One of the most common misconceptions we hear from restaurant and bar owners is: "I already have general liability insurance, so I'm covered if someone gets hurt, right?"
Not if alcohol is involved. General liability and liquor liability are two separate coverages that protect against different types of claims. Understanding the difference between them, and the gaps that exist when you only have one, is critical to avoiding uninsured lawsuits.
At Anchor Insurance, we help restaurant and bar owners structure their liability coverage correctly by explaining what each policy covers, where they overlap, and where dangerous gaps can appear. This post breaks down the key differences and shows you how to avoid the most common coverage mistakes.
What General Liability Insurance Covers
General liability (GL) insurance is the foundation of commercial liability coverage. It protects your business if you're held responsible for bodily injury or property damage to third parties.
Typical GL Coverage Includes:
- Premises liability: A customer slips on a wet floor and breaks their wrist. GL covers their medical bills and your legal defense.
- Products liability: A customer gets food poisoning from your kitchen. GL may cover the claim (subject to policy terms and exclusions).
- Completed operations: You cater an event and a guest trips over equipment you left behind. GL covers injuries from your work after the job is done.
- Personal and advertising injury: A competitor sues you for false advertising or slander. GL provides defense coverage.
What GL Does NOT Cover (and This Is Critical)
General liability policies include standard exclusions, and the most important one for restaurants and bars is the liquor liability exclusion.
Here's the exact language you'll often see in a GL policy:
"This insurance does not apply to bodily injury or property damage for which any insured may be held liable by reason of causing or contributing to the intoxication of any person, or furnishing alcoholic beverages to a person under the legal drinking age or under the influence of alcohol."
In plain English: If alcohol is involved in the claim, your general liability policy won't cover it.
What Liquor Liability Insurance Covers
Liquor liability insurance is specifically designed to cover claims arising from the service, sale, or furnishing of alcohol. It picks up where general liability leaves off.
Typical Liquor Liability Coverage Includes:
- Third-party injury or damage caused by an intoxicated patron: You serve alcohol to a visibly drunk guest. They leave your bar, drive home, and cause a serious car accident. The injured party sues you under dram shop law. Liquor liability covers your legal defense and any settlement or judgment.
- Serving a minor: Your bartender fails to check ID and serves alcohol to someone under 21. That minor injures someone in a drunk driving accident. Liquor liability covers the claim.
- Overserving and subsequent harm: A patron becomes belligerent after too many drinks, leaves, and assaults someone in the parking lot. Liquor liability may cover the claim (depending on whether assault is excluded or covered by endorsement).
What Liquor Liability Does NOT Cover
- Assault and battery (often excluded unless you purchase a specific endorsement)
- Intentional criminal acts by your staff
- Injuries to the intoxicated person themselves (in most states)
- Regulatory fines or license suspensions (not insurable)
- Non-alcohol-related premises liability (that's what GL is for)
The Coverage Gap That Surprises Owners
The most dangerous gap occurs when you have general liability but no liquor liability, and you're sued for an alcohol-related incident.
Example Scenario: The Uninsured Dram Shop Claim
You own a casual restaurant with a beer-and-wine license. You have a $1 million general liability policy through a major carrier. One night, your server continues to pour wine for a regular customer who's clearly had too much. The customer leaves, causes a car accident, and seriously injures another driver.
The injured driver's attorney investigates and learns your restaurant served the drunk driver. They file a dram shop lawsuit against your business for $2 million.
You call your insurance agent, expecting coverage. Here's what happens:
- 1.Your GL carrier reviews the claim and denies coverage, citing the liquor liability exclusion.
- 2.You have no liquor liability policy because you thought "beer and wine" didn't require it.
- 3.You're now defending a $2 million lawsuit out of pocket, including legal fees that can easily exceed $100,000 even if you win.
This is not a hypothetical. This scenario happens regularly, and it's entirely preventable with the right coverage structure.
Where GL and Liquor Liability Sometimes Overlap (and Where They Don't)
There are a few areas where the line between general liability and liquor liability can blur. Here's how to think about it:
Assault and Battery
If a drunk patron assaults another guest in your bar, is that a GL claim or a liquor liability claim?
The answer: It depends on your policy language.
- Many GL policies exclude assault and battery entirely, especially for bars and nightclubs.
- Liquor liability policies also often exclude assault and battery unless you purchase a specific endorsement.
- If the assault is connected to intoxication, the GL carrier will likely argue it's a liquor liability claim and deny coverage.
At Anchor, we help you add assault and battery coverage to either your GL or liquor policy (or both) to close this gap.
Slip-and-Fall by an Intoxicated Person
A drunk patron slips on a wet floor in your restaurant and breaks their arm. Is this a GL claim (premises liability) or a liquor liability claim?
Typically, this is a GL claim because the injury was caused by the wet floor, not by your service of alcohol. However, if the patron's attorney argues that their intoxication contributed to the fall (e.g., impaired balance), the GL carrier might deny the claim and push it to liquor liability.
This is a gray area, and it's one reason you need both policies working together.
How to Structure Your Coverage Correctly
If you serve, sell, or furnish alcohol in any capacity, you need both general liability and liquor liability insurance. Here's how to structure it:
Option 1: Separate Policies (Most Common)
- General Liability: Standalone policy covering premises, operations, and non-alcohol claims
- Liquor Liability: Standalone policy covering alcohol-related claims
This is the most common structure because it allows you to shop each coverage separately and choose the best carrier for each.
Option 2: Liquor Liability Endorsement on GL Policy
Some carriers (particularly for smaller restaurants) will add liquor liability as an endorsement to your GL policy. This can simplify billing and administration, but it limits your ability to shop carriers separately.
We generally prefer separate policies for bar-heavy operations because it gives you more flexibility and avoids disputes about which policy applies.
Option 3: Package Policy (BOP with Liquor Liability)
For small restaurants with limited alcohol sales, some carriers offer a Business Owners Policy (BOP) that includes liquor liability as an optional add-on. This can be cost-effective for beer-and-wine-only operations.
How Anchor Insurance Structures GL and Liquor Liability Coverage
At Anchor, we don't assume one structure fits all restaurant and bar risks. We ask detailed questions about your alcohol service model, revenue mix, and hours to determine the best way to layer your coverage.
Our process:
- 1.Identify your alcohol exposure (BYOB, beer & wine, full bar, events)
- 2.Review your current GL policy for liquor exclusions and coverage gaps
- 3.Shop multiple carriers for both GL and liquor liability to find the best combination of coverage, price, and carrier stability
- 4.Recommend endorsements (assault & battery, employee liquor liability) where needed
- 5.Explain exactly what each policy covers so you understand your protection
Frequently Asked Questions
Can I just increase my general liability limits instead of buying liquor liability?
No. Higher GL limits don't help if the policy excludes liquor liability. You could have $10 million in GL coverage, and it still won't cover a dram shop claim. You need a separate liquor liability policy or endorsement.
What if I only serve alcohol occasionally (e.g., wine tastings or private events)?
You still need liquor liability coverage. Even occasional alcohol service triggers the exclusion in your GL policy. Let your broker know about all alcohol activity so they can structure coverage that protects you year-round.
Do I need the same limits for both GL and liquor liability?
Not necessarily. Some landlords and lenders require the same limits (e.g., $1 million per occurrence for both), but you can often structure different limits based on your exposure. A full bar might carry $2 million in liquor liability and $1 million in GL. We'll help you determine the right balance.