Liquor liability is a type of insurance which covers businesses in the event that claims related to liquor are made against the business. Most classically, such claims involve damages as a result of the actions of an intoxicated person, such as a lawsuit filed by someone involved in a crash caused by someone who was drunk. Although damages in such suits can be substantial, businesses often lack adequate liquor liability coverage, and this can expose them to very high liability.
Most nations have laws which state that businesses which manufacture, sell, or serve alcohol can be held liable for the actions of drunk patrons. For example, if someone gets drunk at a bar and is involved in a car wreck, the bar is liable for the drunk's activity, and the bar could potentially be forced to pay a very high liability claim. People are liable for injuries their drunk patrons do to themselves, as when someone who is intoxicated falls down a flight of stairs, and for accidents which are determined to be the fault of someone who was drunk.
Liquor liability insurance provides coverage for establishments involved in the alcohol business. The terms of the insurance can vary, and it may be attached to a general liability policy as a rider, or purchased as a standalone policy. Business owners should be aware that liquor liability is usually specifically excluded from general liability policies, and that the language of a liquor liability policy can vary.
These policies usually exclude situations in which alcohol was sold or served illegally, as in the case of an accident caused by an underage drunk driver. They may also exclude mental damages and psychological distress from the types of claims they cover, or exclude employees from the policy. Liquor liability policies can also come with caps which limit the overall payouts the insurance company will make.
Rates for this insurance are based on the type of business, the location, and the business record. A business which has been cited for serving or selling alcohol illegally usually will have a more difficult time getting coverage, as will businesses which have a history of complaints related to intoxicated patrons. On the other hand, a business with an excellent record may be able to negotiate cheaper rates.
While many people may think that liquor liability does not apply to them unless they own a business such as a liquor store, tavern, bar, or restaurant, there are circumstances in which people outside the alcohol business need liquor liability coverage. For example, a wedding reception at which alcohol is served could create a situation in which the host would be liable for the actions of someone who become drunk. Some venues have liability policies which cover private events, and in other cases, it's necessary to purchase what is known as a host liquor policy, a type of policy tailored to someone who is not in the business of alcohol sales, production, or service, but who needs liability coverage.