Definition of Liquor Liability Insurance in Business Insurance

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Liquor Liability Insurance

Individual states have their own rules related to business owners and intoxicated patrons. This is not related to bars or restaurants that sell and serve alcoholic drinks. Instead, we’re talking about businesses that allow customers to consume alcohol at an event.

Those who get drunk at these gatherings are more likely to damage the property or someone else’s possessions. Their intoxication might also result in injury to another person. In these situations, basic liability insurance doesn’t cover the payment of damages. These companies need to purchase host liquor liability insurance.

What the Insurance Entails

This form of liability insurance covers the owner of an event venue or other location where alcohol is consumed but not sold. It handles legal fees and reimbursement if a guest or an employee causes damage to property or harm to another individual once they’ve reached a level of intoxication.

Here are some examples of businesses that would be covered under host liquor liability insurance:

  • A restaurant that doesn’t sell alcohol but allows patrons to bring their own wine or mimosa ingredients for Sunday brunch.

  • An IT company that allows its employees to bring beer and wine to the annual picnic.

  • An organization that offers free margaritas to its employees on Fridays.

Normally, this type of policy falls under general liability insurance. The policyholder would need to review the coverage to know for sure. If not, host liquor liability insurance should be purchased as a rider to protect the business.

Third-Party Damage

Host liquor liability insurance covers issues that go beyond the event area. Should a guest get into their car when intoxicated and hit another vehicle, the policy would cover everything connected to the event space.

For instance, host liquor liability insurance would handle reimbursement for repairs to the vehicle and injuries to the other driver. Furthermore, it would handle legal fees if the other party sued the business. What it wouldn’t handle are the costs related to the criminal charges against the guest.

Host Liquor Liability vs. Liquor Liability

There’s a major difference between a standard liquor liability policy and host insurance. The former is for businesses that either manufacture, serve, or sell alcohol on a regular basis. Not only is this type of insurance used for higher-risk operations, but it’s also connected to a business’ valid liquor license. Thus, they’re excluded from purchasing host liquor liability insurance.

Should a restaurant or other food-related company decide it wants to start selling and serving alcohol, then they would need to cancel its host liquor liability.