Dram shop insurance is a type of insurance that protects businesses that serve alcohol from financial liability if a customer who has been drinking becomes intoxicated and causes harm to themselves or others. This type of insurance is also known as liquor liability insurance.
Dram shop insurance is important for businesses that serve alcohol because it can help protect them from financial ruin in the event of a lawsuit. If you own or operate a business that serves alcohol, it is important to have dram shop insurance in place.
This blog post will discuss what Dram Shop insurance is, why it is important, and how to choose a policy.
What is a Dram Shop Law?
The name “dram shop” relates to when taverns sold alcohol by the dram, a small serving often less than a shot of whiskey in the United States. A dram shop law is a state liquor law that holds the institution that supplied them liable for damages caused by drunk individuals.
In a jurisdiction with dram shop laws, a business may be liable for damages if a drunk customer fights another customer, damages someone else’s property, or causes a car accident, even if the incident occurs elsewhere.
Which States Have Dram Shop Laws?
Currently, 43 states have dram shop regulations, which means your company could be held liable if you provide alcohol to someone who later causes bodily harm or death. These are some of the states:
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Colorado
- Connecticut
- Columbia.
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kentucky
- Maine
- Massachusetts
- Michigan
- Minnesota
- Mississippi
- Missouri
- Montana
- Nebraska
- New Hampshire
- New Jersey
- New Mexico
- New York City
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- Rhode Island
- South Carolina
- Tennessee
- Texas
- Utah
- Vermont
- Washington
- West Virginia
- Wisconsin
- Wyoming
The only states that do not have DRAM laws are:
- Delaware
- Kansas
- Louisiana
- Maryland
- Nevada
- South Dakota
- Virginia
Even if your state does not have dram shop regulations, you can still be sued and prosecuted in court for the activities of an intoxicated individual. If your state does not have strict shop regulations, you will have a higher chance of winning the lawsuit, but you will still have to pay court and other legal fees. That is why, regardless of your state’s laws, liquor liability insurance is still a good choice.
When Do Dram Shop Laws Become Effective?
When you serve a drunk client, your business is held accountable in most jurisdictions with dram shop laws. The law, however, differs from state to state.
Because each state creates its own rules, and these laws vary over time, it’s critical to investigate current dram shop legislation in your state.
Examples of dram shop laws include:
- Arizona: In Arizona, a company owner may be held accountable if an employee sells alcohol to a drunk or underage person.
- California: A business owner in California can only be held accountable if an employee supplies a visibly drunk kid.
- Florida: A business owner in Florida cannot be held accountable unless an employee gave alcohol to a juvenile or a chronic alcoholic drinker.
- Illinois: A business owner in Illinois is liable for any harm or loss brought about by a patron who consumed alcohol there.
What is Dram Shop Insurance?
Dram shop insurance protects establishments that manufacture, sell, or serve alcoholic beverages. It is also known as liquor liability insurance.
Today, you’ll usually come across this term when reading about dram shop laws. These are state laws that hold business owners accountable if they give alcohol to someone who later injures or kills themselves.
Even if your state does not have a dram shop statute, being insured is a good idea. If you want to secure a liquor license for your small business, you’ll most likely require dram shop liability coverage. Landlords, property owners, and lenders may also require liquor liability coverage.
Is liquor liability insurance required for businesses in jurisdictions without dram shop laws?
Even in states where dram shop regulations do not exist, anyone can bring a lawsuit and sue you for the behavior of an inebriated customer. Even if the judge rules in your favor, you will still have to pay court expenses and other legal fees. As a result, liquor liability insurance is necessary for any business that sells or serves alcohol.
What Does Dram Shop Insurance Cover?
An inebriated customer can rapidly turn into an inebriated motorist. If they injure themselves or others in a vehicle accident or fight, you may find yourself with an injury lawyer on your tail.
Dram shop insurance may cover the following:
- Assault and battery: An inebriated customer may create a brawl and injure another customer.
- Personal injuries: Drunken patrons may trip and injure themselves.
- Injuries to Others: Others are injured as a result of drunk driving or whatever else the drunken person does.
- Property damage: If your customer drives drunk and smashes someone else’s car, liquor liability insurance covers the price of repairs.
- Legal fees and settlements: These are the costs of defending yourself in court or paying to settle the lawsuit before it goes to trial.
