For owners and operators in the bar, restaurant, and hospitality industry, the cost of liability insurance and liquor liability insurance (sometimes called dram shop insurance), can be high. Rates continue to rise and the cost can sometimes make or break a business.
According to a Q2 2025 report by IMA Financial Group, Inc.—a North American insurance brokerage firm that specializes in risk management, employee benefits, and investment advisory services—liability rates are up five to 25 percent on average. “Increases are due to trends in the frequency and severity claim trends,” the report notes, pointing out that “Nuclear verdicts and increased litigation have caused carriers to restrict their appetites in the restaurant space.” A nuclear verdict is when a jury awards $10 million or more in a civil lawsuit. For liquor liability policies, insurance premiums have risen by 25 to 40 percent in some regions, per Kel Insurance, which specializes in insurance for the nightlife and hospitality industry.
So, to manage rising insurance costs, what can owners and operators do?
David Helbraun, founding partner and chairman of Helbraun Levey—a full-service law firm for the hospitality industry—believes owners and operators should engage with their insurance brokers, especially in the early concept-development phase.
“An in-depth discussion with your insurance broker at the outset allows for the development of a tailored insurance strategy that aligns the concept with the most appropriate and cost-effective coverage options,” said Helbraun.
Izzy Kharasch, a Chicago-based bar and restaurant industry expert and president of Hospitality Works, encourages his clients to do a total review of all of their insurance policies at least every November or December for the following year.
“A number of things could have changed, often bringing down the cost of insurance,” said Kharasch. “The other reason is to make sure they are well covered in case of any issues that may arise.”
Jordan Reis Cohen, managing attorney of Brick and Mortar Legal, with two decades of business transactional legal experience in the hospitality and alcoholic beverage industries, said conversations about insurance don’t have to be just a once-a-year renewal exercise.
“Operators need ongoing conversations with their broker about changes in hours, alcohol service, staffing, entertainment use, and incidents before those changes turn into coverage gaps,” said Cohen. “Further, we refer our clients to a restaurant insurance specialist that understands common gaps and also will review their current policy, if they have one, for additional issues that they need to be aware of from an insurance perspective.”
Courtney Blake, owner and managing director of Pilot Light Consulting—a strategy studio for hospitality ventures, social enterprises, and consumer packaged goods—said it's important for owners and operators to have conversations about risk and exposure with their insurance broker or carrier, as a way to stay on top of things and mitigate rising costs. “We are living in a world where surprises seem more common, whether they are natural disasters or other economic factors,” she said. “Operators sometimes just renew the same old policy that they've always had without taking time to adjust it to their current risk or realities.”
Chris Strome, CEO of Serving Alcohol—a leading provider of responsible alcohol training and certificate courses for owners, operators, and staff of bars, restaurants, hospitality groups, chains, hotels, and other businesses—said the first question to ask an insurance provider is what can the business do to cut down on their costs.
“Each business is scored for risk during the underwriting process,” explained Strome. “Depending on how the business is scored will drive the overall premiums that the business is likely to incur. In many cases, an underwriter will use default settings when assessing the business. Or, they may ask you a series of questions in order to determine the premium. That’s where it pays to be proactive in these conversations. Here at Serving Alcohol, we provide to each of our business accounts a business insurance mitigation checklist. Contained within the checklist is a self-assessment that you can use when talking to your agent.”
Strome pointed out that insurance companies are in business to make money, and one of the ways they can control their costs is to not cover a business for certain situations or activities, often found in exclusionary clauses in the policy.
“As an owner or operator, it is your responsibility to read through the entire [insurance] contract,” said Strome. “The devil is in the details. Understand what the terms and conditions mean to you, your business, your employees and your customers. Understand what the insurance will and won’t cover. Exclusionary clauses can be invoked when a certain set of circumstances occurs. One of the biggest ones out there is if you sell cannabis-based products or THC [Tetrahydrocannabinol] infused products. That is likely to invoke an exclusionary clause and you may well not be covered if you do so.”
Develop a ‘Good Working Relationship’ with Your Insurance Agent or Provider
What are the biggest factors driving insurance premium increases for bars and restaurants at the moment, and which of those factors do owners and operators actually have some control over?
