What is Liquor Liability Insurance?


Any business or individual that manufactures, distributes, or uses alcoholic beverages is at risk of being held liable for the actions of drunk patrons. Although this risk can occasionally affect individuals at home, it generally applies to commercial enterprises such as restaurants, bars, package stores, private clubs, and sports facilities.

Liquor liability is a serious issue that can cost your business a lot of money in claims. It comes into play whenever bodily injury or property damage occurs, and the liable party, such as a business, either a)caused or contributed to the person’s intoxication; b)provided alcoholic beverages to an under-age patron; c)provided alcoholic beverages to an intoxicated patron; or d)violated a law about distributing or using alcoholic beverages. To protect yourself and your business in liquor liability claims, you can get liquor liability insurance. Here are a few of the important things you need to know.

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Who Can Get Liquor Liability Insurance?

Although individuals can sometimes face liquor liability claims, the insurance is designed specifically for businesses. If your business is engaged in any of the following four activities, you ought to look into liquor liability insurance:

  • Manufacture of alcoholic beverages;
  • Sale or distribution of alcoholic beverages;
  • Charging to serve alcoholic beverages, with or without a license;
  • Serving alcoholic beverages at no charge with a license.

Premiums and Rates

The rates for a liquor liability policy can vary wildly, depending on your business’s situation. In general, the premiums are based on two factors: The amount of gross receipts your business receives, and the classification of your business, which is determined by the way alcoholic beverages are distributed and what other services and products are available. A business with more food sales than liquor sales will be classified as a restaurant, while a bar or club will sell more alcohol. A small restaurant might pay a premium of a few hundred dollars, while a large entertainment center might have a premium in the tens of thousands of dollars.

Managing Risks

Of course, your liquor liability insurance policy is not the only way you can protect yourself. In addition to the policy, take active risk management steps. Most importantly, come up with an alcohol serving policy, and strictly adhere to it at all times. When your policy is weak or not rigidly enforced, you can encounter problems. Servers are trying to make money off of tips, which they get from sales; without a strict policy, servers face a conflict of interest and may decide to continue serving because it’s in their individual best interest, even if it puts your business at risk. When the lines are clearly drawn, however, this is less likely to occur.

Another important risk management step you can take is to have a good training program for servers and employees. Although you as the owner are ultimately responsible for your business, you’re not able to oversee every little decision. Your employees have to be trained to make the right choices to protect the business. Employees can be trained to better recognize under-age minors and intoxicated patrons, so that they can refuse to serve them any further.

Having a strong track record of avoiding trouble is the best thing for your business. It will keep your policy costs down and save you money. Even having a training program for your employees might make your business eligible for discounts on liquor liability policies. In the end, it’s your business, and you must take every necessary step to protect it.

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Matt Tarkenton

Matt Tarkenton

Matt Tarkenton is Executive Vice President at Tarkenton Companies, and has started several businesses and is interested in business formation, strategy, and growth. He was part of a group that started Renova Partners, a boutique investment bank, and was recognized as a “40 Under 40: Up and Comer” by the Atlanta Business Chronicle in 2009. Matt performs business planning and marketing training for hundreds of professionals across the country, and co-hosts a weekly coaching program on entrepreneurial education. Matt graduated from Princeton University, and received an MBA from Harvard Business School. He maintains his Series 7, 63, and 79 licenses, and currently serves on the Board of Directors of Youth Villages, on the Education Committee of the National Association of Fixed Annuities (NAFA), and in leadership positions in various organizations.