Consider a nonprofit holding an annual fundraising event with a cash bar; a law firm serving its employees champagne to celebrate winning a case; a software company’s holiday party where spouses and families of employees are invited. All of these situations could result in an intoxicated person injuring someone in an auto accident. This means the companies serving alcohol can be held liable.

If an intoxicated person causes bodily injury or property damage, most states allow businesses and people to be held accountable for that BI/PD, if they served alcohol to the intoxicated person. Liquor Liability can cover this exposure, but most businesses do not need a standalone, or monoline, Liquor Liability policy. What these businesses need is Host Liquor.

Host Liquor is a coverage built into the ISO Commercial General Liability coverage form. Ironically, it is found in an exclusion. The Liquor Liability exclusion, 2.c., excludes coverage for BI/PD. The exclusion’s final paragraph starts with “however” – there’s the exception we need – the “exclusion applies only if you [the insured] are in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages.” This exception provides coverage for the examples above, as the businesses are merely hosts, and are not in the liquor industry.

Having Host Liquor Liability does not mean that all possible claims, or even violations of the law, are covered. The insured must comply with the law. For example, serving alcohol to a minor is against the law, and an insurance policy will not respond to criminal charges.

Having the coverage is also no substitute for risk management. Businesses might consider stopping service to people who are intoxicated; holding events at a venue which includes servers; hiring bartenders or caterers.

While the CGL policy includes Liquor Liability, the coverage can be removed by endorsement. If you know your client needs the coverage, be sure no endorsement excludes it.