in a business. Typically, businesses that manufacture, sell, serve, or facilitate any use or purchase of alcohol, need this type of insurance policy.
Liquor liability insurance is not included in the standard liability policy and therefore it should be purchased separately. Because it covers a business’s exposure to a person’s injury, assault, battery or even death as well as to property damages, the coverage is expensive. However, the insurance premium is calculated based on the location of the business. Insurance companies estimate that only 35% of the businesses that need to have liquor liability insurance actually have this policy. This is attributed to exclusions that are continually added to insurance contracts by the insurers and repel business owners from purchasing the coverage considering it as having no value.
The coverage purchased is determined by the special circumstances that the liquor is served in each business. In other words, the coverage needed depends on the exposure of the business. In particular:
– Host Liquor Liability: this provision provides coverage against bodily injuries or property damages from lawsuits by third parties injured by an intoxicated person who was served alcohol at an event hosted at a particular business. Typically, host liquor liability is included in commercial liability for businesses that do not serve, manufacture, distribute, sell, or provide alcohol.
– Liquor Legal Liability: this provision provides coverage against bodily injuries or property damages for which the business owner may become legally accountable for contributing to a person’s intoxication. This policy is not included in the general liability policy and is always purchased separately covering any business that serves, manufactures, distributes, sells, or provides alcohol for charge or no charge if a license is required for the specific event.
The point for any business is to be able to control the exposure. If an event is hosted and the host has a liquor permit for the specific event, then by default the business belongs to the businesses that serve, manufacture, distribute, sell, or provide alcohol. If an event is hosted and a fee is charged for alcohol, then by default it belongs to the businesses that serve, manufacture, distribute, sell, or provide alcohol.
Although it sounds straightforward, still the line between host liquor liability liquor legal liabilities is blurry. The best solution for business owners is to ask for advice fro their insurance professionals before hosting the event so as to avoid solving the issue in the court.
Liquor liability insurance insures against the following:
– Assault and Battery: the majority of claims against bars are associated to fights. Assault and battery claim provision should be definitely included is liquor liability policy. Or else, the policy doesn’t have a real value.
– Defense Costs: the cost of hiring a lawyer to defend these types of claims is high. Typically, in a $600,000 policy, insurance coverage is $500,000 because $100,000 is attorney’s fees. However, it is absolutely essential to have a good lawyer in case a business faces such claims.
– Damage based on mental disturb: in some cases, damages are caused as a result of stress, psychological strain or mental anguish. Insurers may exclude these types of damages and hence, business owners should thoroughly review what type of policy they purchase so as to avoid limited damage definitions.
Some important considerations
Some leading insurers in the bar and restaurant industry offer free training to insured and premium discounts up to 20% to business owners based on safety rules and clean claim history.
Employees in bar and restaurants drink regardless of the rules. Insurers are aware of that and in some cases they exclude employees from insurance coverage. To include them, business owners should declare employees as patrons.