Liquor Liability
Coverage for bodily injury or property damage claims arising from the selling, serving, or furnishing of alcoholic beverages.
What It Is
Liquor liability coverage responds to claims of bodily injury or property damage caused by an intoxicated person, where the insured is alleged to have contributed to the intoxication by selling, serving, or furnishing alcoholic beverages. The standard CGL policy contains a liquor liability exclusion (Exclusion c) that bars coverage for businesses in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages.
This exclusion applies to businesses for which alcohol is a primary revenue source — bars, restaurants, breweries, wineries, liquor stores, and event venues that serve alcohol. For these businesses, a separate liquor liability policy or endorsement is required.
The CGL liquor liability exclusion does not apply to "host liquor liability" — situations where the insured serves alcohol incidentally, such as at a company holiday party or client event. In these cases, the standard CGL provides coverage without a separate liquor liability form.
Why It Matters for Brokers
Dram shop laws in most states create significant liability for businesses that serve alcohol. A single DUI incident after over-serving can generate claims of $500,000 or more. Brokers placing coverage for restaurants, bars, and hospitality businesses must ensure that liquor liability coverage is specifically addressed — either through a separate liquor liability policy, an endorsement to the CGL, or a specific liquor liability coverage form. The standard CGL excludes this exposure for alcohol-serving businesses.
Real-World Example
A sports bar serves a visibly intoxicated patron who subsequently causes a car accident injuring three people, generating $1.1M in bodily injury claims. The injured parties sue the bar under the state's dram shop statute. The bar's standard CGL policy denies the claim under the liquor liability exclusion because the bar is in the business of selling alcohol. Fortunately, the broker had placed a separate $1M liquor liability policy with a $2M aggregate, which covers the defense costs of $145,000 and the $1.1M settlement. Without the separate liquor liability policy, the bar would have faced the entire $1.245M exposure uninsured.
Common Mistakes
- 1Assuming the CGL covers liquor-related claims for bars and restaurants without recognizing the liquor liability exclusion for businesses in the alcohol trade.
- 2Not recommending liquor liability limits proportional to the alcohol revenue — a nightclub with $2M in annual alcohol sales needs higher limits than a restaurant where alcohol is 15% of revenue.
- 3Forgetting to add host liquor liability confirmation for clients who serve alcohol at corporate events, even though it is typically covered under the standard CGL.
How brokerageaudit.com Handles This
Policy Checker identifies the CGL liquor liability exclusion and cross-references it against the client's SIC/NAICS code and business description. If the client is in the alcohol trade, it flags the need for a separate liquor liability policy. Submission Intake includes alcohol revenue as a required field for restaurant and hospitality submissions to ensure proper underwriting of liquor liability exposure.