Liquor Liability Insurance & Dram Shop Insurance

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Whether you work as a bartender or you work in a liquor store, serving people alcohol exposes you to a lot of liability because of what people may do while they’re drunk. Some might cause an accident and injure others, injure themselves, or get their property destroyed. 

The last thing you want to happen is to take the blame for the person's drunken mistakes. This is why we’re going to discuss the things you should know about liquor liability policy, also known as dram shop insurance.

We’ll start off by going over the basics of dram shop insurance. After that, we’ll take a look at its more specialized forms and then discuss how much you can expect a policy to cost you. At the end of everything, we’ll go over some of the best insurance companies.

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Liquor Liability Insurance

States in the U.S. adopt laws that control the selling of alcoholic drinks to consumers. Their purpose is to mitigate the dangers of premature and excessive consumption. Dram shop liability, also known as liquor liability statutes do this. Failure to comply with them might result in the imposition of a penalty up to the revocation of the license to sell liquor.

Because of the drawbacks that dram shop liability might inflict on sellers, insurance companies offer dram shop liability insurance. This insurance policy shoulder the financial burden arising from liquor liability lawsuits. Here are some situations where the insurance policy can help:

• When the liquor store/bar continues to sell liquor to a habitual drinker in large quantities, and the person hurts another individual or destroys property in his or her drunken rage

• When the liquor store/bar fails to see that a customer is already drunk and the said customer injures himself or herself by accident

• When the customer, after consuming excessive amounts of liquor, breaks owned property and injures himself or herself

If a customer files a claim against your business due to any of the reasons above, dram shop insurance will pay for the defense costs, legal fees, and compensatory payments.

Insurance companies offer this in two ways - sell it as a stand-alone policy or as an endorsement to general liability insurance. Buying stand alone liquor liability policy means that you’ll be paying for annual or monthly premiums separately. On the other hand, getting liquor liability policy as an endorsement means that its cost will be added to the premiums of general liability insurance. Between the two, we suggest you go for the second option because policy management easier. Also, you may enjoy cheaper rates.

So which businesses need to get liquor liability policy? The following are businesses that will find the insurance policy very useful:

• Convenience stores

• Restaurants

• Liquor stores

• Grocery stores

• Supermarkets

• Bars

• Pubs

• Nightclubs

• Food vendors

• Bistros

• Other businesses that sell or distribute liquor

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Liquor Liability Policy Limits

Liquor liability policy usually has a $1 million per occurrence limit with a $2 million aggregate limit. However, in reality, it all depends on the insurance company where you buy the policy. That said, some insurance companies offer liquor liability policy offering $300,000 - $2 million per occurrence limit and a $2 million aggregate limit.

How Much Liquor Liability Coverage Do You Need?

There’s no general consensus about how much liquor liability policy you need to purchase. It all depends on what kind of business you’re running. With that said, to give you an idea, here’s a table showing the recommended coverage for the businesses we mentioned above:

Host Liquor Liability Insurance

As we said earlier, liquor liability is an insurance policy that protects businesses selling or distributing alcohol against personal injury claims or property damage claims from an intoxicated customer. In other words, if you’re a business that doesn’t make money through liquor products, then insurance companies won’t offer this to you.

But note that insurance companies offer host liquor liability policy, which is usually sold as a short-term insurance policy lasting for hours or days. This is a coverage for businesses not selling or distributing alcohol but serving the drink to guests during gatherings. This will cover medical payments, attorney fees, and other legal costs when a drunken guest becomes injured or sustains property damage.

Host liquor liability policy is available as an endorsement to general liability insurance or as a stand-alone policy. Again, when bought as a stand-alone policy, you'll have to pay premiums separately; whereas when bought as an endorsement, the cost will be added to general liability insurance premiums.

So how much coverage do you need to have? The number of guests will dictate the amount of host liquor liability policy you need to have. Here’s a table that provides you with a brief idea:

Liquor Liability Insurance for Event

Events such as expos, trade shows, corporate parties, and reunions aren’t complete without drinks that are spiked with liquor. And so, carriers offer dram shop insurance coverage not only for bartenders, pubs, or bars but also for events too. 

Dram shop liability insurance for event is typically included in events insurance together with these other coverages:

• General liability coverage - Covers the cost of legal fees and compensation if ever injured attendees file a lawsuit 

• Equipment coverage - Reimburses the policyholder if his or her equipment got damaged or stolen during the event 

• Damage to rented premises coverage - Allows the policyholder to pay the owner if a rental property got damaged because of the event hosted

In connection, event liquor liability insurance can be purchased as an on-demand short-term policy that typically lasts for only 12 hours or 24 hours. 

