Bought a Bar? Insurance to Have and a 30 Day Plan

A new bar owner needs liquor liability, written as its own policy or as an endorsement with its own limit, because general liability usually excludes liquor claims. Then confirm general liability, property cover, workers' comp and a clear answer on fight (assault and battery) claims, all in the name of the company that now runs the bar. Bars are usually not eligible for a standard businessowners policy (BOP), so read the seller's program before you assume it fits. This guide is for buyers who just closed on a bar, through a search fund, entrepreneurship through acquisition (ETA) or a Small Business Administration (SBA) loan, and want to know what must be in force and what to confirm first.

The short answer

Assume general liability excludes liquor claims. A bar needs liquor liability with its own limit and form, so read those first.
Ask whether the seller's liquor policy was occurrence or claims-made. If claims-made, the retroactive date decides whether a night before closing has a policy.
Policies do not move to a new owner on their own, and in some states the liquor license does not either. Name the entity that holds the license on every policy.
Workers' comp, property and equipment cover, auto and umbrella questions, crime, cyber and employment practices cover round out the stack.
A quote, a certificate or a lender's request is not coverage. Confirm in writing what has actually been bound.

What insurance does a new bar owner need?

Think in exposures first and policy names second. Which lines a particular bar needs depends on its size, kitchen, entertainment and lender.

Core insurance for a new bar owner, by exposure
What can go wrong	Policy to ask about	What to confirm
A patron slips on a wet floor or a patio step	General liability	Limits, premises coverage, and the wording of the liquor exclusion
A patron who was served too much hurts someone	Liquor liability, on its own policy or endorsement	Limit, occurrence or claims-made form, retroactive date, who counts as an insured
A fight, or a bouncer's use of force	Assault and battery terms inside the liability policies	Whether the claim is excluded, sublimited or tied to security practices
Fire, theft or storm damage to the bar, stock and fixtures	Commercial property	Replacement-cost values, alcohol stock, bar and kitchen equipment, lender clause
A cooler fails or a hood fire closes the bar	Equipment breakdown, spoilage and business income	Whether each is included or optional, sublimits, deductibles, waiting period
A bartender is hurt lifting kegs or burned in the kitchen	Workers' compensation	Payroll estimate, class assignment, ownership change report
A server alleges harassment or unpaid tips	Employment practices liability insurance (EPLI)	Claims-made terms, retroactive date, how the form treats wage and hour claims
A card skimmer or a bartender pocketing cash	Crime and cyber	Whether the form pays for loss discovered during the policy or loss that occurs during it, what proof is required, and who must give notice
An employee crashes a personal car on a bar errand, or the bar offers rides or delivery	Hired and non-owned auto	Whether it is included, whether any employee driving is disclosed, and whether a patron's later crash is a liquor claim rather than an auto claim
One large claim exceeds the primary limits	Umbrella or excess liability	Whether liquor liability is scheduled as underlying cover, because some umbrellas do not sit over every line

Morrow's library has pages on liquor liability and on insurance for bars and taverns if you want the policy-by-policy view. The gaps that hide inside this list are the subject of coverage gaps new owners of bars and taverns find.

Why is general liability or a BOP not enough for a bar?

The standard general liability form written by the Insurance Services Office (ISO) excludes liquor claims against a business that is "in the business of" serving alcohol, and insurers commonly widen that exclusion by endorsement. Assume your general liability policy will not answer a claim that you over-served a patron, including under dram shop laws (laws that let an injured person sue the seller of alcohol). The wording, and what it means for landlords and umbrellas, is in coverage gaps new owners of bars and taverns find.

A BOP is a package of property, business income and liability cover for small businesses. Under ISO program rules as the International Risk Management Institute (IRMI) summarizes them, "bars and pubs" are an ineligible class while restaurants are eligible. Other insurers file their own programs, and a bar with a large kitchen may be placed differently, so the answer is the insurer's. See BOP vs package policy for an acquired business and new owner review: general liability.

Does the seller's insurance carry over to you?

Not by default. The policy that matters most at a bar, liquor liability, is the one to read first for transfer terms. The standard workers' comp policy says the insured's rights and duties cannot be transferred without the insurer's written consent, and many other policies have similar conditions, so check each form. How that applies to losses that already happened depends on state law and is a question for counsel. In a stock or membership interest purchase the entity stays the same, so its policies usually continue, though the insurers still need notice, and a claims-made policy, which may include liquor liability and will usually include employment practices cover, may have change in control terms, so read each one. In an asset purchase your new company usually needs its own policies in force at closing. See keeping the seller's insurance or starting over and policies that still list the seller.

The liquor license adds a second layer. In some states, Texas for one, the license does not pass to a buyer and the new owner applies for their own, so ask deal counsel and the state agency what you may do between closing and approval. In a stock purchase the entity may keep its license, but a change in who owns the entity can still need regulator approval, depending on the state. Business income insurance is not designed to replace revenue lost to a permit delay. The state examples are in contracts, licenses and bonds for a bar or tavern.

What if a claim arrives about a night before you owned the bar?

