Liquor Legal Liability Insurance – What is it and do I really need it?

By: Brent Allen
Allen Financial Insurance Group

There has always been a lot of confusion about the need for liquor liability even among insurance professionals.  Liquor Liability laws vary greatly by state and insurance policy coverage options are often confusing. Here is some basic information dealing with the subject.  The most challenging  definition in the commercial general liability policy is coverage granted for Host Liquor Legal which is defined to cover organizations who are not “in the business” of selling alcohol. 

Simply stated, “dram shop” liquor liability applies to businesses that sell alcoholic beverages and liquor.  In most states, stores, restaurants and other businesses that provide alcoholic beverages as a service or commodity are required to carry liquor liability insurance, but there are still ways by which patrons can take legal action against the establishment from which they purchased and/or consumed alcohol.

In many cases, poor policies employed by store and restaurant owners and their employees create situations that prompt legal action by the consumer.  Examples include providing liquor in venues that are do not effectively regulate mandatory age restrictions, improperly trained staff, and owners and managers who provide liquor to individuals who may prove dangerous to themselves and other patrons as a result of their intoxication level

If you operate any kind of business involved in the commercial sale or distribution of alcoholic spirits you need a Commercial Liquor Liability policy.  Liquor Legal liability insurance pays the damages for liability imposed upon you or your business by the law.  It also pays the cost of defending you when a claim is made against your policy.

Liability policies are designed to help protect you if you are sued by a third party who is injured or whose property is damaged.  A third party is generally someone who is not a family member or employee.  The policy covers defense costs and pays claims for which you are legally liable up to the policy limits.

If you have employees you should carry workman’s compensation insurance as they are not covered under the general liability policy.  You should also make sure that any independent contractors or vendors that work with you show proof of their own liability insurance and ask that you be named as an Additional Insured on their policy.

• Host Liquor: Provides protection for businesses against bodily injury or property damage suits brought by parties injured as a result of an intoxicated guest who was served alcohol at an event you hosted. Host liquor liability is a coverage that is included under the commercial general liability policy for those businesses not  ‘in the business of’  serving, manufacturing, distributing, selling, serving or providing alcohol.
  
• Liquor Legal Liability: Provides coverage for bodily injury or property damage for which you may become legally liable as a result of contributing to a person’s intoxication. This coverage is provided by a separate policy and will only cover insureds ‘in the business of’manufacturing, selling, distributing, serving alcoholic beverages for charge or no charge if a license is required for the activity. This exposure is not covered under the general liability policy.