Insurance for bars and pubs
Bars and pubs are a go-to destination for many Canadian consumers to socialize with friends while enjoying alcoholic beverages. However, bar and pub owners face risks serving alcohol, including intoxicated customers and poor liquor serving practices. These risks can potentially lead to lawsuits or third-party liability claims should one of your patrons get injured, injure someone else, or damage property after getting intoxicated in your establishment. Adding liquor liability coverage to your restaurant insurance policy may help cover any claims arising from a customer’s negligent actions while they are intoxicated.
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What is liquor liability insurance?
Liquor liability coverage is designed to cover the costs associated with claims against your bar or pub alleging third-party bodily injury or property damage due to an intoxicated patron. Your employees must be licensed to serve alcohol by provincial liquor service and sales programs such as Smart Serve in Ontario or ProServe in Alberta. If one of your customers becomes intoxicated at your establishment and injures themselves or others – whether the incident occurred at your bar or pub or elsewhere – you or your employees may be held liable.
What does liquor liability insurance cover?
Any establishment or its employees involved with serving alcoholic beverages may be held liable for damages or injuries that occur if it is determined alcohol consumption is a contributing factor in any incident. That includes:
- Bars, pubs, and nightclubs
- Dine-in restaurants
- Hookah bars and lounges
- Organizers of special events at an establishment or rented facility where alcohol is served
Liquor liability coverage may pay for medical expenses of an injured person and any legal judgments resulting from a lawsuit. If one of your employees gets intoxicated on the job and injures themselves, someone else, or damages property, it is covered under your commercial general liability coverage. Whether serving liquor as part of a special event or for day-to-day service, consider adding liquor liability coverage to your restaurant insurance or commercial general liability (CGL) insurance policy.
What other types of insurance do bars and pubs need?
A comprehensive insurance package for bars and pubs may include the following coverages:
- Commercial General Liability (CGL) Insurance: Commercial general liability insurance, best known as slip-and-fall insurance, protects you against the day-to-day risks that can happen when interacting with third parties, such as claims of bodily injury or property damage. Commercial general liability insurance is a combination of several coverages designed to protect your establishment and typically covers legal expenses and medical fees resulting from a lawsuit.
- Product Liability Insurance: Product liability coverage is usually included in a CGL policy. It protects against claims alleging third-party property damage or bodily injury caused by a product you manufacture, distribute, or sell to a consumer, including food and alcohol.
- Cyber Liability Insurance: Cyber liability insurance is one of the most critical coverages to have for selling products online, especially if you’re storing your customers’ data. While your customers may visit your establishment to purchase food and alcohol, if you offer customers the opportunity to make a reservation online that requires them to include personal or financial information, it is your responsibility to protect their data. Cyber liability insurance covers costs associated with electronic incidents, such as cyber-attacks on your computing systems.
- Commercial Property Insurance: Commercial property insurance protects your establishment’s contents (including your inventory) from insured risks that occur beyond your control, like a fire, theft, or flood. It also covers the venue itself if you own the building. If you lease or rent the business venue, as a tenant, you are protected from damages to your property, whereas the building is covered by your landlord’s insurance policy. Carrying commercial property insurance gives you the option of getting business interruption coverage, which reimburses the net income lost following an insured event. It may also cover overhead costs, employee wages, and other costs associated with temporarily closing your business. However, business interruption coverage does not cover income lost due to a pandemic, infectious disease, or government-mandated closure.
- Equipment Breakdown Insurance: Equipment breakdown insurance covers the costs to repair or replace professional equipment such as commercial kitchen appliances that break or are damaged because of a mechanical or electrical issue. You must have commercial property insurance to buy equipment breakdown coverage. However, it does not protect your equipment from damage against external sources such as a fire or flood. It is commercial property insurance that covers damages from these types of perils.
- Legal Expense Insurance: Legal expense coverage provides access to legal advice on a set of common business topics with an experienced lawyer as well as the cost to retain a lawyer.
- Commercial Crime Insurance: Commercial crime insurance protects against theft by employees, including any losses resulting from forgery or fraud. This type of coverage can be purchased as a standalone policy, or it can be added to your existing commercial general liability policy. There are two types of commercial crime coverages:
- Money and securities: covers losses due to burglary, robbery, or theft.
- Employee dishonesty coverage: covers losses or liabilities resulting from fraudulent acts such as embezzlement.
How much does it cost?
The cost of adding liquor liability coverage to your insurance package is based on several factors, including the type of establishment and alcoholic beverages sold and your establishment’s hours of operation. However, the best indicator of how much it will cost to add liquor liability coverage to your insurance policy is the percentage of your annual revenue from selling alcohol. The greater the percentage of your revenue attributed to alcohol sales, the higher your yearly premium will be.
How to reduce the risk of a liquor liability claim
Your job doesn’t end after your patrons leave your bar or pub. You and your staff have a legal responsibility to make sure your patrons get home safely. You may be legally liable if one of your customers is injured or causes an injury after becoming intoxicated at your establishment. That means you need to mitigate your liability risks. In addition to complying with municipal, provincial, and federal liquor laws, here are a few tips for doing so:
Create liquor-serving policies and procedures for your employees to abide by and enforce:
- Limit your customers’ alcohol consumption and offer food service, and do not serve patrons past the point of intoxication.
- Train your bartenders and servers, document their training, and not permit them to serve alcohol to intoxicated individuals. Ensure they know what to do if a patron has too much to drink.
- Remind your customers not to drink and drive and provide them with options to get home safely, such as hailing them a taxi or ride-sharing service.
- Display posters from Mothers Against Drunk Driving (MADD) Canada or similar organizations wherever alcohol is served.
- Implement a mandatory customer identification policy and never serve alcohol to anyone under the legal age in your province.
- Create zero-tolerance alcohol and drug policy for employees and do not allow them to consume alcohol or drugs before working or while they’re working.
Common claims scenarios
Frequently asked questions