Businesses such as bars and taverns are vibrant staples of social life. But behind the lively atmosphere and busy crowds are a number of risks that many owners and operators overlook until it’s too late.
From fire hazards in the kitchen to liquor liability lawsuits, the realities of running a bar or tavern are far more perilous than they first appear. The rewards of operating these establishment are significant, but so are the risks and implementing a solid risk management strategy is essential for sustainable success.
Understanding the Hidden Risks of Bars and Taverns
Property Exposures: Fire, Contamination, and Total Loss Events
Cooking operations are common in places that serve alcohol, whether it’s simple snacks or full kitchen service. Even with minimal cooking, like microwaves and toaster ovens, the risk of fire is present. When deep fat fryers or grills are involved, the exposures grow exponentially, requiring:
- Automatic fire extinguishing systems
- Clean hoods and grease-free ventilation
- Strict kitchen maintenance
Even a small fire can lead to substantial losses if alcoholic stock is contaminated by heat or smoke. In some cases, the FDA may condemn the inventory, leading to a complete loss of the inventory.
Insurance Tip: Business Personal Property and Business Income with extended period coverage are essential to survive downtime after a loss.
Crime Exposures: Employee Dishonesty and Cash Management
Bars and Taverns often deal in large volumes of cash and high-value liquor stock. This combination makes these businesses a prime targets for theft. Common issues include:
- Skimming from cash registers
- Theft of alcohol and other products
- Fraud involving lottery or gambling sales
Strong cash handling procedures, frequent register drops, and criminal background checks for employees are necessary safeguards, but even the best policies can’t eliminate the risks entirely.
Insurance Tip: Employee Dishonesty and Money & Securities coverage can help protect against these hidden vulnerabilities.
Premises Liability: The Sobering Reality of Alcohol-Related Injuries
Once alcohol is involved, the liability risks soar. Impaired customers are more prone to:
- Slips, trips, and falls from spills, poor flooring, or dance floors
- Accidents in poorly lit areas with unmarked elevation changes
- Injuries involving unstable seating like bar stools
Moreover, managing aggressive or impaired patrons becomes a delicate but essential task to prevent violence or accidents. Staff must be trained not only in hospitality but in de-escalation tactics.
Insurance Tip: General Liability and Umbrella policies are critical, along with a sharp focus on maintaining a safe environment.
Liquor Liability: A Single Mistake Could Shut the Doors
Perhaps the most devastating risk is liquor liability. Over-serving patrons, failing to verify ID, or neglecting visible signs of intoxication can lead to:
- Drunk driving accidents traced back to the establishment
- Lawsuits with massive financial penalties
- Loss of liquor licenses, effectively shutting down operations
Strict internal policies, staff training, and programs like free taxi services for impaired patrons can help, but the legal environment is unforgiving.
Insurance Tip: Liquor Liability insurance isn’t optional, it’s a must-have.
Employee Safety: Navigating High Turnover and High Risk
In addition to customer-related risks, employee injuries are common in bars and taverns due to:
- Slips and falls
- Cuts and burns in the kitchen
- Heavy lifting injuries
- Confrontations with unruly patrons
High employee turnover only worsens the problem, making consistent training difficult. Safety protocols, security measures, and incentives for long-term employment can help stabilize the workforce.
Insurance Tip: Workers’ Compensation coverage, along with robust employee training, are critical to reducing injury risks and claims.
Some Recommended Insurance Coverages for Bars and Taverns
C= Coverage | P = Purpose
| Coverage | Purpose |
|---|---|
C: Business Personal Property | P: Protects inventory, furniture, and equipment from loss |
C: Business Income and Extra Expense | P: Covers lost income after a disaster |
C: Employee Dishonesty | P: Covers theft by employees |
C: Money and Securities | P: Protects cash on premises |
C: Valuable Papers and Records | P: Covers the loss of critical documents |
C: General Liability | P: Covers bodily injury and property damage claims |
C: Liquor Liability | P: Protects against lawsuits arising from alcohol service |
C: Workers Compensation | P: Covers employee injury costs |
C: Umbrella Liability | P: Provides excess liability coverage |
C: Hired and Non-Owned Auto | P: Covers auto liability when employees drive for business purposes |
Other coverages to consider:
Building, Spoilage, Computers, Cyber Liability, Employment Practices Liability.
Why Risk Awareness Leads to Long-Term Success
While bars and taverns can be highly profitable and beloved community staples, they also come with unique risks. These unique challenges don’t make the industry unmanageable, but they do make preparation essential.
Without a strong insurance and risk management strategy, a single event, like a fire, a liability lawsuit, or a liquor license violation, can disrupt operations and threaten long-term success.
For those entering or expanding into the industry, understanding and proactively addressing these risks can be leveraged as a blueprint for building a resilient, thriving business that can weather challenges and continue to grow.
