Alcohol serving establishments or supplying operations may be subject to liquor liability exposures when a patron or third party is injured as of result of over serving alcohol or not preventing an intoxicated customer from injuring himself or someone else. Legal liability is not just limited to alcohol service, but can also arise from other negligent actions of inebriated patrons or inactions of bartenders, servers and owners.
While state laws vary, there is a movement to hold sellers of alcoholic beverages increasingly responsible for damages and injuries resulting from the actions of inebriated patrons. Your State Insurance Manual provides a number grade for each state, scoring from 0 to 10, with a “zero” score representing that there is no cause of action against one who supplies, furnishes, vends or sells liquor (the “liquor vendor”) for injury, property damage or death caused by an intoxicated person. At the other end of the spectrum, a state designated with a “10” imposes strict liability for the liquor vendor. This means that a cause of action for injury, property damage or death caused by an intoxicated person may be brought against the liquor vendor, without limitation, because he or she provided liquor to the intoxicated person and death, injury or property damage was the result. In other words, the mere act of furnishing the liquor is deemed the proximate cause of the injury. Currently, the only state rated 10 is Alabama.
Terry Ewing, line of business manager at Westfield Insurance, shared that the current legal environment really demands liquor liability protection for restaurant owners. Terry commented that “liquor coverage, especially in more strict states, is really not an optional coverage” and recommends that “owners evaluate the exposure level they are comfortable with and then insure beyond that”. Claims involving fatalities are receiving significant financial settlements, often in the millions of dollars, so coverage minimums in the $1 to $5 million dollar range are often purchased.
What can owners do to protect themselves?
Written policies and guidelines for training staff on responsible alcohol service may help them recognize when a patron has had too much to drink or avoid serving liquor to minors. In states where staff can be held liable, this type of training really increases awareness and service responsibility.
"The written guidelines and training really represent the owner’s defense when a claim is made,” said Ewing. Programs to train employees are often offered through the state or through trade organizations – TIPS (Training for Intervention Procedures by Servers of Alcohol) is one program, the National Restaurant Association offers ServSafe, and the National Hospitality Institute offers TAM “Techniques of Alcohol Management”. Check your state training options, which may be available from an on-site trainer or online.
Exposure can also be reduced through other means, such as closing earlier, removing pool tables and reconsidering the frequency or need for live entertainment. Making small changes, such as closing the bar an hour before closing time and having live entertainment finish earlier in the evening, may provide a window for guests to stop drinking before leaving the establishment.
Employing security personnel, who should also be well-trained on managing patrons who are approaching intoxication, or engaging a taxi service to take patrons home, are other solutions.
Purchasing liquor liability insurance typically covers the cost of damages and legal fees up to the policy limits when defending a lawsuit. Talk to your agent as this policy may be added to your existing policy or purchased separately through an excess or surplus carrier.
Make sure your liquor liability policy includes:
- Assault and battery claims coverage.
- Defense costs included – meaning defense expenses are not deducted from your general liability policy limits
- Coverage for your own employees who may be patrons at your establishment
- Coverage for mental damages – for non-physical complaints such as mental anguish and stress.
Managing these risks will help reduce your exposure to a liquor liability claim and the potential financial and reputation losses that may follow. Cheers!?
Kris Hawk is the business development leader for corporate hospitality at Westfield Insurance. She develops and implements marketing plans for Westfield Country Club, Blair Conference Center, corporate dining and Westfield Inn. Her day-to-day operational responsibilities include planning and management for corporate dining at the headquarters in Westfield Center, as well as event planning, audio-visual services and training.