Host Liquor Liability Coverage
Host Liquor Coverage Doesn't Apply to Liquor-Related Businesses
Host liquor liability coverage protects your business against claims or suits that arise from the incidental selling or serving of alcoholic beverages. It is designed to cover your liability as a social host. It is not intended for bars, nightclubs, and other establishments that are in the business of selling liquor.
Covers Social Events
Host liquor insurance covers claims against a business that arise from the serving of alcoholic beverages in a social setting, like a company picnic or Christmas party. Here is an example.
It's around seven P.M. on a Friday evening and employees of A-1 Accounting Services are having a party. Allen, A-1's president, just turned 40 and the entire company is celebrating. A-1 has provided food and champagne, and has directed employees to help themselves. The festivities have been going on for several hours and Martha, an A-1 employee, decides it's time to leave. She drains her sixth glass of champagne, says goodbye to her co-workers, toddles off to her car.
About twenty minutes later, Martha is making a right turn when she accidentally hits a pedestrian named Samantha. Samantha is in a crosswalk but Martha doesn't see her. Samantha is injured in the accident and sues both Martha and A-1 Accounting.
Samantha's suit against A-1 contends that the company was negligent because it allowed Martha to continue drinking after she was visibly drunk. Moreover, nobody tried to prevent her from driving even though everyone could see she was inebriated. Samantha seeks $50,000 in damages. A-1 Accounting Services is insured under a general liability policy that includes a $1 million per occurrence limit. A general liability policy automatically includes host liquor coverage, so Samantha's suit should be covered.
Host liquor insurance covers claims against a business that arise from the serving of alcoholic beverages in a social setting, like a company picnic or Christmas party.
Liquor Liability Exclusion
Host liquor coverage is provided by an exception to the liquor liability exclusion located in the ISO general liability coverage form (CGL). The exclusion can be found under Coverage A, Bodily Injury and Property Damage Liability. It eliminates coverage for bodily injury or property damage for which any insured may be liable if he or she:
- Caused or contributed to someone's intoxication
- Furnished alcoholic beverages to someone under the legal drinking age or "under the influence;" or
- Violated a statute, ordinance or regulation related to the sale, gift, distribution or use of alcoholic beverages
The liquor liability exclusion applies even if a claim alleges negligent supervision or training of others or negligent providing (or failure to provide) transportation to a drunken individual. However, the exclusion applies only if the insured is in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages. In other words, the exclusion is directed at businesses (such as wineries, taverns, and breweries) whose main operations involve manufacturing, selling or serving alcoholic beverages.
The liquor liability exclusion applies only if the insured is in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages. If the insured is not in a liquor-related business the exclusion doesn't apply.
Host Coverage Exception
Companies that aren't in the business of making, selling or serving liquor are exempt from the liquor exclusion. Consequently, they are covered for claims arising from the serving of alcohol in a social setting. This coverage is called host liquor liability insurance.
In the A-1 Accounting example, Martha became inebriated at a social function sponsored by her employer and injured a third party (Samantha). Because A-1 Accounting is not in the business of serving alcohol, Samantha's claim should fall within the exception to the liquor liability exclusion found in A-1's general liability policy.
Any damages or settlements A-1's insurer pays for Samantha's claim will reduce the each occurrence and general aggregate limits in A-1's policy. However, court costs, legal fees, and other expenses the insurance company incurs to defend the firm will not reduce these limits.
The liquor liability exclusion in the standard liability policy specifically addresses BYOB (bring your own bottle) arrangements. The exclusion states that your company is not automatically considered "in the liquor business" if you simply permit someone to bring alcoholic beverages onto your premises to consume there. This is true whether or not a fee is charged or a license is required for the BYOB activities.
For example, suppose that your company sponsors a holiday party for employees at your office. While you don't provide any liquor at the party, you allow your employees to bring their own. Bill, an employee of yours, brings a bottle of bourbon to the party. Bill becomes inebriated and topples over onto the spouse of another employee, injuring her. If the injured spouse sues your business for negligence, your firm's general liability policy should cover the suit. Your company isn't deemed "in the liquor business" based on the fact that you permitted someone to bring liquor onto your premises.
State or Local Statutes
Social hosts may be sued for negligence, a tort under common law, if they serve alcohol to a guest who subsequently causes an accident that injures a third party. Social hosts may also be fined or imprisoned if they violate a state or local liquor statute. Eighteen states have enacted laws that impose liability on social hosts for accidents caused by inebriated guests of any age. Nine states have passed social host laws applicable to accidents caused by drunken minors. To learn what social host laws apply in your state or community, ask your insurance agent or attorney.
Liquor Liability Coverage
Finally, companies that are in the business of manufacturing, serving or selling alcoholic beverages should purchase liquor liability coverage. This coverage protects bars, taverns, restaurants and related businesses against claims for injuries caused by intoxicated customers.