Restaurant Liability with Alcohol Sales

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  • 0:02 Worst-Case Scenario
  • 1:23 Alcohol Sales Laws
  • 4:38 Lesson Summary
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Lesson Transcript
Instructor: Beth Hendricks

Beth holds a master's degree in integrated marketing communications, and has worked in journalism and marketing throughout her career.

Opting to include bar operations or alcohol sales in your restaurant establishment can bring business, but also increased liabilities. In this lesson, you'll learn more about a restaurant's responsibilities with alcohol sales.

Worst-Case Scenario

Picture this: you're 15 minutes from closing up shop in your new corner restaurant and bar on a hip, historic street in downtown Boston. A rowdy group of men having a bachelor party in your restaurant finish their drinks and stagger to the front door. Moments later, you hear the sound of squealing tires and breaking glass. You run outside to discover that a carload of the patrons who just left your bar have crashed their vehicle. They've jumped the sidewalk, hitting a group of pedestrians and landing the car through the front window of a neighboring business.

A sick feeling enters the pit of your stomach. You're concerned with the injured victims and the property damage, but you also realize this accident may have just opened the doors to a liability claim against your establishment. You could be liable for injuries, damages, or both, as a result of the bachelor party you were serving all evening.

This is just one of the scenarios that can impose a liability on your restaurant as a result of your decision to include alcohol sales on the menu. In fact, drinking costs the United States nearly $250 billion annually from losses in productivity, health care costs, crime, and other expenses, according to the Centers for Disease Control and Prevention.

In this lesson, you'll learn more about your obligations as a restaurant owner who has opted to feature bar sales and how you can protect yourself from suffering a devastating blow to your business.

Alcohol Sales Laws

Alcohol sales in your restaurant can be a lucrative addition to your menu. Many people enjoy a drink with dinner or a round of drinks with friends after work, and they're willing to pay for a variety of alcoholic beverages.

However, alcohol sales bring a whole new level of responsibility and awareness to your business. In most states, not only can a restaurant be held liable, but also its employees, if alcohol is served to a minor or an intoxicated customer, or if an intoxicated customer causes injury, death, or property damage. Repercussions can include fines, lawsuits, loss of your liquor license, and even a poor public image. You have liquor liability if you sell or distribute alcohol at your business, serve alcohol at an event, allow others to serve alcohol at your establishment, or permit patrons to bring their own alcohol to your facility.

Restaurants are generally subject to three types of liquor liability laws:

  1. Dram shop laws: apply to restaurants, bars, caterers, and more, with varying requirements in different states
  2. Commonplace negligence laws: deal with your responsibility for negligent customer behavior
  3. Social host liability laws: apply to hosts of non-commercial parties and events, holding them legally responsible for injuries and damages stemming from alcohol distribution

Your liability can extend to incidents involving vehicular accidents, fighting, sexual assaults, trips and falls, and even alcohol poisoning.

However, there are a variety of things you can implement right away to help mitigate your alcohol-related risks. Here are some common tips:

Retain liquor liability insurance.

Most states require establishments that sell alcohol to carry an insurance policy, which will offer some protection in terms of litigation costs and legal fees.

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