State laws may clarify what owners should already be doing
Liquor liability laws vary from state to state. Their basic premise is that businesses selling alcohol to visibly intoxicated persons or minors can be held liable if the consumer later causes death or injury to third parties as a result of intoxication. These laws (AKA dram shop laws in some states) are an incentive for alcohol-vending businesses to consider possible consequences to the public, such as a drunk driving accidents.
Most states require restaurants, stores and other businesses providing alcoholic beverages to carry Liquor Liability Insurance. But just as the laws themselves vary, so do insurance coverage requirements — if they even exist.
South Carolina recently eliminated much of its confusion by passing a new law. Businesses that serve alcohol after 5 p.m. are now required to carry a minimum of $1 million in Liquor Liability Insurance. Without it, they can’t obtain or renew their liquor license.
Most establishments in South Carolina already have Liquor Liability Insurance. They may simply need to adjust the amount to comply with the new law. To carry less than $1 million would be irresponsible given the high-risk nature of the business, said one Charleston restaurant owner.
Calculating the cost
It’s important that businesses selling liquor think of Liquor Liability Insurance the same way they do auto insurance. Anyone owning a vehicle must have it insured in order to operate it.
Liquor Liability Insurance can range in cost. Factors taken into account by the insurance carriers include the types of alcohol being sold, if the business has a dance floor, or if it employs bouncers.
But the most significant factor is the liquor-sales to food-sales ratio.
The insurance rate is higher when liquor sales are more than 35 percent of a business’s gross food and liquor sales. So if its gross liquor sales are 30 percent of its total gross sales of $1.5 million, the cost of Liquor Liability Insurance insurance would be $3000. But if gross liquor sales are 50 percent or higher on the same total sales, it would pay $4500.
What state laws do to protect innocent third parties
As stated above, liquor insurance laws are enacted to keep businesses accountable. Injured parties can sue, of course. But what’s the point if the business doesn’t have sufficient assets, either money or property, to compensate the victims?
Setting a $1 million minimum on insurance coverage assures victims of compensation. However, that might not be enough, according to personal injury attorney David Lail. Medical costs, lost wages, punitive damages and other costs involved in a personal injury case often exceed $3 million.
One way lower the risk of liability is to train servers and bartenders on intoxication prevention and intervention. Another is checking identification, serving water between drinks, knowing the signs of intoxication can all go a long way in avoiding a tragic accident. There’s typically a discount if all employees hold TIPS certification.
How to get a Liquor Liability insurance quote for your business
Contact our commercial department by completing our web form or by calling 800-622-7370. We generally write Liquor Liability along with General Liability and Property. Most carriers require that risk management controls are in place, such as TIPS certification.