If you’re running a restaurant and have alcohol on the menu, you will need to have secured a liquor license, but there are many things to consider, including insurance.
Every business that sells alcohol needs to have liquor liability insurance to ensure the owners can relax and focus on running the business, and to be covered in case you are sued by a customer who drank at your establishment, later crashed their car and sued you for not cutting them off when they had had enough.
What is liquor liability insurance?
Liquor liability coverage protects you from financial liability if you sell alcohol in your business. It is different from general liability insurance.
General liability insurance covers you and your business when claims are made due to personal injury, bodily injury and property damage. Host liquor liability is part of your general liability insurance policy, but it will only cover you when you cater an event outside your normal place of business.
Liquor liability insurance covers you and your business if you serve, sell or manufacture alcoholic products. The policy provides coverage for legal fees, settlements and medical costs associated with bodily injury or property damage caused by an intoxicated person, who was served or sold liquor by the policyholder. Most states require that restaurants purchase liquor liability insurance if they deal in alcohol.
Some business owners may pass on securing this type of insurance to avoid the added cost. However, that could be a decision that could end up sinking their business in case they are ever sued over an issue with alcohol.
Why you need it
There are various situations where you need liquor liability in restaurants. For instance, if you serve a customer alcohol and they die or are injured driving under the influence, you and your business could become a target for a lawsuit. Their lawyers are likely to argue that you continued serving alcohol to a customer who had had enough.
The victim or their family has grounds to sue you for damages. This law, called the Dram Shop law, may seem unfair, but is used in 38 of the nation’s 50 states. Liquor liability insurance covers legal fees, penalties, court costs and damages.
This type of insurance is similar to having a homeowner’s insurance policy. It is better to have one than to be sued personally by people injured in your building. It helps reduce costs and shield your business from losses if a customer is injured or involved in an accident after leaving your premises.
What else liquor liability insurance covers
Apart from lawsuits when a patron leaves and gets into an accident, liquor liability insurance can protect you in the following situations:
Assault and battery claims ― Restaurants and bars are often sued due to fights that break out among customers who have been drinking. Liquor liability policies cover this, and chances are you will need this cover when running a bar or a restaurant.
Defense cost coverage ― Defense costs are expensive. It is, therefore, essential to have legal fees covered outside the policy, which leaves enough money to deal with damages.
Employees as patrons ― Whether you allow it or not, your employees may drink while working. It is, therefore, essential that you make sure that your policy covers your employees as patrons.
Mental injuries ― A claim may cite stress, mental anguish or anxiety as a form of psychological damage due to events at your establishment. Most liquor liability policies do not cover this, so review your policy and ensure that it does.
It’s important that you maintain your liquor liability insurance as long as you have a liquor license. Letting it lapse can result in your license being revoked.
But critically, when alcohol is in the picture, problems can occur particularly when people become intoxicated. It’s important that you protect what you’ve built by ensuring that you keep your policy current.
BGES Group’s office, located in Larchmont, NY is a full service insurance agency offering, Property, Liability, Umbrella Liability, Business Auto, Bid & Performance Bonds, Inland Marine, Worker’s Compensation, New York State Disability, Group Health, Life insurance, Personal lines and Identity Theft.
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