Many businesses in Texas are required to carry liability insurance. Whether it's a daycare or an auto repair shop, these businesses must have valid insurance coverage in order to operate. But are bars and other alcohol providers required to carry liability insurance under Texas law?

Answer: No, bars and other alcohol providers are not required to carry liability insurance in Texas.

What Kind of Insurance Are We Talking About Here?

The kind of liability insurance that alcohol providers sometimes choose to buy is called "liquor liability insurance." This is distinct from "general liability insurance," which many businesses carry in case of a slip and fall or similar lawsuit by a guest to their premises. Liquor liability coverage is only applicable to a dram shop case that someone hurt by the over-service of alcohol might file against a bar, restaurant, or other alcohol provider. Some alcohol providers will buy a general liability policy and will add liquor liability coverage as an add-on. Sometimes they buy it as a standalone policy. Sometimes they choose to buy no insurance at all.

But the key takeaway from this article is that they're not required by law to carry any kind of insurance.

Why Aren't Bars and Other Alcohol Providers Required to Carry Liquor Liability Insurance?

The reason bars aren't required to carry liquor liability insurance is pretty simple: the Texas Legislature has never passed a law requiring it. We could spend a lot of time talking about the motives of the various parties involved in this issue, but suffice it to say, bars and other alcohol providers lobby against any proposed bills that require them to carry liability coverage.

Why Don't Bars VOLUNTARILY Carry Liquor Liability Coverage?

Even though the legislature in Texas has never passed a law that requires alcohol providers to carry liquor liability coverage, why wouldn't they do it voluntarily?

The short answer is, some do and some don't. Based on cases we've seen, the split is about 50:50. In any given case against a bar, there's about a 50% chance that they'll have coverage.

But why?

That's a tough question to answer, and we certainly haven't done any sophisticated research on the topic. But our best-guess opinion is that there are a few interrelated phenomena at play, which can generally be summarized as:

• Not enough lawyers sue bars.
• Bars can't afford it.
• It's a strategic decision.
• They have enough assets to pay a judgment.

Now let's explore each of these in greater depth.

Not Enough Lawyers Sue Bars

It may be hard to believe, but most lawyers won't take cases that involve suing a bar. Why? Because of a myth that exists in the Texas legal community where it is believed that you can't win a dram shop case against a bar. Our firm has proven time and time again that this is simply not the case; we beat bars all the time. Nevertheless, the myth persists and it's the reason the vast majority of dram shop cases against bars never get pursued.

Think about it. If you worked in an industry that almost never gets sued when a member breaks the law, how much of a priority would you put on carrying liability insurance?

Example: A drunk customer gets over-served alcohol at a local bar. He then gets behind the wheel, crashes into Tom Smith and kills him. Mrs. Smith contacts a lawyer and the lawyer says, "Mrs. Smith, I would love to help you, but cases against bars in Texas can't be won." Mrs. Smith doesn't realize she has an actionable dram shop case and that a competent lawyer could probably hold the bar accountable to the tune of hundreds of thousands or millions of dollars. But because a lawyer told her that a case against a bar can't be won, she doesn't pursue it, and the bar never faces liability for its violation of Texas dram shop law.

The above scenario happens more often than you think and the reality is it plays right into why bars don't get liability insurance. If you're a bar that routinely breaks the law in serving alcohol to customers and no one sues you for it, why would you need liability coverage?

Bars Can't Afford It

As we now know, the lack of insurance amongst bars and other alcohol providers can partly be contributed to the fact that most lawyers won't sue a bar. But aside from this, there are a lot of bars that see liquor liability insurance as nothing more than an added expense. Unfortunately, there are many bars that just don't have the financial means and can't afford to pay a monthly premium for liability coverage. Many of the bars and restaurants involved in our cases are worth tens of millions of dollars. Some are worth billions. But others are struggling to pay the rent, cover employee salaries, or keep the lights on. To an establishment like that, insurance is just another expense not worth considering.

It's a Strategic Decision

I think we can assume that most bars that voluntarily get liability insurance do so in order to protect themselves from dram shop claims. In other cases, there is a strange phenomenon at play where bars don't get insurance in order to protect themselves from lawyers who might want to sue them.

To understand this phenomenon, I want to tell you a story involving one of our firm's employees who went to a gun range and struck up a conversation. The owner of the gun range unabashedly explained how, many years ago, an instructor accidentally shot a customer. The owner of the gun range wasn't worried about it at all. In fact, he saw himself as lawsuit-proof. Why? Because he didn't carry insurance, so there was nothing for the lawyers to go after. To his way of thinking, there was no insurance, and no one wanted to sue him just to take over a gun range out in the middle of nowhere. The injured student did try to sue the gun range owner and ended up dropping the lawsuit because the range was uninsured.

This example shows exactly how some alcohol providers specifically avoid buying insurance to their "advantage." Essentially, they refuse to buy coverage in order to dissuade anyone from coming after them.

The problem with their plan is that some lawyers are just committed enough to spend their own money going after a financially insolvent defendant just to teach them a lesson. Sometimes, that's us.

They Have Enough Assets to Pay

It's rare, but some businesses are so successful that they don't buy coverage and instead "self-insure" with their own assets. When such a business doesn't have coverage, it doesn't matter. You can just sue them for their assets.

Conclusion

If you or a loved one have been involved in an accident where someone was over-served by a bar or restaurant, you probably have a dram shop case. The best practice is to not sweat over whether they have insurance. Instead, call us for a free consultation, and we'll help you determine whether that matters.