People love to celebrate and have fun in bars and restaurants. Alcohol brings life to parties, celebrations, and gatherings. But, it can also cause fights and accidents. Did you know that you’re also liable for any alcohol-related incidents your customers may have? While parties and celebrations increase sales for business owners, they also introduce new risks and liabilities. But how can you run your business with all these risks and liabilities? Don’t worry. You can protect your business from these liabilities by getting liquor liability insurance. You need a liquor liability policy if your business involves selling, serving, manufacturing, and distributing alcoholic beverages.
What is Dram Shop Law?
Most US states have dram shop laws. Dram shop laws hold establishments like bars, restaurants, and liquor stores liable for injuries, damages, and deaths caused by drunk driving accidents. Under the dram shop laws, business establishments that serve or sell alcohol to customers who caused bodily injury or property damages may be held liable for monetary damages to DUI victims or their families. Victims of DUI collisions in Colorado can sue business establishments for over-serving a drunk driver. These parties may be held liable if they sell alcohol to any of the following:
- Visibly intoxicated person
Why Do You Need a Liquor Liability Insurance Coverage?
Every time you sell alcohol to your customers, you become liable for any accidents and damages that the drunk customer causes. A single liquor liability claim can cost you thousands of dollars. This may put you in financial jeopardy. A liquor liability insurance policy limits a company’s liability risk. Liquor liability insurance covers the followings costs in the event of a lawsuit:
- Third-party property damage claims
- Third-party bodily injury claims
- Legal costs associated with lawsuits like court costs, lawyer fees, and settlements
- Assault and battery coverage
What Claims Liquor Liability Insurance Doesn’t Cover?
Liquor liability insurance doesn’t cover the following claims:
- Accidents and damages involving underage customers
- Damages to your business property
Does Your Business Need a Liquor Liability Policy?
Any business that sells, manufactures, and distributes alcoholic beverages needs liquor liability insurance. Some states require entrepreneurs to get a liability insurance policy for liquor license applications. Here’s the list of businesses that need liquor liability coverage:
- Bed and breakfasts
- Liquor stores
- Grocery stores
- Convenience stores
The Cost of Liquor Liability Insurance
Different factors affect the cost of liquor liability coverage. Liquor liability insurance cost varies according to:
The amount of coverage limit is the major basis of insurance premiums. The higher the coverage limit you get, the higher your premiums will be.
Claims also affect liquor liability insurance policies costs. Frequent claims can result in increased insurance premiums.
The level of risk in every business is different. Businesses with a higher risk of liabilities tend to have higher premiums. Bars and restaurants have higher risks as they often serve alcohol than wineries holding occasional wine tasting.
The liquor insurance premium is also based on the percentage of your alcohol sales. The higher your alcoholic beverage sales the higher your premium will be.
Some states require companies selling, manufacturing, and distributing alcohol to have a minimum liquor liability coverage limit.
How to Purchase Liquor Liability Policy
There are different ways you can purchase a liquor liability insurance policy from an insurance company. Business owners can get liquor liability policy by:
- Purchasing a separate liquor liability policy
- Add it as an endorsement on your general liability insurance
- Include it in your Business Owner’s Policy (BOP)
Host Liquor Liability VS. Liquor Liability Insurance
Did you know that companies that do not sell, manufacture or distribute alcohol can still be liable for alcohol-related incidents their employees and guests get into? Companies that host social events can be liable for the injuries and damages your drunk employees or guests caused. Host liquor liability protects all kinds of businesses that hold social events that involve serving or furnishing. Liquor liability insurance protects businesses that manufacture, sell, and distribute alcoholic beverages. Business owners can get liquor liability policies as a part of the general liability policy.
What Insurance Do Small Businesses Need?
