Dram Shop Law
What Does Dram Shop Law Mean?
The Dram Shop Law holds businesses that sell alcohol accountable if they serve liquor to someone who is visibly intoxicated, and that individual subsequently causes harm or damage within a specified timeframe. To manage this risk, restaurants and bars are required to purchase liability insurance. The specific policy that covers this exposure is called liquor liability insurance, which pays for bodily injury or property damage claims tied to alcohol service.
Insuranceopedia Explains Dram Shop Law
The Dram Shop Law is widely used in the United States, though not all states enforce it, as proving that a particular establishment’s alcohol service caused a specific loss can be challenging. For instance, a person might consume drinks at a bar but then take additional shots in their car before driving and causing an accident, complicating the establishment’s liability.
Because a single dram shop claim can result in a six- or seven-figure judgment, liquor liability coverage is often a requirement for obtaining a liquor license. Most carriers bundle it into a broader bar insurance package alongside general liability and property coverage.
