What is Liquor Liability Insurance & What Does it Cost?
In this article, we’re going to cover Liquor Liability Insurance, what does it cost, what does it cover, why do you need it if you’re a restaurant, bar, tavern, or other foodservice establishment.
Any restaurant, bar, food establishment that is licensed to sell or serve alcohol is subject to something known as the dram shop act or dram shop liability.
Wonder what the term dram means as an interesting side note?
A dram is a measure of alcohol used in the 1700s and it’s about .125 ounces, and dram shop laws establish that any business which sells or serves alcohol can be held liable for the actions of a customer who was served alcohol.
The most common liability lawsuit arising under dram shop actions is of course drunken driving where an intoxicated patron injures or kills a third party in an auto accident.
Why is it a separate policy or endorsement to a policy needed?
Because the standard general liability policy specifically excludes liquor liability when the insured is in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages.
What the standard general liability policy does cover is something known as “host liquor liability” – so in most cases, if your business is having a social event and serving alcoholic beverages, your standard business liability policy will cover that. What some businesses do when they have a big event is to sort of double up on coverage will buy a separate event policy so that their regular business policy isn’t affected by potential claims arising from a larger event.
How much does liquor liability insurance cost?
Most liquor policies are rated – or based on sales, so the greater your sales or receipts for liquor, the higher your premium. But the cost of liquor liability insurance is affected by a number of other factors as well, including:
> The type of establishment you operate. A high-end restaurant with liquor receipts less than 25% of total receipts will pay a lower rate than a bar that has more than 75% in liquor receipts.
> Your geographic location will also determine costs. Some states have higher rates than others and rates will vary from city to suburban areas as well in the same state.
> If you operate a nightclub with dancing, bouncers, and heavy alcohol sales the rate will be higher.
> If you have an active training program for servers you will earn a discount.
> If you’ve had liquor claims, expect of course, to pay more than average.
> Other factors that influence the costs: the average age of patrons, the establishment owner’s experience level, the security systems deployed such as cameras, and what written procedures do you have for dealing with intoxicated patrons? Hours of operations, etc.
Because all those underwriting factors are so difficult to account for in pricing liquor, I’m going to give you a very rough range of premiums based on different types of operations:
- Restaurants can range between $500 and $4000 a year
- Bars and taverns range from $2,000 to $6,000 a year
- Caterers range between $500 and $1,500 annually
- Retail stores selling alcoholic beverages pay the least – $200 to $500 a year.
The premium ranges I just mentioned are for $1,000,000 limit of liability policies.
If you want to get a better idea of what liquor liability insurance would cost you, reach out and let’s chat.
Typically, I don’t see businesses buying liquor liability insurance cost separately – it’s best to bundle this with your BOP or package policy that covers your general liability and property coverages. Especially if you’re a restaurant. This will help reduce costs and in many cases, your insurer can provide excess insurance over your primary liquor limits in their umbrella policy but check the umbrella schedule of underlying policies carefully to make sure.
To reduce your premiums, but more importantly, to reduce the chances of being sued you should have your bartenders and wait staff properly trained and provide ongoing training for alcohol awareness.
Thanks for watching reading this post or watching the video, my name is Gordon Coyle and if you’re looking for help on liquor liability insurance for your restaurant, bar or tavern, give me a call, let’s chat. No pressure, no sales gimmicks just some conversation to see if I can help you and if we might be a good fit for your business insurance needs. Just click the button below to get started.