Does Your Restaurant Need Liquor Liability Insurance?

Foodservice is a $90 billion industry in Canada, as well as its 4th largest private-sector employer. There are more than 65,000 restaurant establishments across the country and more than 4,600 establishments considered as bars, taverns, and drinking places. Needless to say, it’s a highly competitive landscape.

Many restaurant and bar owners keep a close watch on their finances and strategies to survive and thrive. However, unforeseen incidents that result in legal action can quickly drain their financial resources or even shut down the business. This is why adequate risk management can make all the difference.

One of the most important liabilities that restaurant and bar owners need to understand is liquor liability. In a perfect world, liquor would be used for its intended purpose - to unwind, to celebrate, and so on - all in moderation. But many restaurant and bar owners find themselves in situations where someone gets hurt under their watch. It is then that the nightmare of liquor liability litigation can transpire.

This article talks about liquor liability and the corresponding insurance policy that you need. But one thing all restaurant owners must understand is that liquor liability is only one of many restaurant liabilities - which will be our first point of discussion.

Let’s get started!

What are Restaurant Liabilities?

To put things in a broad perspective, restaurants and similar establishments are responsible for the safety of their employees and customers. Therefore, they are liable for the following:

1. Food Safety

If a patron becomes ill or suffers an allergic reaction from food that was prepared in your restaurant, it can be a source of lawsuits. Typically, a general liability insurance policy will cover this. But of course, an added layer of protection is maintaining a high standard when it comes to food preparation.

2. Employee Accidents

Even with highly-trained staff, employees can still injure themselves during the course of their work. If an accident happens and causes the employee to be injured or ill, the employer can be held liable. Safety training and having the right tools will help to prevent such occurrences. Moreover, the worker’s compensation insurance policy will provide the needed protection in such scenarios.

3. Delivery Disasters

Having employees out on the road is an added risk for any business. It is important to make sure that the delivery staff are well-trained. Additionally, commercial auto insurance can help protect your business from the legal and financial risks due to bodily damage or property damage caused by your vehicle.

4. Liquor Liability

If your establishment serves beer, wine, and liquor, then you need to protect your business with liquor liability insurance. Restaurants and bars that serve liquor to their patrons can receive lawsuits in the event that an alcohol-related incident causes harm.

No doubt intoxicated individuals are still accountable for their actions. But according to the dram shop laws, restaurants, in some cases, can be liable as well.

How Is a Restaurant or Bar’s Liquor Liability Connected to the Dram Shop Laws?

“Dram shop” is an old term for a bar, tavern, or similar commercial establishment. These days, the term is no longer used in everyday speech but is still used by lawyers or anyone involved in a dram shop claim.

Dram shop laws are also known as liquor liability laws. These laws hold businesses accountable when they serve or sell alcohol to minors or to observably intoxicated persons who later cause injury, death, or property damage.

Can A Restaurant or Bar Be Sued If Their Intoxicated Guest Leaves and Causes a Car Accident?

This ties back to the dram shop laws and it is possible for the restaurant to be sued. Certain factors can make the case viable, such as:

• If the guest was a minor
• The guest was proven to be served alcohol even when visibly intoxicated

Additionally, if the guest was proven to be allowed to leave the establishment even when visibly intoxicated, this can be seen as an act of negligence.

Can A Restaurant or Bar Be Sued If A Drunk Guest Injures Themselves?

Some examples of this are when a guest, due to alcoholic consumption, loses balance and falls or misses steps on the stairs. In most cases, this does not make for a viable liquor liability case unless the guest was a minor.

In some cases, it can expose negligence on the part of the business - if for example, a mopped section does not have a sign or if the staircase is so poorly lit that it can cause accidents even in sober individuals.

Can A Restaurant or Bar Be Sued For Drunken Fist Fights?

In most cases, when there is proof that the fistfight was something that both parties agreed to, restaurants will not be held liable for this. They can, however, be held liable for inadequate security measures in such a scenario - again, this falls under negligence and not liquor liability.

Can A Restaurant or Bar Be Sued If An Intoxicated Guest Harmed Another Guest or A Third Party?

The viability of such cases, again, is increased if the intoxicated offender was a minor, was served even when visibly intoxicated, or was served an amount that obviously leads to intoxication.

Beyond liquor liability, if another guest is harmed within the premises, the restaurant can be charged with negligence for not having the proper security measures in place.

Can A Restaurant or Bar Be Sued If Its Security Personnel Used Excessive Force To Manage an Intoxicated Guest?

Having adequately trained security is the responsibility of any restaurant, particularly one that serves alcohol. If one of the guests becomes intoxicated, unruly, and potentially harmful, security must step in.

However, excessive force can lead to lawsuits. This does not directly tie in with liquor liability but because there is always a chance it could happen, it is typically included in liquor liability insurance as well.

How Does Liquor Liability Insurance Minimize Risk?

Liquor liability insurance protects your business against the legal and financial risks arising from a liquor liability claim. Typically, liquor liability insurance covers medical/legal costs for:

• Third-party injury by the intoxicated guest
• Third-party property damage by the intoxicated guest
• Claims of battery and assault by security personnel

Is Liquor Liability Insurance Included In My Business Owner’s Policy?

At its most basic essence, the business owner’s policy is meant to combine the general liability insurance and commercial property insurance, usually at a lower rate than when they are purchased separately. Therefore, liquor liability insurance policy is not typically included in the business owner’s policy unless it was included as an add-on.

What Kind of Establishments Need Liquor Liability Insurance?

If you operate a restaurant, bar, tavern, or a similar establishment that serves alcoholic drinks to your guests, then you need liquor liability insurance. This will protect your business from unforeseen alcohol-related injuries that can be the source of viable (and draining) lawsuits.

Where Can I Get Liquor Liability Insurance?

Do you need liquor liability insurance for your restaurant or bar? Perhaps this article has also prompted you to look into other insurance types that your business might need? Whatever the case, we will be more than happy to help.

As one of the top providers of business insurance in Canada, we at KASE Insurance work closely with our clients to give them the best, tailor-fit insurance coverage for their business.

Through the years, we’ve gathered awards and industry recognition - we believe it’s because we put our customers at the heart of everything we do. With KASE Insurance, you can be sure that you are in good hands.

If you have any questions for us, we’d be happy to connect. Contact us today or get a quick quote to get started!