Restaurants and bars have specific, and sometimes unique, risks to cover. One of those risks centers around alcohol sales and consumption on their premises. And while it may seem obvious, how much they sell is key. But how much is too much? The corresponding coverage for this risk is called Liquor Liability Insurance, and there are a few ways it is underwritten by most carriers.
Many insurance companies measure alcohol sales risk by comparing it to the amount of food sold by the venue. If the percentage of alcohol sales is high, the classification of a restaurant may be changed to a “bar” instead. If that “bar” also has a stage, live music, a dance floor, etc., it may be considered a nightclub. Both bars and nightclubs have higher risk potential when considered by underwriters.
In addition, different states have very laws around liquor sales. Often called “Dram Shop Laws,” these regulations take into account the potential of alcohol contributing to liability claims. This might include actions that a patron took after being served alcohol by the establishment. In very strict states like Alabama, this is more prevalent, while in a state like Nevada, there may be less liability.
As mentioned earlier, the type of venue is a key piece of liquor liability coverage. A restaurant may have less risk in an underwriter’s eyes, while a nightclub or tavern might have a higher level of concern for them. And again, the key to that determination may center around alcohol sales as well as the characteristics of the venue.
So, what does liquor liability actually cover for these establishments? In most cases, these policies will help cover damages caused by a patron that has been served alcohol by the venue. These damages may be related to bodily injury or property damage. One of the best ways for a venue to protect themselves is to have proper risk management in place for the sales and service of alcohol, and to have the right liquor liability coverage in place in case an incident does occur.
What is the right policy for your restaurant? We can help you determine that! Contact Brandon Patterson from our team at 865.453.1414 or brandon@ownbyinsurance.com.