Liquor liability insurance is a type of insurance for businesses that sell alcoholic beverages. For example, a convenience store, a night club, bar/tavern or country club. Organizers of special events may, too, want or need liquor liability insurance.
Why would a business obtain this insurance? Because selling alcoholic beverages is inherently risky. The greatest (but not the only) risks are service to underage or obviously intoxicated patrons—and fights (assault and battery). Some businesses are at greater risk than others, based upon the type and size of the business and their alcohol-serving policies and practices. For example, a huge night club with live entertainment that caters to a young crowd has more risk than a café.
Liquor liability insurance is designed to defend a business against a lawsuit due to an injury, death or property damage from negligent and/or illegal alcohol service.
Having insurance doesn’t prevent liability, though. Licensed businesses are only insured to a certain level of coverage. Beyond that, the licensee is responsible for paying the claim.
In applying for liquor liability insurance, an insurance company may ask you about these or other issues:
- Entertainment (live band, etc.)
- Dance floor
- Gross annual revenues of food vs. alcohol
- Square footage of business
- Average age of patrons
- Drink promotions and happy hours
- Responsible beverage service training for all employees
- Age verification procedures
- Type of clientele (local workers vs. college students, etc.)
- History of alcohol-related problems at the business
Liquor liability insurance is important, but a business needs more to guard against liability. Implementing responsible business practices is the best protection against liability. The main responsible business practices include:
- Discouraging intoxication
- Promoting non-alcoholic beverages and food
- Promoting safe transportation alternatives
- No drinking on duty
- Responsible promotions and marketing
- Implementing comprehensive training
- Maintaining adequate number of employees to properly monitor patrons
- Having a standard hiring system
- Having a system for rewarding and disciplining employees
- Implementing and enforcing written alcohol management policies and signage
Some insurance give discounts up to 20% for businesses that implement training and responsible business practices. A qualified insurance professional can provide you with details, such as cost, discounts and coverage.
I am excited to find this site! Thank you so much.
My question is… I work as a Coordinator at an event venue. We require our guests using the building to get liability insurance and name us as insured for the day of the event and also to provide us with a copy of the insurance.
I have worked there for a year and have noticed that some of our clients have said that they were not going to service alcohol, so we did not require insurance. When later, I found evidence, (half full wine glasses on the window sill, bottles in the trash etc.) I have written notes on their files stating regardless of what they say, next year, I will require it. Is that permissible? Also, if I was told there was no alcohol and I show up to check on the guests (which I do a couple of times to see if they need anything) could we include on the contract that the event will end if there is evidence of alcohol being served when in fact they said there wouldn’t be? And could we actually shut down an event that checked NO alcohol and is serving it?
Cab, thanks for your question. Normally, a social host (as opposed to a commercial vendor) who provides alcohol to an adult guest is immune from liability when third persons are injured due to that adult guest’s intoxication. Still, the host has a duty to not serve an obviously intoxicated or underage guest. Whether a licensed establishment or a private, unlicensed social event, it is vital to control the drinking environment with drink limits, offering alternatives to alcohol, serving food to slow intoxication, designating drivers, checking IDs on anyone who looks under 30 years old, and not over-serving alcohol. These are the best ways to reduce risk of liability. “Liability,” of course, being lawsuits or arrest and prosecution for violating state liquor laws. Venue owners can stipulate these types of event policies in their rental agreement with the host.
We have a very large home (used to be a clubhouse in CA). We occasionally rent out the auditorium and I request liability insurance (with us as additional insured). In this case it will be a bereavement memorial. There will be no charge to attendees, except I will be charging the host for use of the venue. They wish to provide wine. It looks low risk, but I am fearful about liability. Might venue owners be held responsible for host alcohol?
Matt,
My pleasure to help. Liquor liability insurance is not required by law in California, either for licensed establishments or special events. However, some venues where events are held may require it as a condition of use. Since your group has an “organizing” role with the 501c3 that is getting the ABC license, it might be good to talk to an insurance agent who provides this kind of insurance.
