Do you operate an establishment in the state of Texas? Does the majority of your entity’s revenue come from alcohol sales? If you’ve answered “yes” to both of these questions, then you’d be required by law to acquire a liquor liability insurance policy – that is, should a bill proposed by Texas state representative Chris Turner be signed into law.

House Bill 409, which has been nicknamed the “dram shop bill,” was originally proposed by Turner in 2013, again in 2015 and was more recently re-filed for consideration in early 2016. According to a report from Claims Journal, the bill was originally proposed following a 2-year-old’s eventual death when the car he was riding in was hit by a drunk driver who had been over-served at a local watering hole. However, what may soon become mandatory for many restaurants in the state of Texas should serve as a stern reminder for restaurants, clubs and bars nationwide – it’s never a bad idea to have a liquor liability insurance policy.

Learn More about the Dram Shop Bill with NOLO.COM

Liquor Liability Insurance: The Basics

Presently, it’s estimated that about one out of every three alcohol-serving entities in Texas has a liquor liability insurance policy. The same is likely true of many states and cities across the U.S. – establishments that are under-covered. Many business owners think that a general liability insurance policy will cover alcohol-related incidents – but these business owners aren’t only mistaken, they’re potentially putting their establishments on the line.

Here’s a closer look at the specifics of what a liquor liability insurance policy covers:

  • Lawsuits and property damage stemming from alcohol-induced fights.
  • As in the reasoning behind the Texas dram shop bill proposal, liquor liability covers civil and criminal charges related to a patron’s drunk driving.
  • Attorney fees, court costs and any damages that are awarded as the result of a lawsuit.

A good liquor liability policy should also cover things like sexual assault, mental trauma suffered in an incident, coverage for any employees who are drinking on the job and involved in an incident and coverage for violent acts that may occur, such as stabbings or shootings.

While it may seem unfair that a bar, restaurant or nightclub could be held accountable for an alcohol-fueled incident, in many cases it is the business that served a particular customer that is often attempted to be held responsible as well.

Liquor liability policies vary in cost, from basic policies that run about $500 to more advanced policies that can run thousands of dollars in premiums each year. The policy amount purchased often depends on several factors, such as size of the establishment, location of the establishment, type of business and how much alcohol is sold each year, among others.

Liquor Liability: Why Do I Need It?

So just why do you need liquor liability insurance? Simply put, if your business serves alcohol and you don’t have an appropriate policy, you’re risking financial ruin each and every day. Many bars and restaurants, especially the smaller, family-owned ones, don’t have the financial means to pay out of pocket for things like unforeseen attorney fees, court costs and potential damages that someone on the wrong end of an alcohol-induced incident is awarded in a lawsuit. Being that lawsuits can drag on and on, costs and fees have a tendency to add up, perhaps costing your business tens of thousands of dollars when it’s all said and done.

It’s worth noting that liquor liability doesn’t protect a business from all alcohol-related incidents. For instance, such policies usually don’t cover lawsuits and damages resulting from establishments serving underage patrons – whether it be knowingly or unknowingly. So noting this, a liquor liability insurance policy doesn’t make a bar or restaurant “invincible” from all alcohol-fueled incidents – employees should still be trained not to over-serve patrons or serve minors, for instance.

The bottom line is that if your establishment sells alcohol and you don’t have a liquor liability policy, it could spell catastrophic news for your business in the event that you’re named in a relevant lawsuit. Such policies may soon become mandatory for businesses in Texas where more than 50 percent of their revenue comes from alcohol sales, and this bit of news in the Lonestar State is a good reminder to assess your establishment’s situation as well.