Who does the liquor liability insurance coverage apply to?


Not every buyer of a commercial general liability policy automatically receives protection against liquor liability. In fact, there is a special exclusion pertaining to those whose business includes the manufacturing, selling, distributing or serving of alcohol. If your business does not involve any or the above-mentioned operations the exclusion does not apply to you - what is more, you are provided with host liquor liability coverage.

When Host Liquor Liability Insurance Applies

Host liquor liability insurance is of highly restrictive nature that is, the insured business owner has to meet some very strict requirements to receive this type of liability protection. The following rules apply to host liquor liability insurance:

  • As mentioned above, for an insured to be protected under the liquor liability insurance coverage provision, they need to prove that their business does not involve the production or distribution of alcohol, nor the selling, furnishing or serving thereof.
  • Liquor liability insurance coverage is automatically excluded if the insured is found liable for deliberately causing the intoxication of another person.

To illustrate this, we can compare two hypothetical situations:

  • A bar owner is sued for selling alcoholic beverages to an under-age driver who happens to have caused a car accident after leaving the bar intoxicated.
  • A hotel owner rents their premises to a wedding planning company for a wedding reception to be held. However, a group of wedding guests accidentally cause a fire, resulting in significant property damage to other hotel guests.

It goes without saying that both cases will most likely result in serious liability lawsuits.

In the first case, the bar owner is very likely to be held liable for selling alcoholic beverages to under-21s. The host liquor liability insurance clause does not apply to the owner, since their business involves the selling of alcohol.

In the second case, however, the hotel owner will probably have signed a hold-harmless contract with the agency renting the venue prior to the event in question, and will not be held liable for the wedding guests' intoxication.

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