Strome, of Serving Alcohol, said litigation—"pure and simple”—is making the most impact in insurance costs. “You see it advertised in any market across this country,” he said. “Slips and falls, victim of DUI [driving under the influence] accidents, and the list goes on. We always state to our customers that your biggest asset in limiting your exposure is a well-trained staff. They need to know what to do when situations arise. And your best defense is to stop the problem at the door. Use your house rules to explain what is unacceptable behavior at your establishment, and have your staff consistently enforce them. Your house rules can be more stringent than the law, as long as they are enforced in a fair and non-discriminatory manner.”
Strome suggested that owners and operators develop a good working relationship with their insurance agent or provider. “Your insurance agent can work with you to explain the line items they identify in your business model that are affecting your premiums,” he said. “They are the ones who can coach you on what you can do to control your costs.”
Helbraun, of Helbraun Levey, noted three of the key factors that impact both bars and restaurants when it comes to insurance costs. They include:
1. Building Characteristics – “The physical attributes of the building in which the business operates play a significant role, including construction type [frame versus fire-resistive], whether the property is fully sprinklered or not sprinklered, and whether it is new construction or a building that is 100 years old or older,” explained Helbraun. Additionally, he said the age and condition of the building’s plumbing, HVAC [heating, ventilation, and air conditioning], and electrical systems can become material loss factors, if they are not well maintained and in good repair.
2. Hours of Operation – Another factor that impacts insurance costs is operating hours. “Operating hours are a critical underwriting consideration,” said Helbraun. “As the old adage suggests, insurance carriers tend to believe that ‘nothing good happens after 1 a.m.’ Late-night restaurant hours may push a business into more expensive policy options, whereas bar and lounge carriers typically price late operating hours directly into their rates.”
3. Life-Safety Measures and Housekeeping – Helbraun said strong life-safety protocols and overall housekeeping are also essential when it comes to insurance. “This includes maintaining a fully operational ANSUL fire suppression system with quarterly inspections, properly storing flammable materials away from deep-fat fryers and other heat sources, and keeping sidewalks and entrance areas clean and well maintained,” he said. “Skid-resistant stairs and non-slip flooring are also strongly recommended to help reduce slip-and-fall exposures.”
Slips, trips, and falls are another area of concern, and they’re one of the leading causes of workers compensation claims related to insurance, according to Society Insurance. The firm offers insurance coverage and service to select businesses in Colorado, Georgia, Illinois, Indiana, Iowa, Minnesota, Tennessee, Texas, and Wisconsin.
“These incidents cost employers’ tens of billions of dollars per year from regulatory fines, productivity losses, and other administrative expenses,” said Society Insurance in a statement. “Making sure that you have the correct safety equipment and protocols in place will save you from legal liabilities and costly fines. After all, the average slip and fall claim in the workplace costs over $50,000.”
Society Insurance shared that risk control experts can work directly with policyholders, taking a proactive approach to reduce the number of slip and falls and their severity. “This is done by reviewing floor cleaning procedures, the use of floor mats, maintenance and repair of floor surfaces, advocating non-slip footwear programs, and completing walkway audits,” the company noted.
Cohen, of Brick and Mortar Legal, said operators can’t control rising litigation costs, but they can control claims frequency, staff training, incident response, and how their risk is presented to underwriters. “Ultimately, quality contracts with employees, landlords, and vendors, as well as up to date training of staff, will lower liability and diminish claim frequency,” he shared.
Strategies to Better Position a Business with an Insurance Carrier
How can owners and operators better position themselves with insurance carriers to help manage insurance costs? Complete transparency with an insurance broker during the underwriting phase is key, per Helbraun of Helbraun Levey.
“All carrier requests should be answered honestly, accurately, and in a timely manner,” explained Helbraun. “Remember, your broker is your advocate—the more information you share, the better positioned they are to develop an insurance program that aligns with both your coverage needs and budget. Any anticipated operational changes should also be discussed in advance, before implementation.”
Helbraun said that once coverage is bound and the insurance carrier has completed its inspection, it is equally important to work closely with the broker or carrier to promptly address any noted deficiencies or recommendations.
“Few things frustrate carriers more than a lack of response,” revealed Halbraun. “Failure to comply can result in a notice of cancellation for non-compliance, potentially forcing an expensive mid-term rewrite of coverage. Timely follow-up benefits all parties—it helps mitigate loss exposures, strengthens carrier relationships, and reduces the likelihood of future claims and costly coverage disruptions.”
