Whenever alcohol is sold, served, or consumed, there exist a number of liability exposures of which insureds should be aware. Most policies have an exclusion for Liquor Liability, which generally applies if you are in the business of manufacturing, distributing, or selling alcohol. Most policies do provide coverage for Host Liquor Liability, which covers an insured for bodily injury or property damage arising out of the serving or furnishing of alcohol by a party not engaged in this activity as a business enterprise. The main difference is that the insured is not collecting a fee to serve the alcohol.
Many community associations hold an annual holiday party or summer barbecue, and alcohol is often present. Most of the time, it’s BYOB or the association provides the alcohol at no charge. As long as the community association isn’t providing a cash bar or collecting a cover charge to attend and consume alcohol, coverage is more than likely provided under Host Liquor Liability. Once a fee is charged, the association has now entered the business of manufacturing, distributing, and selling, and more than likely, the Liquor Liability exclusion will apply.
If your association plans to hold a party and charge for alcohol, it should request that the Liquor Liability endorsement be added to the policy. If that cannot be accomplished, then a one-day Special Events policy should be taken out. This will be a separate policy provided just for the day and will include Liquor Liability coverage.
If your employees will be serving the alcohol, you may want to have them take part in a server training course to be educated on ways to avoid lawsuits by spotting problematic situations and how to effectively handle them. Such programs often can provide a degree of legal protection by offering a “reasonable efforts defense” in the event of a third-party suit. The goal of this type of training is to limit your exposure and ensure the enjoyment and safety of your clients, guests, and the community at large.
