Businesses that sell liquor are regulated under Dram Shop laws and protected with Liquor Liability Insurance. Liquor Liability Insurance is fairly self-explanatory and can help businesses with some of the costs they face when someone sues them under Dram Shop law. But what in the heck is a Dram Shop?
The word “dram” originally meant a certain measurement of alcohol. The definition has since evolved: a Dram Shop now denotes any business that sells alcohol, including:
- Bars
- Clubs
- Restaurants
- Taverns
Dram shop laws: past and present
The history of liquor liability, or the ability to hold an establishment partially responsible for damages caused by an intoxicated person, is long and storied. So here’s a timeline to help sum it up.
- In 1700s England, gin provided a cheap and potent alternative to port. The British government even encouraged citizens to consume gin.
- Soon, however, the government switched its stance; taxes and regulations were imposed on alcohol production and sale in England, spelling the beginning of temperance.
- Similar problems were echoed in the United States as states attempted to impose laws limiting alcohol.
- At the same time that laws were becoming stricter in the U.S., alcohol consumption rose. U.S. citizens were unhappy with these limitations and taxes placed on their alcohol. One tax led to the famous Whiskey Rebellion of 1794.
- As time went on, temperance movements and prohibition gained and lost popularity.
- In 1933, the 21st Amendment moved the power over regulating alcohol from federal to state hands, largely ending the Prohibition era. This is why Dram Shop laws today differ in every state.
Dram Shop laws often focus on correcting establishments that sell alcohol to minors and businesses that continually serve drinks to overly intoxicated people. But how is a Dram Shop owner supposed to know the ins and outs of Dram Shop laws and protect themselves against risk?
Why liquor liability insurance matters for dram shops
Dram Shop owners take many risks, one being the risk of serving alcohol to people who could then injure someone or damage property after leaving the establishment. To protect themselves owners can invest in insurance programs and risk management strategies that safeguard the business they worked hard to build.
Liquor Liability Insurance is a type of insurance that helps businesses that are found negligent under Dram Shop laws. In other words, it allows the Dram Shop to cover legal fees, settlements, and judgments that come with a failure to abide by Dram Shop laws. Liquor Liability Insurance is often required for Dram Shops.
What’s the worst that could happen without liquor liability insurance?
Dram Shop laws are no joke. Many tragic accidents have taken place when businesses have been negligent in serving customers alcohol. As a result, Dram Shops have paid millions of dollars in settlements to families of drunk-driving victims.
Paul Murdaugh was a teenager in South Carolina. One night, he decided to buy some beer from a convenience store with his older brother’s ID. After drinking the beers Murdaugh met up with his friends to take them out on a boat. Despite his intoxicated state, Murdaugh insisted on driving. He eventually crashed the boat into a bridge which resulted in the death of Mallory Beach, one of Murdaugh’s friends.
The lawsuit, filed by the family of Mallory Beach, sought settlement payments from the Parker’s Kitchen, the Dram Shop from which Murdaugh bought the beer. The lawsuit claimed that the convenience store did not stop Murdaugh from buying beer, which led him to become so intoxicated that he crashed the boat. Parker’s Kitchen did not accept liability for the accident and their insurance company will pay the settlement of $15.5 million. Without liquor liability insurance Parker’s Kitchen would have had to pay the entire settlement.
Beyond liquor liability insurance
Liquor Liability Insurance is just the beginning. Dram Shops face other risks as well:
- Third-party injury and property damage: General Liability Insurance is a fundamental form of protection that covers businesses from financial losses that occur when a customer has filed a lawsuit. General Liability Insurance is strongly recommended and often required for businesses that interact with the public.
- Employee injury: Worker’s Compensation Insurance is often required for Dram Shops and covers medical bills and lost wages when employees are injured or become sick while at work.
- Unexpected financial losses: Business Interruption Insurance covers financial losses resulting from an unexpected stoppage of work caused by natural disasters or unexpected equipment failure. It is not required but highly recommended for businesses.
- Auto accidents: Commercial auto insurance with a Hired and Non-Owned Auto (HNOA) endorsement covers business vehicles and personal cars driven for business. Commercial auto helps cover the cost of accidents caused by company vehicles, as well as legal expenses.
- Property damage: Commercial property insurance is a popular form of insurance that protects a business’s building and land in the case of fire, theft, vandalism, damaging weather, or other natural disasters. Often, damages and lost income are covered.
- Crime: Crime is all too frequent in the hospitality industry and insuring against it is a good investment for any Dram Shop. Theft, robbery, fraud, embezzlement, and other types of crime can be covered by crime insurance.
- Wrongful employment practices: Employment Practices Liability Insurance (EPLI) covers wrongful employment practice lawsuits, such as discrimination and harassment.
What you can do
The dedication to serving alcohol responsibly and following Dram Shop laws can save lives. When it comes to your business, however, insurance may not provide enough protection against potential risks. Managing that risk involves various strategies, with a key focus on addressing financial risks and the first step is to implement a strategic risk management plan.
POWERS Insurance & Risk Management understands the unique risks that hospitality businesses face. We want to help you understand those risks, and prepare accordingly. To set up a comprehensive assessment and identify the necessary policies for addressing your uncontrollable risks schedule a free 30 minute consultation today.