Restaurants and bars need specific licenses to sell liquor. However, just having the appropriate state-issued license won’t guarantee that the business will be fully protected. Selling alcohol still comes with a good deal of risk, even when business owners are careful about obtaining the required permits and following local laws.One of the most serious risks associated with the sale of liquor is potential liability for the actions of intoxicated patrons. Unfortunately, businesses can be held legally and financially accountable if their patrons are involved in alcohol-induced incidents or accidents. That’s why they need liquor liability insurance.

What Is Liquor Liability Insurance?

Liquor liability insurance is a type of specialized policy designed to offer extra protection to businesses that serve or sell alcohol. This type of policy covers both property damage and bodily injuries caused by intoxicated patrons who have legally purchased a business’s liquor. Also called dram shop insurance, it’s legally required in most states, including Massachusetts.

What’s Covered by Liquor Liability Insurance?

Liquor liability insurance will cover not just settlements and court costs for businesses facing legal disputes regarding liquor-related problems but also medical bills, repairs, legal costs, and more. Some of the most common examples of dram shop insurance claims include costs related to patrons’ alcohol-induced driving accidents, assaults, and property damage. In some cases, policies also cover issues associated with alcohol consumption by minors and employees drinking on the job.

Types of Businesses Required to Have Dram Shop Insurance

In Massachusetts, as in most states, most businesses that serve or sell alcohol are required to have dram shop insurance. In fact, business owners are generally required to take out policies before they can obtain liquor licenses. Business owners should anticipate needing liquor liability insurance coverage if they run:

  • Bars
  • Taverns
  • Breweries
  • Wineries
  • Liquor stores
  • Restaurants that serve alcohol
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However, there are also some less obvious circumstances under which businesses would be required to carry a dram shop insurance policy. Grocery stores, for example, must also take out liquor liability insurance before they can start selling alcohol, and catering companies will need to do the same if their business models include serving beer, wine, or liquor at events.

Event Coverage

Sometimes, companies that don’t normally sell alcohol need coverage for specific gatherings. While they’re not always required to take out liquor liability insurance policies, it’s still a good idea to have coverage in place. Even an accident or incident involving an employee who receives free alcohol at a company-sponsored event can leave a business dealing with serious legal issues if it doesn’t take out appropriate insurance first.

The best solution for companies that want to serve liquor at individual events is to purchase a short-term policy that offers the required protections but has an effective period limited to the day or night of the event. That way, the company will be protected but the insurance premium will be low. Event liability policies sometimes include host liquor liability coverage, as well.

How to Find the Best Policy

Whether businesses sell alcohol to patrons in the course of performing their core functions or only plan to give away free drinks at a company party, it’s always best to maximize liquor liability protections. Reach out to an insurance agent for specifics about state requirements or help with choosing the right policy.

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