The Need for Any Restaurant to Carry Liquor Liability

Restaurant owners know that the hospitality industry is faced with numerous liability risks. These risks are only compounded when restaurants and nightclubs serve alcohol to their guests. To protect financial assets, liquor liability insurance is a critical risk management component for restaurant owners. What is liquor liability insurance, and why is it so important? In this guide, we will explore how this insurance coverage is a valuable addition to the risk management toolbox.

What is Liquor Liability Insurance?

Liquor liability insurance is a specialized insurance policy that protects any business that makes, sells, or serves alcoholic beverages. The policy provides financial coverage for the medical costs, legal fees, and judgements or settlements associated with bodily injury or property damage caused by individuals served or sold alcohol by a covered establishment.
Any business can benefit from this insurance protection, including:
• Grocery stores
• Liquor stores
• Breweries and distilleries
• Restaurants
• Taverns
• Nightclubs
• Convenience stores

When reviewing insurance coverage options for your clients, you may be asked about “host liquor liability”. This is a specialized insurance coverage for business owners who do not manufacture, sell, or serve alcohol, but who allow patrons to consume their own alcoholic beverages on restaurant premises. Just like liquor liability insurance, host liability policies provide financial protection against bodily injury and property damage resulting from alcohol-related incidents. In some cases, host liquor liability is included as part of another insurance policy, such as general liability or business owners’ policies.

Why is Liquor Liability Insurance Needed?

Incidents related to alcohol are a huge problem for restaurants and bars serving or selling alcoholic beverages to their guests. According to the National Institute on Alcohol Abuse and Alcoholism (NIAAA), a division of the National Institutes of Health (NIH), alcohol-related incidents cost the United States over $249 billion in 2010, and the economic toll has only grown higher. The cost includes all injury and property damage incidents, not just those resulting from the manufacture, sale, or service of alcohol by businesses. Nevertheless, restaurant owners may face steep expenses – even millions of dollars in legal fees and settlements – if a patron were to cause injury or property damage as a result of drinking alcohol on restaurant premises.

Complicating the issue of liquor liability is the fact that restaurant and bar employees may not know a patron is dangerously intoxicated until an incident occurs. Perhaps a restaurant guest consumes alcohol with dinner, then causes a vehicle crash on the way home. That patron may not have appeared visibly intoxicated while on restaurant property, yet restaurant owners and staff may still be held liable for the actions of the patron even after he or she leaves the premises. In these cases, liquor liability insurance can protect the business from financial ruin.

General Liability vs. Liquor Liability

Most restaurant owners manage risks by carrying some form of general liability insurance. General liability coverage is designed to protect business owners from common operational and liability risks. Unfortunately, this insurance may not be sufficient to cover incidents involving the consumption, sale, or distribution of alcoholic products. In fact, a number of general liability policies specifically exclude coverage for alcohol-related liabilities. Restaurant owners must carefully evaluate their existing insurance coverages and purchase stand-alone liquor liability insurance policies or endorsements to existing coverages. One incident involving an intoxicated patron – a fight, a vehicle collision, a slip and fall injury – can result in hundreds of thousands or even millions of dollars in property damage and medical care for affected individuals. With liquor liability insurance, restaurant owners gain valuable protection against unexpected risks associated with the sale or service of alcohol.

About Coastal Oak Insurance Services

At Coastal Oak Insurance Services, we strive to protect your personal and business assets from coast to coast. When you work with us, you’re family. Contact us today at (949) 519-3738 to learn more about how we can provide you with comprehensive and tailored insurance coverage.