Liquor liability insurance is an important but underutilized insurance protection that any establishment that sells alcoholic drinks for consumption on their premises should consider purchasing. Many bars and restaurants do not fully understand this insurance policy and as such go without this important protection.  Some don’t purchase liquor liability because of the cost of the coverage, others mistakenly believe that their general liability insurance provides this protection and still others are just unaware of this kind of insurance policy in the first place.  We are seeing a trend in states where several are now requiring proof of liquor liability insurance in order to renew your alcohol permit.  States where this is in force include Massachusetts, Rhode Island and South Carolina.

 

So what kind of loss does liquor liability protect for the bar or restaurant owner? Simply stated, if you serve alcohol to a patron who then goes out and causes property damage or bodily injury to a third party, and if you are held liable for these damages because you over- served this patron, then liquor liability insurance is the insurance coverage that you need in place to protect you from this third party liability.

 

Many bar owners might say that they are very careful and do not over serve their customers and therefore they don’t need to purchase this kind of insurance policy. Sadly though, that is not the only determining factor in who might face lability and lawsuits.  I have seen several different cases where a patron leaves one bar, relatively sober, and then visits two other bars as the evening goes on, leaving each one progressively more intoxicated than the last.  The drunken patron later causes an automobile accident and kills a young driver and all three bars that served the drunken patron over the past 8 hours are sued.  Often they all end up having legal bills and a liability judgement against them.  So this exposure is not just one that you can control with your internal procedures.  When a loss exposure is this far out of your control, insurance is the best way to protect your business and personal assets.

 

Once you have determined that liquor liability insurance is needed, how do you decide what limit of coverage to purchase? Generally I would advise that you purchase as much as you can afford.  The problem here is that your exposure to loss is essentially unknown and unlimited.  There is no way to predict the extent of your liability to an unknown third party before an accident happens.  Given that, buying more than you need would certainly be safer than buying less.

 

Your liquor liability insurance policy will be rated based on your gross sales for alcohol. You will need to make an estimate of those sales for the 12 month period of time that the policy will be in force.  At the end of the policy term, the insurance company will ask for your actual alcohol sales during that time period.  If you had underestimated this sales number, then you will owe the insurance company an additional premium.  If you had overestimated your sales, then you will be due a refund.

 

If you want more information, or if you need help setting up a liquor liability insurance policy for your restaurant or bar, please feel free to call us, toll free, at 877-687-7557 or visit our website at www.clinardinsurance.com or www.SCLiquorInsurance.com.