Resources & Insights

Liability Grinch Can Ruin Your Holiday Cheer

December 21, 2016

The holiday season is upon us and, for many, that means attending festive holiday parties. It can be a wonderful time of the year. Unfortunately, it also too frequently means some of us will overdo it when it comes to holiday cheer.

Liquor liability
CCIG’s Michael Kline.

Colorado’s so-called dram shop law limits the liability for bars and restaurants, but after a handful of incidents, the coverage in a standard commercial general liability insurance policy can quickly run out. What’s more, assuming someone’s hurt during a bar fight, these establishments also can be sued for premises liability where the caps on economic damages are much higher.

The Colorado Supreme Court said as much in a 2011 ruling. The justices held that an alcohol licensee who violates the Dram Shop Act can be held liable for even unforeseen injuries to a third person that result from an intoxicated person’s conduct.

In other words, unless they’ve bought the right kind of coverage at adequate levels, then businesses that serve alcohol could easily find themselves serving last call for good.

Dram shop laws are so named because alcohol was once commonly sold by a unit of measure known as a dram. Under our dram laws, bars and liquor stores can be liable only if they sell alcohol to a visibly intoxicated person or to a minor. In such cases, damages are limited to about $300,000 and typically cover medical bills, lost wages and pain and suffering.

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But guess what happens when the bartender fails to recognize or simply ignores that someone is intoxicated.

There’s no shortage of cautionary tales.

Take, for example, the story of a woman who had arrived at a restaurant already intoxicated and drank as many as four margaritas and several shots of tequila during the course of the evening. She drove away from the restaurant and a short time later struck and nearly killed a police officer while he was standing outside his patrol car.

The loss amounted to $5 million.

All of this is where Liquor Liability insurance comes in. A policy for owners and operators of establishments that sell, serve, manufacture or facilitate the use of alcohol, Liquor Liability protects these businesses when they are sued for the damages their intoxicated guests cause others.

Because not all policies are created equally, the best liquor liability policies will also include:

  • Intoxicated employee coverage, covering the actions of employees the same way policies cover customers.
  • Off-premises coverage, providing a bar or restaurant coverage when they cater an office party.
  • Mental damages coverage, for lawsuits that arise out of the psychological trauma witnesses suffer after seeing an alcohol-related accident.

Exact figures are hard to come by, but many smaller bars and other businesses that should have this coverage try to go without it. Some do so to save on the expense, others because they wrongly assume their general liability policies will cover alcohol-related incidents.

Whatever their reason, what they soon discover is that paying out of pocket for big damage claims is not good for business. And even a win in court can mean tens of thousands of dollars in attorney’s fees.

The hospitality industry welcomed Colorado’s dram shop law when it was adopted years ago. But as any bartender will attest, there’s a lot that can wrong when people start to drink.

Michael Kline is a CCIG Assistant Vice President. Reach him at or 720-212-2042.

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