The office picnic, office-sponsored sports activities, holiday party, and client party may involve serving and consuming alcoholic beverages. Therefore, a number of questions arise, such as the following:

  • Can our business be held responsible for injuries or damage that results from serving alcohol?
  • Is the current insurance program sufficient to address this concern?
  • Is it necessary to purchase special insurance?

What Determines Liability?

State alcohol laws (called Dram Shop Laws in most states) determine a business entity’s liability for injury or damage arising from serving alcohol. Laws vary, but those in most states assign legal liability to entities who serve alcohol to persons who are minors or who are visibly intoxicated.

The Commercial General Liability (CGL) policy provides coverage for Liquor Liability, EXCEPT for operations ‘in the business of’ selling, serving, or manufacturing alcoholic beverages. If the event offers alcohol for free, that entity is not ‘in the business of’ selling or serving. If persons have to pay, even if the charge is only to offset the alcohol’s expense, that creates a different legal situation.

When hosting an event that includes liquor, some businesses have decided that hiring a bartender will reduce their risk of being held liable. This step at least offers the benefit of another party being held primarily responsible and reducing the amount the business might be required to pay. The main issue is obtaining proof from the bartender to confirm that he or she carries an adequate level of Liquor Liability insurance. Proof should be obtained PRIOR to the event. You cannot take protective action after a loss occurs and it is discovered that insurance coverage is either insufficient or non-existent.

Society is less tolerant of drinking and driving. An impaired driver who causes an auto accident is much more likely to be sued. Besides the driver, a lawsuit will likely include a business that provided alcohol. Why, because such a business is considered as contributing to the loss and is called on to share (or fully bear) the cost of injury or damage. The Commercial General Liability policy could provide the necessary defense for the business.

Example: Business A and Business B are both insured by CGL policies and each company recently sponsored a Christmas party. After each party, a very inebriated employee leaves and, before reaching home, causes a collision. The injured drivers sue the businesses along with the drunken employees. Business A is an accounting office and its CGL handles the lawsuit. Business B is a tavern; its CGL denies the claim.

The solution is to discuss the types of events your business sponsors or hosts with your agent to determine if you need to purchase special coverage. This discussion may also help you take steps to reduce potential lawsuits. Some businesses may find it easiest and safest to ban drinking during business hours, including business lunches, dinners or other events. Your insurance agent and legal counsel can assist you in determining ways to protect your assets.

If you have questions about business insurance call us at 800-392-6532.

 

©The Rough Notes Company, Inc.



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