A liquor liability policy is an insurance policy that is designed to help protect businesses that sell, distribute, manufacture or serve alcohol. It can be added on to an existing commercial liability policy or purchased separately, but not all businesses choose to carry this type of insurance for their business. In fact, it is estimated that only about 35% of all businesses that sell, distribute, manufacture or serve alcohol. And while there are definitely many reasons why businesses opt out of liquor liability insurance, the result of a claim can mean complete financial ruin.
If you have a business that hosts, serves, manufactures, sells or distributes alcohol, take the time to understand what a liquor liability policy is, how it can protect your business and why it might be a much-needed insurance policy.
You Are Liable
When it comes to liquor liability, there is something that you need to know; no matter what level of involvement you or your business has in the liquor industry, you can be held liable for an accident, injury or fight that is fueled by alcohol consumption. You can be sued by the intoxicated individual. You can be sued by someone injured by an intoxicated individual. You can be sued by a family member of the intoxicated individual. You can even be sued by an employee that is injured because of an intoxicated individual.
Litigation processes are extremely expensive. You need legal representation for you and your business. You may also be responsible for damages to the individual – medical bills, death compensation, property damages and even loss of income can all become your responsibility. In many states, the liability of the liquor distributor, manufacturer, seller or server is held liable by law. In these states, it is almost essential that you obtain liquor liability insurance. But even if the state you do business in does not have a governing law about liquor practices, you may want to consider purchasing a liquor liability policy. The absence of a governing law does not prevent lawsuits from happening.
The Problem with Liquor Liability Insurance
Unfortunately, liquor liability insurance is not without flaws. First, it is extremely expensive; so much so that many businesses that need it cannot afford it. What a lot of businesses fail to see, however, is that the cost of insurance, when compared to the cost of litigation,, is rather small.
Another common complaint with liquor liability insurance is the fact that there may be and often are numerous exclusions in the policies – one of which is any lawsuit that involves the distribution of alcohol to a minor. Before purchasing a liquor liability insurance policy, be certain that you know about any and all exclusions that could affect your business.
How Your Cost is Determined
There are many factors that are used to determine the cost of your liquor liability insurance – previous claims, business location, type of business, revenue and more. Understanding what your policy quote is based on can sometimes help you reduce the cost. If, for instance, you have a high number of claims, learn how to reduce claims against your business so that you can receive a lower premium in the future.
What to Look for in a Liquor Liability Insurance Policy
When you are checking into liquor liability insurance, there are some specific elements you should ask for. While these items may increase the cost of your policy some, having them will help ensure that you are fully protected from alcohol-related litigations that do not involve minors.
- Employees as Patrons: Even if you set aside rules that restrict your employees from drinking, you have to know that employees will break the rules. It is inevitable. For this reason, many policies will exclude employees from the policy. This exclusion, however, will leave you unprotected. So if you serve alcohol at your facility, make sure that you include your employees, even if it costs a little more.
- Legal Fees: Some policies exclude defense costs from their policies. Unfortunately, the legal fees can make up the bulk of your total litigation costs. Make sure that you find a policy that covers legal counsel.
- Assault and Battery: When it comes to bars, night clubs and restaurants, the majority of claims relate to assault and battery charges. Insurance companies know this and often exclude this type of coverage from the policy. Unfortunately, if you do not have this type of coverage and you have one of the aforementioned businesses, you will find that your policy has practically no value because it cannot protect you from the most frequently filed claims.
- Mental Damages: Damages do not have to be physical when filing a claim. Claims can be made regarding stress, psychological damage or mental anguish. Mental damages should be included in your policy and if the damages section is obscure in your policy, find another.
- Safety and Claims Discounts: Finding an insurance company that offers premium discounts for classes, training, safety plans and a lack of claims. This can reduce your premiums drastically.
(Note: No policy will cover litigations that relate to alcohol sales to minors.)