Remember, because your company is not the one getting the ABC license, your company cannot share in the profits from the sale of alcohol. Instead, your company may receive a flat fee for its services from the 501c3, but can’t legally receive a percentage of the sales. Otherwise, it would be considered a “false ownership” situation, a violation of Section 23300 and 23355 of the Business and Professions Code.
As far as who can serve the alcohol in your scenario, the 501c3 can hire whomever it wants to work the event and to serve the alcohol. Or it can have its volunteers serve. Ideally, the volunteers would be experienced servers because volunteers have the same legal duties and liabilities as a full-time bartender in not serving minors or obviously intoxicated guests.
Whatever is decided about the insurance issue, a licensee can reduce its risk of problems by following responsible business practices during the event: Discourage intoxication, promote food and non-alcohol beverages, encourage people to designate a driver, don’t allow drinking on duty by anyone working the event, check ID’s on anyone who looks under 30, have enough people to properly monitor guests, and don’t serve anyone who looks or acts drunk. Lauren
Hi Lauren,
A bit late, but i thought I should give a question a try. I’m in California and I’m going to throw a one night event where I’m selling tickets. We’ll be providing alcohol and will have secured an ABC 221 license through a non profit organization that our event will be benefiting. The crowd is between 25-35 years of age and all young professionals and entrepreneurs, so I perceive it to be somewhat of a risk averse crowd.
Would I need to secure liquor liability insurance? The 501c3 is “hiring” us for organizing the event. So will they need to have this liability insurance in their name (ABC 221 holder) or in my company’s name, if needed at all? Additionally, could I have my staff work the event, since they are hiring my company to organize?
Any advice on this would be greatly appreciated. Thank you so much.
Cheers
-Matt
Rick,
An event open to the general public is not considered a private party. If you plan on selling beer and wine there, or including it in the ticket price, you should contact the ABC about a license. Beer and wine consumption always increases risk of liability at an event, especially when the event involves a large number of people, both adult and underage. It just goes with the territory that someone will drink too much and someone underage will manage to get hold of some alcohol. If you decide to get the beer and wine license, remember that your servers have the same responsibilities and liabilities as a full-time bartender.
If you want to reduce the risk of problems and your worries, skip the alcohol and have a family-friendly, alcohol-free event. If you plan it well and offer creative non-alcoholic beverages, good food and great music, it will be a memorable and enjoyable event for the families–and for you. Lauren
Hi Lauren,
We are having a big multi-generational reunion and music fest this coming August at Live Oak Camp in Santa Barbara County.. it is a County Park. The county requires that I get combined single liability insurance for this which is not a problem. We will be sellinbg tickets for this to the general public but we will have the entire campground, which is gated, for ourselves. Would this be considered a “Private Party” ? I dont want to get in trouble or sued by someone who drinks and gets in an accident or something. We were thinking of selling beer and wine with a Special Day License but I am kinda sacred to death over getting sued. Thanks !
Belinda,
It boils down to whether your events fall under the definition of a “private party.” See my response to Eva, where I define a private party.
If your events are truly “private parties,” then no license or permit is required. As to liability, ordinarily, a social host of a private party who makes alcohol available to adult (age 21+) guests is not liable for injuries to third persons caused by the guest’s intoxication. (There could be liability for a social host in certain situations, however, where they know the guest has a propensity to drink heavily, is a minor, etc.)
If your event is not a private party, then a license or permit is required.
Does your community have a homeowner’s association? The association may qualify for a temporary beer and wine permit (also known as Special Daily license). This would allow the association to sell beer and/or wine to members and guests at social gatherings. (A temporary license to serve beer, wine and spirits is harder to qualify for and is not feasible in your case.) Your local ABC district office can provide details on the Special Daily license and what proof you need to show of your nonprofit status.
If the event is not a private party, and you are allowing drinking without having a license/permit, then you could be at risk for operating an illegal “bottle club.” Section 25604 of the CA Business & Professions Code covers this issue and reads as follows:
“25604. It is a public nuisance for any person to maintain any club
room in which any alcoholic beverage is received or kept, or to which
any alcoholic beverage is brought, for consumption on the premises
by members of the public or of any club, corporation, or association,
unless the person and premises are licensed under this division. It
is a public nuisance for any person to keep, maintain, operate or
lease any premises for the purpose of providing therein for a
consideration a place for the drinking of alcoholic beverages by
members of the public or other persons, unless the person and
premises are licensed under this division. As used herein
‘consideration’ includes cover charge, the sale of food, ice, mixers
or other liquids used with alcoholic beverage drinks, or the
furnishing of glassware or other containers for use in the
consumption of alcoholic beverage drinks.
