The bar, tavern, and nightclub industry experienced a decline in revenue in 2020, primarily due to being heavily affected by social distancing regulations. Also, the trend of consumers drinking alcohol at home rather than at bars puts a drag on industry growth. The decline will level off as the pandemic recedes.
The good news is we’re still looking at a roughly $20 billion industry that has more than 60,000 establishments with an independent owner rate of more than 90 percent. Those statistics indicate small business owners who are excellent prospects to target with bar insurance programs.
What is Bar Insurance & Who Needs It?
There is much time, and personal resources poured into any bar business. The company and its owners need insurance for bars and nightclubs because running that business is a serious undertaking that requires a significant investment. Bar insurance helps owners of drinking establishments in the US safeguard their businesses from various potential risks.
Bar insurance programs are specialized for the owners, managers, employees, and patrons of bars and similar establishments. Since bar owners face many risks, they need protection from bar insurance coverage that packages multiple policies into programmed bar insurance coverage.ff The list below represents the types of policies typically found in bar insurance programs.
Types of Bar Insurance
General Liability aka Commercial General Liability (CGL)
Bars need a broad liability policy to protect against claims of owner negligence causing injuries or property damage to patrons, visitors, or other third parties while on the bar premises. If a patron trips on an obstruction in the parking lot and breaks their arm, general liability will provide the appropriate coverage.
Due to public access to the premises and serving alcoholic beverages, bars have exposure to a high amount of liability. Alcohol can impair motor abilities, which increases the likelihood of falls. Poorly lit changes of elevation are hazards that should be carefully marked, especially when lighting is dim. It’s necessary to maintain parking lots and sidewalks with snow and ice removed and kept level and free of exposure to avoid slips and falls. Bars that have bouncers who escort patrons from the premises create additional personal injury exposures. As such, bar owners need to make it a policy to document all bouncer activities.
BOP
Business Owners Policies (BOP) are popular with bar owners because they are convenient and affordable. The standard BOP policy packages three essential business coverages.
1. General Liability Insurance. As discussed above, a CGL helps pay for losses and settlement damages from lawsuits claiming the bar is liable; coverage includes paying legal defense costs.
2. Commercial Property covers damage and loss of property the bar owns or leases, including leased equipment, fixtures, accounts receivable, and other vital business records and paperwork.
3. Business Interruption Insurance (BI). Income losses related to significant events that keep the business from operating need protection a BI policy offers, including paying for temporary relocation costs.
A BOP is not comprehensive, meaning the business may require additional policies, add-ons, or endorsements for commercial auto, workers’ comp, and employees’ health, disability, and more.
Commercial Property
Insurance coverage is necessary for any business property of the owner. Commercial property covers losses related to damage to a bar’s physical structure, equipment, furniture, signage, and related property. Due to the nature of the business, bars and restaurants are more fire-prone than typical small businesses.
Bar owners should consider additional property insurance for earthquakes, wildfires, or landslides depending on the location and other factors. For bar owners who lease, it’s critical to ensure the property owner has commercial property insurance. And they need property insurance to protect the building’s contents, including equipment, furniture, and inventory. An additional and advisable property insurance coverage for bars that serve food is coverage for spoiled refrigerated goods.
Public Liability
Public liability insurance protects bar owners against lawsuits should they be found liable for death or injury, third-party property losses or damage, or economic losses due to their negligence. Public liability is often packaged with other insurance products with limits that are sometimes inadequate for complete protection. It is essential to review whether the amount covered for public liability insurance in the CGL or BOP is sufficient to avoid unexpected uninsured losses.
Liquor Liability
Liquor liability is coverage for businesses that sell or serve alcohol. It is a statutory requirement in most states. Liquor liability insurance will help pay for losses due to legal defense fees, lawsuit settlements, and medical costs when a person becomes intoxicated in the bar and harms others or damages property.
There are dram shop laws that stipulate accountability for bars that sell alcohol to a visibly intoxicated individual who injure others in most states. The most typical examples are assaults and car accidents caused by an intoxicated patron of the bar who causes an auto accident or physically assaults another patron.
Assault and Battery
CGL and liquor liability coverage does not exclude assault and battery coverage generally, but the policy language and limits may leave exposures that warrant a specific assault and battery policy. Reviewing the policies, the bar’s history, and other pertinent data can help determine a need for a standalone assault and battery policy.
Product Liability
Hospitality businesses, including bars, that serve beverages and food have risks from patrons after visiting the establishment. Product liability will help pay some bodily injury and property damage claims after consuming food or drinks at the bar. E. Coli and other contaminants can cause food poisoning. Whether a customer consumes the product or takes food home and later becomes ill due to consuming the food, product liability provides some safeguards against their claims.
Product liability is another coverage that a CGL policy may include. It’s essential to review the CGL to determine if product liability is in the CGL and if the limits are adequate.
Additional Recommended Coverages
Bar insurance programs offer extensive protection from various potential losses, but they do not include all risks bar owners face. The following list consists of some of the coverages for bar owners to add for their most complete protection.
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Workers’ Compensation (Required in nearly every state)
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Commercial Auto
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Equipment Breakdown
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Employment Practices Liability
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Food Spoilage
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Garage-keepers liability
Bar Insurance Costs (and what factors affect the price)
A combination of factors goes into the calculations underwriters use to figure the cost of bar insurance programs. The primary factors they investigate are the bar’s risk exposure, business location, owner’s industry experience, and claims history. Policy limits and deductibles also have a direct effect on premiums.
An article from 2ndKitchen.com provides these approximate cost estimates.
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BOP $270 per month
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CGL $135 per month
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Liquor Liability $170 per month
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Worker’s Comp $185 per month
Best Bar Insurance Programs
The recommended first stop for agents researching for the best bar insurance programs is the Program Business Market Directory, where they will find a listing for Charily First. Beginning in 1985 as a program manager, Charity First today serves retail insurance brokers nationwide with markets and products to meet the unique needs of their clients. Its footprint includes comprehensive programs for religious institutions and insurance products for for-profit commercial accounts and hard-to-place risks, including bars and taverns.