Liquor Liability Insurance: What You Need to Know

Jun 16, 2023 · 5 minutes to read

Liquor liability coverage, like a well-mixed cocktail, ensures your protection from the risks involved in serving alcohol.

What is Liquor Liability Insurance?

Liquor liability insurance in Illinois protects businesses that manufacture, serve, and sell alcohol. This specialized insurance is specifically designed to cover any losses caused by intoxicated customers, offering comprehensive coverage for a range of potential scenarios. These losses include:

  • Legal Costs
  • Lawsuit settlements
  • Property Damage Repairs
  • Medical costs incurred by injuries

Say, for example, that you have a customer who is drunk in your restaurant. On their way to use the restroom, they knock another customer to the floor. The guest who falls breaks their wrist and sues your business for the medical costs.

Liquor liability can pay for medical expenses and legal fees. Liquor liability insurance generally covers:

Property damage. A drunken patron slurps red wine at your restaurant’s bar while sharing a story. Unluckily, the wine spills on a patron’s $900 designer shoes.

Slips and falls. Intoxicated customers can cause injury to themselves or other guests at your establishment.

Bodily Injuries. A group of friends gathers to celebrate a friend’s birthday with drinks and dinner. The group leaves without seeming drunk, but on their way home they cause a serious accident that injures another driver. If the driver is over the legal limit, your business may be liable for damages.

Who is eligible for Liquor Liability Insurance?

You will need to purchase liquor liability insurance if you sell or serve alcoholic beverages.

All food service businesses, whether they are small or large, can benefit from coverage.

In 30 states, some laws hold businesses that serve alcohol liable if they sell or serve alcohol to people who injure or kill others due to their intoxication. The “dram-shop laws” are what we’ll be discussing in the next section.

Some states do not require you to have liquor liability insurance. However, if you rent your restaurant space, your landlord may insist that you purchase it. Insurance coverage may be required by business property owners to protect their properties from damage caused by alcohol.

Banks and lenders, who are interested in protecting their investment (you), may also ask you to purchase this coverage. From their perspective, having liquor liability insurance reduces your risk.

Some states require proof of insurance to obtain a liquor license.

Why is Liquor Liability Important?

Here are several reasons why having liquor liability coverage is a must-have:

1. Dram shop laws

The term “dram shops” is used to describe a bar or pub that sells alcohol by the dram – basically, by the spoonful. It seems that this is how people used to drink in the old days.

Dram shop laws are state laws that make a business responsible for serving or selling alcohol to intoxicated individuals who cause injury or death.

Say, for example, a group of friends comes to your restaurant to celebrate the birthday of a friend. They have fun and order several rounds of drinks. On the way home, they have a car crash that causes injuries to the other driver. If the driver exceeded the legal limit, you can be sued.

In the United States, any business serving alcohol can be held responsible. The laws vary from state to state. It’s best that you check the liability in your area.

2. Alcohol-related incidents are not covered by general liability

You may have assumed that you are covered by your general insurance. However, alcohol-related incidents are not covered by general liability insurance.

Liquor liability is excluded from most commercial general liability policies. Businesses can purchase a standalone policy or bundle the coverage with general liability insurance.

3. Legal fees and settlements add up

A lawsuit can create unplanned costs, such as attorney fees, court costs, or damages. Even the most popular restaurants in town could be ruined by these costs.

The cost of defending a lawsuit before it reaches the court can be thousands of dollars.

Accidents can happen even if you follow strict protocols for handling drunken people or preventing overserving. A single incident that occurs if you are not adequately covered can hurt your bottom line.

Host Liquor Liability vs. Liquor Liability

Liquor liability is often discussed in conjunction with host liquor liability. Host liquor liability insurance is short-term and has overlapping coverages. However, it is different from liquor liability.

This insurance is for people or companies who host private events, such as weddings and corporate events. Most hosts are unaware that providing alcohol to their guests at special events could make them liable for the actions of their guests.

The host liquor liability insurance does not cover businesses that manufacture, sell, or serve alcohol as part of their operation. This is more for businesses that temporarily allow alcohol consumption.

It can be bought for a specific event or for a short time on site.

How can I obtain Liquor Liability Insurance?

BizInsure makes it a priority to make liquor liability insurance available to all business owners, whether they serve drinks at the table or offer drinks to go.

All your insurance options are in one place, making it easy to understand.

How much does liquor liability insurance cost, though? It depends on what type of business it is, but BizInsure Insurance can provide a quick quote.

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