The Attorney General or any district attorney may bring an action
in the name of the people to abate the nuisance, and the Attorney
General shall, upon request of the department, bring the action.”
If you don’t have a homeowner’s association who could obtain the temporary license, then you could have a licensed caterer handle the alcohol. However, you could not derive any profits from the sale of alcohol, which defeats your stated purpose of raising funds to maintain the clubhouse. Thanks for your question. I hope this helps. Lauren
I live in a small community where we have a community center. In order to cover the expenses for this center we have social events. I have asked for the members who attend to give a donation for the wine and beer provided thinking I am not exactly selling it. One of our members protested this and wanted to bring his own liquor. I now know it is not legal to ask for donations but what happens if people bring their own liquor and get into an accident on the way home? Are we legal for allowing liquor on the premises in the first place?
Good Afternoon Eva,
Thank you for your kind words.
As the owner of an unlicensed event venue, the person or organization who rents your venue may or may not need a license. It depends upon the circumstances.
If an event is a private party, then no license is required. Section 23399.1 of the California Business & Professions Code defines a private party. It says that if ALL THREE of the following elements exist, then NO license is required:
1. That there is no sale of an alcoholic beverage. [Note: “Sale” includes direct transactions such as paying for a glass of wine AND indirect transactions such as asking for donations from guests, admission charges, or charging for the food and the alcohol is included.]
2. That the premises are not open to the general public during the time alcoholic beverages are served, consumed or otherwise disposed of.
3. That the premises are not maintained for the purpose of keeping, serving, consuming or otherwise disposing of alcoholic beverages.
On the other hand, if any ONE of the above applies, then it is NOT a private party and there must be a license. To qualify for a Special Daily license for beer/wine, the group must be a non-profit organization. To qualify for a Daily General license for beer/wine/spirits, the group must be a political party/candidate, a charitable, civic, fraternal or religious organization. These “daily licenses” are NOT issued to individuals. If the group is not any of these types of organizations, then they would need a licensed caterer to handle the alcohol. A licensed caterer is someone who has a Type 58 Caterer’s Permit issued by the ABC, and who also has written authorization from the ABC for the particular event.
Liquor liability insurance is for protection against liability, and has nothing to do with authorizing the sale or service of alcoholic beverages. Thanks for your question. Lauren
Hi Lauren,
I also found your website so helpful.
My family has a small event venue and can’t afford a liquor license. Since we are not selling alcohol, do we need one?
I have heard of liquor liability insurance that a guest can buy if they want to consume alcohol at their event. If we required them to have this insurance, would we be legal in letting them serve alcohol on our property?
Hi Khorsani,
Thanks for your question. It would be illegal here in California, and is illegal in NYC, too. Section 130 of the NY liquor laws makes sales without a liquor license a misdemeanor crime. Here in California, and probably in NY also, asking for donations is the same as selling the alcohol.
As to giving the alcohol to the crowd for free, I’m assuming this concert is open to the public and not a private party. I believe that would put you at risk for trouble as well because it circumvents the liquor licensing process. You may want to check with the NY Liquor Authority about possibly getting a temporary license or having a licensed caterer handle the alcohol for you. Here in CA, only non-profit groups and certain other groups can get temporary licenses. Not sure about NY. If it is the same there, maybe you can have a non-profit group sell the alcohol. Of course, all the profits from the sale of alcohol would likely have to go to them, and not you.
The NY State Liquor Authority has a call center for the NYC area. The number is 212-961-8385. I hope this helps. Lauren
Hi Lauren, I went through your excellent blog and could not find an answer to a question I was looking for. It pertains to NYC: Can I serve alcohol at a concert I’m organizing without a liquor license and ask for suggested donations for the wine and beer? What about serving alcohol to the crowd for free? There will probably around 400 people or so drinking. Would I get into trouble if the cops arrived?