So how much coverage do you need to get from liquor liability policy for events? The coverage needed depends on the type of event you want covered. Refer to the table below:

Dram Shop Insurance for Wedding

When there’s a wedding, there’s alcohol. One can't exist without the other.  And of course, the following can happen:

• Person A gets drunk and starts a fight with person B leaving both injured and needing medical attention

• Person A owns a car and refuses to take Uber. He drove the car drunk and got involved in a car accident

• Person A is tipsy and didn’t notice that a portion of the venue’s area is wet. He slipped and fell on the floor sustaining minor injuries that need medical attention

• Person A suffers from a health condition, which is often triggered by drunkenness. Upon drinking a considerable amount of alcohol, person A lost consciousness, has shallow breathing, and needs to be rushed to the hospital 

Consider getting liquor liability or dram shop insurance for your wedding. You might be wondering what this is. Wedding liquor liability insurance is a type of host liquor liability policy specially underwritten for wedding ceremonies. This coverage is typically offered as a one-day insurance policy - pretty on point since there’s no need to get long-term coverage as wedding ceremonies only last for a day. 

So how does the dram shop insurance for weddings work? The policy offers coverage for the following:

• Third-party injuries - Someone slips and falls on the wedding venue and is holding you responsible for what happened

• Third-party property damage - A drunk person drops his phone on the floor and blames you for it

Note that wedding dram shop insurance is included in tailored wedding insurance and bundled with:

• Personal effects/property coverage - Provides reimbursements equal to the value of items lost during the wedding ceremony 

• Wedding cancellation coverage - If the wedding is canceled, wedding cancellation coverage will reimburse what was spent on the event venue, decorations, and rental equipment 

• Personal accident coverage - Covers treatments if the policyholder gets injured during the wedding. Additionally, this will provide coverage to blood relatives named in the policy’s terms 

• Public liability coverage - Covers the personal injury claims and property damage claims who incurred personal injuries or property damage due to accidents in the wedding reception but not related to alcohol consumption 

How much insurance money can you get from wedding liquor liability policy anyway? Most carriers offer $500,000 - $1 million. However, you can find carriers that offer custom limits starting at $300,000. 

You can have your wedding without liquor liability policy. However, you should know that most event venues require renters to get covered and add them as additional insured. And so, without wedding liquor liability policy, you might find difficulties in finding a place to rent. 

Liquor Liability Insurance for Bartenders

Liquor liability policy for bartenders has a $1 million up to $2 million limit. This policy is useful for bartenders who are working independently or for those who do bartending outside other than the bar or pub they’re working for to get extra income. 

Liquor liability coverage for bartenders is offered as a long-term policy and as a short-term policy.  Short-term bartender liquor liability lasts for one day or three days. 

Bartenders can do two things to have liquor liability coverage. They can purchase the insurance as a stand-alone policy. Or if they already have general liability coverage, it’s better to add liquor liability to their existing policy for convenience. 

Liquor Liability Insurance Cost

There are a few factors that go into determining how much you can expect to pay for your liquor liability policy. This means that it’s pretty difficult to get an estimate of how much it’s going to cost you if you’re not willing to go through the whole quote process for your company of choice.

As we mentioned above, the duration of your insurance policy is one thing to account for. Shorter policies will cost you less overall but they will typically cost you a lot more per day. You’ll also have to consider whether you’re getting a policy as a bartender or as a business.

If you’re getting business liquor liability insurance coverage, you’ll need to account for the size of the business, since that will amplify the risk that the insurance company is taking when they cover you. This is due to the larger number of customers that you’ll have, making it more likely that someone will do something worthy of a claim.

Also, as we briefly mentioned before, insurance companies care about whether you’ve had to make a claim in the past. These companies see people who frequently make claims as high risk because they assume that they must be doing something wrong, even if the claims were due to simple bad luck.

To get these costs, we took a small-to-medium-sized bar that has no history of making prior claims. We did this to make sure that these values are as close to the average as possible. The average cost of alcohol liability coverage is about $61 per month and $732 per year.

Host Liquor Liability Insurance Cost

The cost of host liquor liability policy is lower than that of a bar because of the fewer risks that an insurance company is taking by covering you. If you’re the host of a smaller event, you can expect to pay as little as $215 for a 24-hour coverage. 

However, if you regularly host larger events, you may find yourself paying more for your liability coverage. For example, some event hosts have to pay as much as $500 for 24-hour coverage.