Insurance provides an important financial safeguard for many businesses, and restaurants and establishments that serve alcohol especially need the protection provided by solid coverage. Most property owners leasing space to bars or restaurants won’t even let tenants open up shop without proof of appropriate insurance, and some states require liquor liability insurance coverage for bars and restaurants to obtain liquor licenses.
Restaurants and bars offer their owners an incredible opportunity to earn substantial incomes, but that opportunity comes with risk. Restaurant and bar owners face the same exposure to misfortune and legal liability that most business owners do—fires, property damage, slip and fall cases, etc.—but they also face unique risks related to the nature of their business.
For example, if a customer were to be made ill by food from a restaurant, he or she could sue. Establishments serving alcohol also face increased risk; for example, if a person were to be injured in an auto accident caused by another person who just left a bar, the accident victim could sue the establishment that served the other driver alcohol.
Owners and operators of restaurants and bars aren’t the only ones who can face lawsuits in these circumstances. Landlords who lease the property where the businesses are located may also face lawsuits by people injured on the premises or injured as a result of the operations of businesses located there.
To protect their investment in the property, and to protect against claims from third parties, most landlords will require restaurants, bars, and nightclubs to carry at least general liability insurance, property insurance, and liquor liability insurance, and they may also require commercial vehicle insurance, product liability, and other forms of insurance. Without the right insurance, you may never even get to see a rental agreement, and, if you let it lapse, your landlord may evict you from the property.
General liability insurance – General liability insurance, also often referred to as business liability insurance, protects a business from a variety of claims that may arise from the operations of a business. Some typical coverages include:
- Bodily injury and property damage
- Damage to premises
- Medical payments
- Personal and advertising injury
For example, if a bar patron were to slip and fall in the bathroom and sustain an injury, he or she might sue the bar and the property owner. The general liability policy would provide coverage for these claims and would aid in defending them in court.
Property insurance – Lots of things can happen in bars and restaurants. A grease fire may erupt in a restaurant kitchen, special effects for a performance may spark a fire, a dishwashing system may flood a portion of the bar or restaurant, etc. Property insurance provides coverage for damage to the property leased by the business owners.
Liquor liability insurance – This is important for bars, nightclubs, and restaurants that serve alcoholic beverages. Most landlords will insist these businesses carry this coverage, and, in some states, the businesses must have it in order to open.
Liquor liability insurance provides coverage for bodily injury or property damage caused by an intoxicated person who was served liquor by the holder of the policy. Many states have very strict liquor liability laws that hold alcohol-serving establishments responsible for the actions of their patrons. For example, many states will hold every bar an intoxicated person visited before getting involved in an accident liable, even ones where the person only did a little of their drinking.
A good liquor liability policy will cover attorney’s fees, damages, incidents that occur off premises, coverage for assault and battery, and coverage for specific incidents such as fights, stabbings, shootings, etc.
Commercial auto insurance – Restaurants that use vehicles to deliver food to customers or bars that use delivery vans to ferry alcohol and other supplies between locations need commercial auto liability insurance to cover claims that may arise from the use of these vehicles in business. Personal policies may not cover claims involving a vehicle used for business purposes. That’s why it’s important to cover automobiles used for business with commercial policies providing coverage of bodily injury, property damage, medical payments, and other incidents.
Other Policies You May Want to Look Into
Worker’s compensation insurance – In fast-paced restaurants, bars, and nightclubs, employees can and do get injured. Broken glass, slips in the kitchen, injuries sustained breaking up fights between patrons; these are all risks that can occur in these industries. In some cases, workers may have a claim against the business owner. Worker’s compensation insurance provides coverage for employees’ medical expenses and lost wages and provides coverage for lawsuits that may arise from employee injuries.
Employment practice liability insurance – Restaurants, bars, and nightclubs see a lot of employee turnover. Unfortunately, sometimes that turnover results from sexual harassment or other improper behavior by other employees or management. This insurance will help protect business owners from these claims.
Cyber liability insurance – Restaurants and bars collect quite a bit of credit card data from their clients, making them attractive targets from hackers. If customers’ personal financial information is stolen via a hack, those businesses may face a class action from customers alleging that they did not exercise reasonable care to protect that information. Cyber liability insurance will cover these claims.
Umbrella insurance – Most commercial insurance policies limit coverage to $2 million. If a judgment or settlement against the business is greater than that, business owners are on their own to pay the difference. Umbrella policies are add-ons to commercial policies that increase the limit of covered claims. Most of the time they’ll provide $5 million to $10 million in additional coverage. Umbrella policies may also provide coverage for risks excluded in the commercial policy.
Each state has its own regulations concerning how much and what kind of insurance businesses must buy. Costs will also vary, as some states have stricter laws concerning liquor liability than other states. For example, in Louisiana, liquor liability costs about $2 for every $1,000 in liquor sales, whereas in Alabama, liquor liability policies cost about $16 for every $1,000 in sales, because Alabama has some of the strictest liquor liability laws in the U.S., according to Insurance Journal.
To find out what type of insurance is required in your state, talk to an insurance agent with experience in the restaurant, bar, and nightclub businesses. Agents who have insured these clients will have a better idea of your specialized needs than a general insurance agency.
A lot of variables will go into determining the cost of a restaurant, bar, or nightclub policy, including:
- Years in business/experience of the owners
- Average number of customers served each year
- Annual revenues
- Number of employees
- Claims history of owners
- Type and age of leased facility
- Safeguards such as fire and security alarms
- Value of contents, equipment, and inventory
For new businesses, many of these numbers will be estimated from the restaurant, bar, or nightclub’s business plan.
Tabak Insurance Agency specializes in restaurant, bar, and nightclub insurance, offering just the right policies to meet client needs. Tabak Insurance has worked in the restaurant, bar, and nightclub insurance segment for a quarter of a century, and, thanks to that experience and the relationships built in that time, Tabak is able to offer the best policies at lower premiums. Tabak Insurance Agency saves its clients 20 percent, on average, on their insurance premiums, making the company a value leader in the industry. Restaurant, bar, and nightclub owners who want an insurance agent who works for them instead of the insurance companies should contact Tabak Insurance for a consultation today.