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Liquor Based Business Insurance Information

Liquor Liability Insurance/Dram Shop Protects You Against Alcohol Related Lawsuits
Serving Illinois, Indiana and Ohio

Why would I need liquor liability insurance?

Serving liquor is an innately risky activity. No matter how careful you are and/or how well-trained your staff is, you always run the risk of accidentally serving alcohol to an underage minor, or being sued when someone causes problems after having a drink. Liquor liability insurance not only helps pay for the cost of defending yourself and/or your staff during a lawsuit, but it can also pay some or all of the claims (depending on policy limits and deductibles) if you are held responsible. While liquor liability insurance will not cover cases of willful neglect, it can be utilized for general liquor related claims received by bars, pubs, restaurants, and even for private events. The policy doesn't just cover events that occur when people leave your establishment, but can also cover events, including assaults and batteries, that occur within your bar or club.

What is Dram Shop Insurance?

Dram shop insurance is the same as liquor liability insurance. A dram shop is a term for an establishment that sells alcohol for consumption on premises (a long time ago alcohol was sold by the dram or 1/8 of an ounce). Almost all business insurance and many homeowners’ policies exclude coverage for any liability caused by serving alcohol. That coverage can be purchased in the form of a liquor liability insurance policy (also known as dram shop insurance). This coverage is required before you can obtain a liquor license.

Do I need liquor liability insurance if I serve liquor at my home or at an event I am hosting?

You need some liability insurance that does not exclude liquor liability. That liability coverage may be in your homeowners or business insurance policy (as long as you are not selling the alcohol). To avoid buying coverage you don't need, look at your policy or talk to your agent first. If you have that coverage already you probably don’t need to buy more coverage.  However, we often receive calls from people that are hosting a social function and the venue (golf course clubhouse, community hall, homeowners association clubhouse, etc.) is requiring proof of liquor liability insurance that may or may not also name them as an additional insured. In these situations we can provide a special event policy that will provide general liability and liquor liability protection for the day of that event. As always, get in contact with us and we are happy to talk about your unique situation. 

Do I need liquor liability insurance if I am being paid to serve the liquor but I did not buy the liquor?

If someone has purchased the liquor and is selling the liquor then they need a license and liquor liability insurance. If you are not an employee of that entity but an independent contractor then that is probably a question for your lawyer. We do however have some customers that have purchased this coverage regardless. This may fall under the idea that it is better to be safe than sorry.

How much does liquor liability insurance cost?

The cost of the insurance depends on a number of factors

  • How much alcohol will be sold/served - the more that is served the more risk there is
  • Where you are located - some places are higher risk then others (we are licensed to sell liquor liability insurance in Illinois and Indiana)
  • The limits of liability – the higher the limits that the insurance company is providing the higher the cost
  • The ratio of food to alcohol – the theory is that food sales reduces intoxication and therefore risk
  • Hours of operation – the later you are open the longer your patrons can drink and the more likely that you will inherit customers that have been somewhere else drinking before they came to you
  • Server training – Indiana requires training for servers to dispense alcohol. Illinois is rolling the requirement in so it will be required in the whole state by 2018
  • The experience of management – it is considered to be riskier to insure someone that has never sold alcohol before
  • Square footage of the establishment – the bigger the establishment the more patrons it can hold and therefore more risk
  • Type of security – some security is ok; the need to have a lot of security is more expensive

One last thing

We are not lawyers. It is not our intent to provide legal advice. As insurance agents our default answer regarding legal matters is to buy more insurance. If you have specific questions about what could happen if someone is over-served at your location it would be best to consult your lawyer. Having said that, we would be happy to answer any questions you have about insurance. If you would like to speak to one of our insurance professionals please call our office at 815-432-5401 or email us your questions and an agent will reply promptly. 

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