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Liquor Liability Insurance Explained

What is liquor liability insurance?

Liquor liability insurance serves an important layer of protection in many other business operations out there right now. What does this type of insurance offer its subscribers, and what kinds of companies are typical buyers? 

Provided Protections Against Lawsuits

Unlike most other kinds of insurances, liquor liability insurance uniquely protects many of the potential liabilities associated with vending alcoholic beverages in a business setting. In most cases, this protection is that of financial coverage against the costs of lawsuits involving the vending of alcohol. Should some accidents occur, this insurance covers its carrier for those subsequent costs. 

Typical Scenarios Covered:

  • Accidental injury – An intoxicated customer falls and injures themself or gets into a car accident. A lawsuit could be filed against you, holding you liable for medical costs.
  • Property damage – An intoxicated customer reverses his vehicle into another customer’s car in your parking lot. The patron sues, holding you responsible for restoring the car.
  • Assault and battery – An intoxicated client starts a fight and injures another customer, who sues your company. 
  • On-the-job drinking – Bartender drinks on the job and gets an accident on the way home. A lawsuit could be filed against you, holding you liable for medical expenses.

Implications of State Law

Most states strictly require liquor liability insurance for businesses to gain a liquor license and subsequently deal with alcoholic beverages. Beyond this, what is known as “dram shop laws” also call into necessity liquor liability coverage. These laws, also found in most states, hold an alcohol vendor responsible if they sell alcohol to a noticeably intoxicated person. 

The only states that do not have dram laws:

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

In states with dram laws you may be responsible for covering:

  • Legal fees
  • Medical bills
  • Settlements

Primary Businesses

The primary patrons of this kind of insurance coverage are alcohol vendors. The types of vendors can range greatly, however. Examples of specific types of businesses that heavily rely on liquor liability insurance include hotels, bars, lounges, restaurants, taverns, breweries, and distilleries. In some states, even those businesses involved with simply advertising alcoholic products become regular patrons of this type of insurance.

Purchasing Liquor Liability Insurance 

Liquor liability insurance can be purchased as a standalone policy or added to another policy like a business owner’s policy (BOP) or general liability policy. The cost is determined by several factors, including company size, deductibles, and coverage amounts. 

Final Takeaway

Liquor liability insurance provides an essential layer of insurance coverage for alcohol-vending businesses. In most states, this is a required coverage for such alcohol-vending operations. Finally, as a best practice, many companies also elect to complement or “bundle” this unique insurance offering with numerous others for the utmost protection against business liabilities and risks.

Updated on April 22, 2020

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