- Medical bills: If you are proven liable, this insurance pays for the medical bills of the other individual.
If you have a general liability policy, you may recognize some of these. However, if your firm relies on the production or sale of alcohol, general liability insurance will not cover alcohol-related property damage or personal harm. Insurance firms, on the other hand, may sell it as an add-on to your coverage or as part of an insurance program.
What Does Dram Shop Insurance Not Cover?
Your dram shop or liquor liability insurance coverage, like all insurance, includes critical exclusions that you should be aware of.
Dram shop coverage is a sort of third-party insurance, so it will not pay for damages to your personal property or medical fees if an employee is injured. Equipment insurance and workers’ compensation should cover this.
If you serve patrons under the legal drinking age, your dram shop coverage will not protect you. It also won’t aid in cases involving slander, libel, or anything other than property damage and bodily harm. So, if your company gets publicly accused of an alcohol-related incident, you won’t be able to sue the person who publicized it.
Who Needs Dram Shop Insurance?
Dram shop insurance is required for business enterprises that serve alcohol regularly, such as:
- Alcoholic beverage stores
- Taverns and bars
- Convenience Stores
- Grocery Shops
- Restaurant
- Caterers
Perhaps you’re not the type of business that serves alcohol daily. Some states, however, hold you liable as a social host if you offer alcohol at work parties or special events.
If this is the case for you, you will require host liquor liability coverage. It’s an excellent choice for businesses that are occasionally vulnerable to alcohol-related incidents. Consider holiday parties, fundraising dinners, milestone celebrations, and other types of company events that are common in many small organizations. Yes, you could expose yourself to liability if you provide alcohol and someone gets into an accident on the way home or is injured in some way while under the influence of alcohol.
Check to see whether your current general liability policy already contains host liquor liability coverage before searching for a new one. They almost always do. If you’re unsure whether yours does, consult your insurance declaration page or your insurance broker.
If yours does not, see if you can add on host liquor coverage. You could also look at specific event liquor coverage. Event liquor liability insurance is only valid for a few days, just long enough to protect your visitors and your business.
How Does Dram Shop Insurance Cost?
The cost of dram shop insurance varies by state and depends on your industry, claims history, and exposure (selling less alcohol exposes you to fewer risks). However, dram shop plans often start at about $400 per year for an aggregate maximum of $300,000 or more.
Take great note of your deductible and coverage limits while getting a liquor liability insurance quote. You must ensure that they are following state laws. For example, to obtain a liquor license in Massachusetts, minimum coverage levels of $250,000 to $500,000 are required. As a result, you’ll require coverage that fits the bill.
Where Can I Get Dram Shop Insurance?
Some big insurance companies offer dram shop insurance. If you don’t want to shop around for a new policy, you may always ask your current insurance broker. Even if they don’t specialize in liquor liability, they’ll almost certainly have some excellent referrals for you. And they’ll almost certainly get you the greatest deal.
Preventing Liquor Liability Claims
A liquor liability case can cost you a lot of money, especially if there is a death involved, and it can damage your company’s reputation. There are steps you can take to reduce your risks. You must:
- Train your personnel to deal with inebriated consumers and identify underage drinkers.
- Prepare your liquor licenses and permits.
- Keep track of how much your consumers are drinking and keep your serving sizes to a minimum.
- Avoid activities that encourage binge drinking, such as late happy hours or late closings.
If you’re throwing an event, make sure you choose a trustworthy, licensed, and experienced vendor. Request proof of their liability coverage and have them add you as an additional insured to their policy.
You’re accountable as a social host simply for permitting your visitors to drink, even if the drinks were free or they brought their own. So do your best to keep everyone in line. You can employ a cash bar to make attendees less likely to overindulge, or you can provide a bus or cab service to reduce the possibility of drunk driving.
Conclusion
Dram shop coverage is required if you manufacture, sell, or serve alcohol, even if you are not subject to dram shop legislation. It protects you from having to pay out of cash if one of your clients injures herself or others or causes property damage.
You can advise your customers to drink sensibly, but there is always the possibility of a consumer overindulging. Don’t fall in love with them! A comprehensive liquor liability policy can protect your business from alcohol-related mishaps.
Even if you’re not in the business of doing these things and are just hosting a work event with alcohol—whether it’s BYOB or you’re serving—having a host liquor liability insurance policy is a sensible investment.
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