Every business, small or big, is at risk for various liabilities. Equip your business with adequate insurance coverage to avoid sudden financial expenses. A sudden financial problem could cause business closure. Having appropriate business insurance will protect your business from liabilities and sudden financial expenses. The type of business insurance your business needs depends on your business industry and operations. Here are some of the insurance coverage you can purchase to protect your business:
This coverage protects business owners against third-party bodily injury or property damage claims. This policy covers the medical expenses of customers injured on your business premises. Endorsements can be added according to your company’s liability exposure. Here are some examples of liability insurance:
- For businesses manufacturing and selling alcohol
- Product liability insurance is for businesses manufacturing and selling their own products. If there are bodily injuries or property damages claims caused by your products, this will cover the costs of defending your business.
This policy protects your business’s properties against damage and loss. It pays for the repair or replacement of damaged property under a covered loss. This insurance covers properties used for business operations. It includes:
- Commercial building
- Furniture and fixtures
- Office equipment like computers and fax machines
- Exterior signage
- Commercial landscape and fences
- Important company documents
- Commercial Auto insurance
If your business operations involve the use of vehicles, you must purchase commercial auto insurance. Personal auto insurance doesn’t cover vehicles used for business activities.
Nearly all US states require companies to carry workers’ compensation insurance for their employees. In Colorado, all businesses must provide workers comp coverage regardless of the number and work status of employees. Failure to carry workers comp policy is punishable by the law.
Business Income Coverage
In case of sudden business interruption because of a covered peril, this policy will pay for your business’s lost income. Business expenses like rentals and employee salaries don’t stop even if your business operation stops. That’s why it is important to have a backup to help you with your business expenses in case of business interruption.
Business Owners Policy
This policy provides comprehensive protection to small business owners. This policy provides multiple coverages such as:
- General liability coverage
- Commercial property coverage
- Business income coverage
Small business owners can greatly benefit from this policy as it consists of multiple insurance policies. Policyholders can also customize their BOP policy and add endorsements as needed. Business owners have an option to add endorsements on top of their BOP policy. It includes:
- Liquor Liability Coverage
- Data Breach Coverage
- Professional Liability or E&O Insurance
- Commercial Auto Insurance
- Employment Practice Liability
How to Minimize Your Business Liquor Liability
As a business owner, there are many ways you can manage the risks associated with your business operations. Here are some tips you can use to help you avoid liquor liability claims and additional financial expenses.
- Comply with your state liquor regulations.
- Create business policies and regulations regarding the serving of alcohol.
- Ensure employees provide customers with regulated-poured or measured alcoholic drinks. This will prevent serving too much alcohol to customers.
- Encourage serving of food, light, or nonalcoholic beverages.
- Have a guideline limit of the number and types of alcoholic beverage can be served per customer.
- Follow an effective system to keep track of the number of served alcohols to each customer.
- Provide responsible alcoholic beverage training to employees.
- Require identification cards to identify customers’ ages. Checking your customer’s identification can minimize the risks of serving alcohol to underage customers.
- Prohibit serving alcohol to an intoxicated person. Train employees to identify signs of alcohol intoxication.
- Hire professional security guards. Security guards help manage bar or club capacity. They are also responsible for ensuring patrons entering the business establishment are within the legal drinking age.
- Arrange a designated taxi for customers under the influence of alcohol. Arranging special transport for drunk customers prevents drunk driving accidents.
- Train employees on how to soothe customer arguments and when to contact the police. It lowers the risks of bodily injury and property damages claims.
- Purchase liquor liability insurance. It protects your business and finances in case of liquor liability lawsuits. Liquor liability insurance will save your business from hefty insurance claims in case preventive measures didn’t work.
Every business has risks involved. If you want your business to become successful, it is important to mitigate your risks. One effective way to mitigate your risks is to get adequate business insurance. Business insurance doesn’t only protect you from possible lawsuits. It can also save your business from the hefty financial expenses lawsuits bring. With the right insurance policy, alcoholic beverages can be a very profitable business.
At AIS, we understand the risks business owners face. We work with different insurance companies to find the right, best-value business insurance coverage for any business. We provide customized business insurance to meet every business’s needs. Call now toll-free at (855) 973-1202 or (855) 712-6584 and let’s discuss how you can ensure your business’ protection today!