Who Needs Liquor Liability Insurance?

The general liability insurance policy that protects most businesses includes an exclusion for all losses arising out of the sale, manufacturing, distribution, serving, or furnishing of liquor.

True to the confusing nature of insurance policies, there is an exception to the exclusion for those not in the business of selling, manufacturing, distributing, serving, or furnishing liquor.

Effectively, this means that coverage is only excluded for those who are in the business of furnishing alcohol.

Many insurance advisers call this “host liquor liability coverage.” The idea that coverage is available for hosts and not businesses who serve alcohol.

It is generally held that the purpose of the host liquor liability coverage is to take care of the incidental exposures that exist in the general business environment. For example, holiday parties, business dinners, and celebrations where alcohol is served.

So, if you’re a restaurant, or tavern, the general liability policy will clearly not provide you with any protection. Likewise, if your convenience store or a grocery store sells beer, wine, and alcohol, you have no protection under the general liability policy. Those who manufacture, blend, or distill alcoholic beverages also have no coverage under the general liability policy for suits brought by customers for the sale of alcohol.

Confusion comes to organizations who are in a gray area. For example, a bed and breakfast, or hotel that serves its guests a complimentary glass of champagne. Are they in the business of serving alcohol?

It’s a question you shouldn’t ignore. It’s better to have a conversation with your attorney and insurance adviser to make sure that you have the proper insurance protection.

The solution for any business that sells or serves alcohol is a separate liquor liability insurance policy. The specialized liability contract provide specific protection for the exposure that is presented by your business.

Another issue is the umbrella liability policy which, in most cases, has the same liquor exclusion as the general liability policy. Does your umbrella provide excess coverage over your liquor liability?

Again, talk to your insurance adviser.