- Last Updated:
- 10/22/2024
- Lindsey Fliger
It’s one thing to imagine all of the “what ifs” and worst-case scenarios, but to experience the consequences of serving alcohol firsthand can be detrimental to your life and business. Intoxicated people can cause serious damage to themselves, others, and their surroundings, all of which can have a lasting impact.
Understanding dram shop liability and how it impacts you is vital for alcohol-serving businesses. To shed some light on the subject, we’re offering up some real-world liquor liability claims to illustrate just how important it is to serve responsibly.
What Is Dram Shop Liability?
Dram shop liability laws hold alcohol-related businesses responsible for the actions of their customers. If you serve a visibly intoxicated patron or somebody under the age of 21, you could face civil and criminal charges if they cause injury or damages, depending on your state.
All but eight states in the U.S. have dram shop statutes. The consequences for violating these laws include fees, lawsuits, loss of liquor license, and even jail time.
Who Can Be Sued in a Dram Shop Case?
If you serve, sell, or provide alcohol to guests or customers, you are open to the risk of a dram shop lawsuit. This includes bar owners, bartenders, servers, and caterers who serve wine, beer, and spirits. You can be sued if an intoxicated customer hurts themselves or somebody else, or causes property damage.
Examples of Dram Shop Claims and Lawsuits
Consider the following:
- 37 people die in drunk driving accidents each day
- 5% of high school students reported drinking and driving in the past month
- 42 states and the District of Columbia hold bartenders liable for irresponsible alcohol service that leads to injuries, death, or property damage
When you’re mixing cocktails and pouring wine, it’s easy to forget how quickly things can turn from fun to unfortunate. Below are some real-world examples of claims from our policyholders*:
*Names, details, and other identifying information have been changed to protect the privacy of our clients.
Claim #1: Post-Wedding Crash
At a California wedding reception, a bartender failed to catch a fake ID and served an underage guest. After a night of dancing and several drinks, the young woman left the venue, driving herself and her date home.
She ended up causing a serious automobile accident, resulting in severe injuries to herself, her passenger, and the other driver. The bartender was held financially liable for providing alcohol to an underage guest and continuing to serve her past intoxication.
Insurance paid: $980,000
Claim #2: Bar Brawl Turned Deadly
On the night of a big college game, a South Carolina bar was packed with patrons gathered to root for their favorite teams. With the hectic pace of the evening, the bartender didn’t notice that a few customers had consumed a few too many beers.
The drunk sports fans grew belligerent as the night went on, escalating from a verbal argument to a fistfight. After getting punched in the nose, one man pulled a gun and shot his attacker. The evening ended with one person dead and several others requiring medical attention.
The victim’s family sued the bartender and venue for the wrongful death of their loved one.
Insurance paid: $40,878
Claim #3: Holiday Celebration Gone Wrong
A Florida client hired a private bartender to serve their annual family holiday party. Throughout the evening, Uncle Joe sampled the entire cocktail menu. After his third Irish Coffee, he began dancing around the living room, doing his best Santa impression as he bumped into furniture and other guests.
After being asked by the host to take a breather, Joe stumbled to the front door and fell through it, shattering the glass and pulling the frame from the hinges. He was fine, but the door required some major repairs. Because she failed to cut Joe off, the client demanded that the bartender pay to repair the door.
Insurance paid: $584
Dram Shop Liability Insurance: A Must-Have for Alcohol-Serving Businesses
As you can see, a single dram shop claim can devastate a small business. Between legal fees, judgments, medical bills, repair costs, and other related expenses, the financial toll is tremendous.
Dram shop insurance helps offset these expenses by mitigating the cost of alcohol-related claims. If a customer you served goes on to cause an accident, your insurance can cover some or all of your monetary responsibility so you aren’t forced to pay out of pocket.
How to Reduce the Risk of Dram Shop Violations
Operating safely and responsibly is the best way to prevent claims. Here are a few tips to protect yourself and your business:
- Complete training: Certification programs, such as TiPS, provide essential education for those who serve and sell alcohol, including legal requirements and how to balance customer service with compliance.
- Check identification: Always ask for ID before serving a customer and learn how to verify for validity and accuracy. Never serve anyone under 21.
- Say no: Learn how to refuse service when a customer is visibly intoxicated, belligerent, or otherwise unfit to consume alcohol. It is your duty as a bartender or server to follow best practices and make responsible judgment calls.
- Offer water and food: Always provide non-alcoholic beverages, snacks, and hors d’oeuvres to help keep customers hydrated and their bellies full (which can assist in metabolizing the alcohol).
- Pay attention: Watch customers for signs of intoxication — slurred speech, stumbling, depression, agitation — and cut them off when you recognize it. You should also be mindful of how many drinks customers order and consume per hour.
The Key to Responsible Alcohol Service
Knowing and following dram shop law is an essential part of working in the industry. When you understand your responsibilities (and the consequences) of serving alcohol, you can take a proactive approach by carrying liquor liability insurance and reducing your risk as much as possible.
FAQs About Dram Shop Liability
When Should You Consider Dram Shop Liability Insurance?
You should purchase a dram shop liability policy before you open for business or attend an event where you will be serving alcohol. In some cases, you can even purchase your policy on the same day as the event.
However, depending on where you operate, you may need to show proof of insurance before you can sign a contract or get a permit, so it’s best to plan ahead. Always check local requirements before serving alcohol.
How Do Dram Shop Laws Vary by State?
Dram shop statutes are different in every state, varying in consequences, what events qualify, and who is responsible. However, most states have stipulations for businesses that serve a visibly intoxicated customer or provide alcohol to a minor.
Only eight states in the U.S. do not have dram shop laws:
- Delaware
- Kansas
- Louisiana
- Maryland
- Nebraska
- Nevada
- South Dakota
- Virginia
Are Social Hosts Covered Under Dram Shop Laws?
Dram shop laws usually only apply to commercial services that profit from the sale or service of alcohol, which excludes social hosts. Some states do include social host liability under their dram shop laws, but most areas have separate statutes to cover host liability.
How Does Dram Shop Insurance Work, and Is It Required?
Dram shop insurance (aka liquor liability insurance) is designed to respond if an intoxicated customer causes an accident that results in bodily injury or property damage.
Bartenders, servers, and other alcohol-serving businesses can be held liable for the actions of their customers. Liquor liability coverage can cover some or all of these expenses.
Some states mandate that you provide proof of insurance before you can receive a permit or license. Additionally, most venues require bartenders to share their Certificate of Insurance (COI) as part of their contract.
Lindsey Fliger | Copywriter
Ohio-based copywriter Lindsey Fliger leverages her experience dabbling in everything from crafting to cooking. She holds a bachelor’s in English from Kent State University and a master’s in English Literature from The University of Akron. Before Veracity, she was a writer and editor in the retail and SEO spaces, covering products ranging from wine to beauty products. Lindsey is fully trained on Insurance Canopy’s wide variety of products and is equipped to help pros like you navigate your insurance needs.
Ohio-based copywriter Lindsey Fliger leverages her experience dabbling in everything from crafting to cooking. She holds a bachelor’s in English from Kent State University and a master’s in English Literature from The University of Akron. Before Veracity, she was a writer and editor in the retail and SEO spaces, covering products ranging from wine to beauty products. Lindsey is fully trained on Insurance Canopy’s wide variety of products and is equipped to help pros like you navigate your insurance needs.
