Insurance Whitepaper: Liquor Liability: Limit Your Exposure

Businesses in the hospitality industry (bars, restaurants, hotels) provide a fun and relaxed atmosphere for clientele to briefly escape their everyday routines. While these establishments look for ways to distinguish themselves from the competition, they often share one common feature: a bar. Alcohol service, the commercial sale of alcohol, creates unique risks and exposures which business owners must not only address by having specific guidelines in place; they must also strictly enforce.

The Problem

Did you know that laws regarding the selling and consumption of alcohol are not established by the federal government? Local authorities establish and enforce these laws which means the specific guidelines as to who can sell, purchase, and consumer alcohol and under what conditions – as well as the punishments for violation – vary widely across jurisdictions. Although all fifty states have a minimum drinking age of 21 and maximum limit for blood alcohol content (BAC) allowable to operate a vehicle, that’s where the similarities end and differences begin. Failure to manage the commercial sale of alcohol in one’s business could threaten the success of a business due to increased liability exposure, both criminal and civil.

There are a variety of laws and regulations that might impact your business in relation to service of alcoholic beverages. One such law is a DRAM Shop Act that may allow third parties or others to recover for damages caused by alleged overservice of alcohol. In addition to DRAM, some states allow for the criminal prosecution of the servers in cases where the alleged alcohol overservice caused damage to property or injury to people. Failure to follow the appropriate laws and regulations for your business could result in fines, jail, license revocation and/or bad publicity.

While it is understood that all services provided to the public carry some risk, proper controls can help limit your exposures, create a safer environment for your customers and employees, and help maintain a positive reputation throughout the service industry.

Recommended Controls

Management Responsibility

It all starts with management of the business. Managers must be knowledgeable of laws governing alcohol service and the agency responsible for enforcement. Managers must take an active approach to responsible alcohol service by modeling the proper behaviors and developing policies and procedures for ensuring staff adherence to applicable laws. The success of any program policy requires management commitment to provide the necessary training, equipment and support. The management team must diligently correct any negative behaviors and not be afraid to provide discipline where necessary.

Education and Training

The most helpful place to start on your way to combating unnecessary loss is education. Many states have passed legislation that mandates servers and sellers of alcohol to complete alcohol service training. ServSafe is an accredited company recognized across the country for service training. Society Insurance has a partnership in place that provides discounts for Society policyholders to use any service offered by ServSafe. This table outlines the governing liquor authority, required training, and a website where you can find reputable providers for the states in which Society Insurance conducts business. Each one of these training sources operate under the same premise: alcohol servers and those involved in alcohol service need to be educated, responsible and prepared.

Staff Controls

The staff is your foundation to controlling liquor liability in the business and those actions/behaviors must be present from the highest managment and followed all the way down. Proper educational components which establish the policies and procedures are not only necessary to ensure the staff have all the information required to responsibly serve at your standards, but they must continually observe these behaviors modeled by every level of management.

Service Controls

Drink Counting

The benefits behind accurate drink pouring and proper drink tracking are twofold. Not only will they help monitor your inventory, but these can be extremely effective ways to control overservice. There have been recent innovations in Point of Sale (POS) systems that allow the business to accurately determine how much alcohol has been served in comparison to what was ordered. One such example utilized frequently in the hospitality industry are special wireless spouts, which can determine how much liquor has been pouted into a drink and then matches that amount at the POS system to give an accurate figure. The evolution of these POS systems are mainly results of trying to increase profit, but provide the added benefit of tracking how strong a drink may have been poured or how many drinks a customer consumed while on your property. While these innovations may initially be a major source of contention from your “regulars” or frequent customers, the changing trends of liquor liability laws have placed a heavier burden of responsibility on the business for the actions of your customers while at and even after they have left the establishment. Understanding that you strive for repeat business and don’t want to offend the “regulars” is important to your servers, but their actions can have the same adverse outcome as first-time customers. Some of these long-time customers may also be able to effectively mask their level of intoxication and appear to have a greater tolerance; however, their blood alcohol level rises just as it would with every other guest. A plan should be made between bartenders and servers to help one another keep track of patrons that request drinks from multiple bar stations.

Cut-Off Policy

A strong, consistent cut-off policy should be developed which at its minimum follows the standards presented in the state approved training. Your cut-off policy should be a part of regular training with all staff involved in alcohol service. This should always include bartenders, bar backs, servers, door staff, security and even bussers because everyone has a role in liquor liability and accident prevention. It is imperative that management strongly reinforce the concept of server liability to help employees understand how critical it is to follow the establishment’s cut-off policy and be careful to pervent overservice.

If the situation reaches the point where an individual must be cut-off or a safety issue has been identified among your customers, make certain that a part of your policy includes an alternative form of transportation for that intoxicated patron. There are far too many occasions where the intoxicated patron walks away from the premises only to return within a few minutes and get behind the wheel of their car. Arrangements should be made with a local taxi service or ride sharing program that can assist your intoxicated passenger home without putting them or the public in a dangerous scenario.

Security Controls

A proper security program includes procedures and training which clearly outline how your employees shoudl fulfill their duties and document incidents if any action is taken. Having a written security program, incident form and training can provide your employees with the necessary skills to de-escalate situations and/or document the incident when actions have been taken. A lot of time can be spent on just security controls alone, but make certain to always include these crucial aspects:

  • A comprehensive background check (It is important to know the history of any employee that might be involved in a customer altercation.)
  • Do not touch people – EVER
  • Call the local authorities
  • Protect your other patrons

Security training programs provide valuable information on the best ways to de-escalate a situation, how to deny alcohol service without losing a valued customer, and how to make the best of these tough situations. It is recommended to include this subject as part of your monthly staff meetings as a reminder of how to best react in these situations. It’s also beneficial to run through potential scenarios of what might happen so your staff has a chance to act out proper responses, just as they might react if such a situation ever occurs.

The business should be monitored by a digital surveillance system to document any incidents that occur. Several of your staff members should be trained to effectively pull permanent copies of any important video off the DVR, which will help protect the establishment in event of an incident.

Summary

Liquor service is a complex line of business, but you can still provide a quality service to your guests with the proper controls in place. The idea that safety of the staff and patrons is part of everyone’s responsibility each and every day is critical for ensuring the longevity of your business and to making sure your establishment’s reputation is preserved. Customers plan on a night out on the town with the intention of having a good time and making good memories. Your staff shows up to work every day with the intention of earning a living, and doing a job they love. An accident or injury due to one or more of the items discussed does not meet anyone’s expectations. Equipped with this knowledge and the information you receive from an approved liquor training program, you and your staff can make sure that you are always in control. 

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