A bar claim can trace back to a single night. Which policy answers depends on the trigger. An occurrence policy responds to injury during its policy period, whenever the claim is filed. A claims-made policy responds only to claims made during the policy or its reporting window, and only for acts after its retroactive date (the earliest date of injury or wrongful act the policy will consider, depending on the form).

A hypothetical example. You close on a tavern on March 1. Your new liquor liability policy starts that day and sets its retroactive date at March 1. In June a lawsuit arrives about a patron served on a night in December who later caused a crash. The seller's liquor policy turns out to have been claims-made and ended at closing with no extended reporting period. Your new policy does not reach service before its retroactive date, as the form defines it, and the old policy is no longer taking claims. Whether you are legally responsible for the seller's pre-closing service depends on deal structure and state law, a question for counsel. The gap may have been avoidable by asking about the trigger before closing.

Ask the seller's broker for the liquor policy's form and trigger and whether a tail can be bought. Ask your own broker whether the new policy can carry the earlier retroactive date, which is an underwriting decision. See prior acts and tail coverage after an acquisition.

What will your lender and landlord expect to see?

If you used an SBA loan, the lender will want its interest named on property insurance. SBA's lender rulebook, Standard Operating Procedure (SOP) 50 10 8.1, calls for a clause naming the lender on the building policy if real estate secures the loan (a mortgagee clause), and a lender's loss payable clause on equipment and inventory that is collateral, with at least 10 days' notice of cancellation to the lender. SBA sets no minimum liability limit, but the lender can ask for more. The lender will also want evidence of required licenses after closing; see the contracts guide below. See SBA lender insurance requirements after closing.

Your landlord's insurance letter is a separate document, and so are any rules tying the license itself to proof of financial responsibility for liquor claims. Michigan and Massachusetts, for example, do that by statute, Michigan with several ways to show it and Massachusetts with a liquor liability policy at stated limits. The details, and what a certificate does and does not prove, are in contracts, licenses and bonds for a bar or tavern.

What should you confirm in the first 30 days?

Collect everything. Get the declarations pages and full policy forms, with endorsements, for every policy, starting with the liquor policy.
Ask for three sets of loss runs (the carrier's claim history for each policy). General liability, liquor liability and workers' comp each have their own history. How to read loss runs shows what to look for.
Pin down the liquor trigger. Note the limit, the form, any retroactive date and any extended reporting option.
Read the assault and battery wording. Ask what the policy excludes or limits and what security practices it expects.
Put the right company name on every policy (the named insured). It should be the entity that holds the license and runs the bar, with lender clauses added.
Report the ownership change. Under NCCI-based rules and several other states' rules the workers' comp insurer must be told within 90 days, and the seller's experience usually follows the business. Ask your insurer for your state's deadline.
List the equipment and who owns it. Draft systems, coolers, jukeboxes and signage are sometimes leased or vendor-supplied.
Collect license, training and incident records. Underwriters and plaintiffs both ask for them.

The broader sequence is in your first 90 days of insurance after buying a business, and the pre-closing version is the insurance checklist for buying a business. For what moves the price, see what drives insurance cost for a bar or tavern, and for choosing who places the cover, see how to choose a broker for a bar or tavern. Morrow can review the inherited policies against the bar you bought, flag gaps and request quotes, with any new terms subject to carrier underwriting.

Keep reading

Frequently asked questions

Does my general liability policy cover liquor claims at my bar?

Assume it does not. The standard form excludes liquor claims against a business that serves alcohol, and insurers commonly widen the exclusion by endorsement. A bar needs liquor liability on its own policy or endorsement, and your policy wording decides.

Can I use a businessowners policy for my bar?

Under Insurance Services Office program rules, bars and pubs are an ineligible class for the standard businessowners policy. Individual insurers file their own programs and a bar with a big kitchen may be treated differently, so ask your broker which markets will write your bar and on what form.

Do the seller's policies cover me after closing?

Usually not on their own. Many policies cannot be transferred without the insurer's consent. In a stock purchase the entity and its policies continue, but the insurers still need notice. In an asset purchase your new company usually needs its own policies in force at closing.

Whose name goes on my bar's insurance policies after I buy?

The entity that now holds the license and runs the bar. Ask each insurer to confirm the named insured in writing, and add any lender clause. In a stock purchase the entity stays the same, but the insurers still need notice. In an asset purchase your new company usually needs its own policies in force at closing.

What should I ask the seller's broker first?

Ask for the liquor policy's full form, whether its trigger is occurrence or claims-made, the retroactive date and whether a tail can be bought. Also ask for loss runs for general liability, liquor liability and workers' comp, and for the declarations pages and endorsements on every policy.

References

Just bought a business? Get your insurance reviewed.

Send Morrow the declarations pages, loss runs and key contracts you inherited. Morrow can review them against the business you bought, flag gaps and request quotes where it makes sense. Any new terms depend on carrier underwriting.

Request a review Check a contract

Morrow · 25 New Chardon Street, 4th Floor, Boston, MA 02114

This article is general information, not legal, tax or financial advice, and not a coverage determination. Coverage depends on the actual policy wording, carrier underwriting, your purchase agreement and your contracts. Ask your attorney and accountant about deal and legal questions.

Just Bought a Bar or Tavern? What Insurance Do You Need?