March 2, 2015

Our agency has an insured with a banquet hall and art museum where the insured holds special events and sells alcohol to the guests. Our insured does have a liquor license and liquor liability coverage on its commercial package policy. The insured hires bartenders/servers from a local vendor for these events. The vendor's insurance company has told the vendor that it does not have to carry liability insurance, nor do the bartenders since they are not selling the liquor; our insured is. Our insured is wondering now if it is protected under its liquor liability policy since it seems the vendor and the bartenders do not carry such coverage.

Indiana Subscriber

The standard liquor liability exclusion applies to any insured that is in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages. In our opinion a banquet hall that sells alcohol is definitely in the business of selling, distributing, serving, and furnishing alcohol. It may not be the main source of income for the hall but selling alcohol has to be a huge percentage of income for the insured and probably, if alcohol was not sold, the number of events scheduled for the hall would diminish. So, if your policy has the standard liquor liability exclusionary language, failure to carry liquor liability coverage would be a big mistake in our opinion. The fact that the insured does have liquor liability coverage is a very good risk management decision.

The liquor liability coverage that the insured has will provide it with the necessary liability coverage regardless of whether the vendor and/or the bartenders do not have such coverage. Your insured is an insured under the terms of its policy for injury imposed on it by reason of the selling, serving, or furnishing of any alcoholic beverage. The vendor and the bartenders are not going to be considered as insureds under your insured's policy since they do not meet the descriptions of insureds under the "who is an insured" clauses.