Liquor liability insurance is an important protection for businesses of all sizes, and is often required by state law if you want to operate any business that involves alcohol. But what exactly are you at risk for when your business involves alcohol, and when do you need liquor liability protections? Test your knowledge with the questions below.
Let’s start with a palette cleanser question about business liability in general.
Question 1: You own a sports equipment store that sells hockey sticks and pads, baseball bats and gloves, football pads and cleats, and more. One fall day, a group of teenagers comes in and buys a bunch of hockey pads and sticks. You ask them about why they need the equipment, and they say they each play hockey on the school team, and are simply restocking on the supplies they need to replace. Later that night, you hear on the local news that some teenagers wearing pads and swinging sticks robbed a gas station in the next town over. Sure enough, they are the boys you sold the equipment to.
Is your sports equipment store liable for the damages the boys caused with the products you sold them? (The answers are in the next section.)
Question 2: You own a sports bar, which obviously doesn’t sell any equipment, but instead classic bar cuisine and alcoholic beverages. You are in full compliance with local, state, and federal regulations. One night after a long football game, a drunk patron leaves and gets in his car in the parking lot. He only makes it a hundred yards down the street before he crashes into the rustic wooden fence outside of a steakhouse nearby. Luckily, no one is hurt. Unfortunately, the fence is mostly destroyed and several outdoor tables and chairs will need to be replaced.
Is your sports bar liable for the damages caused by the drunk driver after he left your establishment?
Question 3: You are the owner of a boutique ad agency, and you rent an office space in the business district of a large city. You are having your annual holiday party at the office when you suddenly hear shouting across the room. The new accountant has had way too much to drink, and has started kicking chairs over and throwing wild punches into the air. His tie is wrapped around his head and his shoes are missing. You grab your phone to start recording, but then he runs out into the street and begins challenging people to fights. You change your mind about video taping and dial 911 instead. The police show up pretty quickly, but not before your employee goes full Bruce Lee from Way of the Dragon, and some poor passerby becomes his Chuck Norris. As the police throw your colleague into the cruiser, one officer calmly gives you explanations of things like assault and battery, reckless endangerment, and more. Windows are broken, ribs are broken, laws are broken. It’s a mess.
Is your ad agency liable for the damages the accountant caused?
In the first example (the sports equipment store), your business would not be liable for what the boys did. They were already intending to rob that gas station before you (legally) sold them the equipment. As teenage boys, they fit well within your stores normal clientele. And being fall, hockey season is right around the corner. You couldn’t have known what their intent was, and it would be exceedingly difficult to sue you (claim you are liable) for your part in the events.
In the second example, your sports bar could be found liable for what the intoxicated man did immediately after leaving your business. The man was (probably) not intending to drive drunk on his way home tonight, but when your business served him alcohol all night and then allowed him to leave without getting a ride from someone sober, you were complacent in helping this man endanger people and property. The steakhouse could indeed sue your bar for the damages, and may very well do so. You need liquor liability to protect you in this case.
And what about the third example? As an ad agency, you don’t serve liquor as part of your business operations, and these events didn’t even take place during business hours. Can you be held liable? Unfortunately, the answer in many states is yes, you can be held liable for the damages caused by your intoxicated employee. You would be classified as the “social host,” which can carry the same liability in those circumstances as a bar, tavern, or other business which serves alcohol regularly. This kind of liability might be covered by your business’s general liability policy or business owner’s policy (BOP), but that’s no guarantee. If you plan to have any activities or celebrations at your place of work where alcohol might be available, you should ask your current insurance provider about liquor-related liabilities, and if you aren’t covered, get a liquor liability policy as soon as possible.