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Liquor Liability – The Facts

Liquor liability insurance is defined as coverage for bodily injury or property damage caused by an intoxicated person who was served liquor by the policyholder. The breadth of liquor liability coverage varies by state because each state has its own interpretations and evidence requirements of who is legally liable in the event of an injury to a third party.

  • Dram shop liability or social host liability, holds a social or commercial host liable for injuries inflicted on a third party by an intoxicated guest of the host’s event or establishment.
  • Forty-four states and the District of Columbia have enacted dram shop liability laws or statutes that extend to social or commercial (retailers) hosts.
  • In some states, every bar in which an intoxicated person drank can be pulled into a lawsuit if the person causes bodily injury to a third party. The establishment must prove that the patron was not or did not appear intoxicated while there.
  • Other states require proof that the establishment sold alcohol to the intoxicated individual, injuries were sustained, and the injury was the direct result of the individual’s intoxication.
  • The Center on Alcohol Marketing and Youth (CAMY) report states that 54.3 percent of binge drinkers who reported driving after their most recent binge drinking episode drank in an on-premises, retail alcohol establishment such as a bar, club or restaurant.
  • In February of this year, ISO (Insurance Service Office) revised the liquor liability exclusion contained in its general liability forms to address “bring your own” alcohol establishments. The new exclusions now have an exception for insureds that are not considered to be “in the business of serving, selling or furnishing alcohol under the scope of the liquor liability exclusion simply by allowing someone to bring and consume their own alcohols on its own premises.
  • Many insurance companies offer discounts on liquor liability coverage to establishments that provide alcohol awareness education and training to employees.

The bottom line for business owners who serve alcohol - You will be held responsible if guests are served alcohol in your business and then go on to cause property damage or bodily injury. So, what can you do to protect yourself?

  • Train your employees above and beyond what your state requires for alcohol awareness.
  • If you don’t have video surveillance in your business consider getting it. It may give you a defense for liquor liability, general liability, and employment practice litigation.
  • Empower your employees to follow all state regulations to avoid over serving any guest in your business, including employees/owners who are off duty.
  • No patron’s business is more important than strictly following state dram regulations. A few extra dollars in the till at the end of the night will never be worth the devastation from a drunk driving incident.
  • Please contact us at 214-216-0225 or email Mona Carpenter at mcarpenter@innovativenationalrisk.com if you have any questions.