Strome, of Serving Alcohol, said it’s all about being proactive and reaching out to the business’s insurance agent. “Engage with them on what you are doing to control risk and get their input,” he said. “This is not an area of your business that you want to have a passive approach to, as you are the one that can explain to the agent what you are doing to run a tight ship manned by a knowledgeable staff. I would refer you again to our risk mitigation checklist. Conduct a self-audit of your business and correct situations that will raise red flags during the underwriting process. Share what you are doing so they know you have a responsible management team.”
Cohen, of Brick and Mortar Legal, said the goal with these insurance conversations isn’t really about the cheapest premium; it’s about making sure the business survives a worst-case claim, which is where underinsurance becomes dangerous.
“As counsel to our clients, my focus is not to advise them how to save money day to day, but to minimize liability as much as possible,” said Cohen. “This means having a business that can withstand operations going sideways or avoiding such an event altogether. A lack of coverage for a labor dispute, contract breach, or a force majeure event—such as Covid—will almost always be more costly than the premium that plans for it.”
Tips: Operational Changes That May Have an Impact on Lowering Risk, Insurance Costs
What operational changes may have the greatest impact on lowering risk—and ultimately insurance costs—without compromising the guest experience?
Cohen said that well-run hospitality businesses with clear policies, security plans, and documentation are simply better risks.
“We strongly emphasize an annually updated and thorough employee handbook, as well as written management protocols,” said Cohen.
From Kharasch’s perspective, he sees most major insurance risks in the back-of-the-house or behind the bar. “Making these areas safer and training the staff to help create and work in a safer environment will keep the insurance costs down,” he said. “Neither of these compromises the guest experience.”
Helbraun believes that eliminating or limiting happy hours, two-for-one drink specials, or any other promotions that may encourage overconsumption are all good ways to lower risk. “Avoid flaming drinks entirely, and if open flames are present within the premises, ensure that no flammable materials are stored nearby, including excess firewood or similar items. All candles should be flameless,” he shared. “As a general rule, if an operational feature appears unsafe, there is a strong likelihood that your insurance carrier will share that assessment.”
Documentation—such as training records, incident reports, and maintenance logs—is also important when it comes to insurance.
“We cannot stress enough the importance of maintaining records for your business,” said Stome. “Throughout our courses, we provide examples and templates that businesses can use. Incident logs, no entry logs, right of refusal logs, signature logs—all of these when used correctly help to provide a framework for running your operations. Your staff will know what to do when certain situations arise. Communication logs when you interact with law enforcement as an example. Those become very important when you have to defend yourself and your business. These are tools that reinforce good business practices.”
Kharasch shared the same insights. “Right after creating a safe environment, documentation is job No. 1,” he said. “Having an accurate history of incidents is crucial. Training management to write accurate reports and keeping precise records will keep costs down or at least make it easier and more accurate to understand what happened.”
Cohen said documentation cannot be overemphasized enough when it comes to insurance. “At our firm, we often run into ‘he said/she said’ matters that become difficult to assess or resolve due to a lack of facts,” he shared. “Training records and incident logs can be the difference between a defensible claim and a costly one. Everyone’s perspective of an event is different.”
Reporting an incident is also linked to documentation. According to Society Insurance, early reporting is paramount.
“Simply put, the sooner a claim is received, the sooner it can be processed, managed and brought to a resolution,” said Society Insurance in a statement. “It’s also of utmost importance to carefully document the events—and retain the video evidence—that lead to the claim while memories are fresh, rather than having to rehash it later on once details are long forgotten or evidence is harder to verify. A strong incident investigation process by management is vital. Delayed injury reporting more often than not results in more time wasted, stress accrued, and money spent on remedying the situation.”
Society Insurance added that early reporting ensures important evidence is obtained or documented right away when still available. “If litigation ensues, having this documentation will be important for verifying claims and protecting your business,” the company noted.
Besides adjusting operations for safety reasons and ensuring documentation, staff training is paramount for supporting a safe environment, which is helpful when it comes to insurance.
“There is no substitute for a well-trained and caring staff,” said Strome. “Your culture should be about welcoming the general public through your doors for an entertaining and rewarding experience. When customers are in your house of business, they are guests and you are responsible for their well-being and their safety. If you and your employees approach your business with that perspective then you can help mitigate situations that lead to claims and lawsuits. Everyone is responsible for the wellbeing of your customers. There are no exceptions to this. Engage with the customers, do table touches, make them feel welcome and by adhering to the basics, you can help identify problems before they become an incident.”
In the end, stressed Strome, don’t underinsure. “That’s a mistake that may cost you the business,” he said.
Aaron Kiel is an award-winning journalist and PR professional with more than 20 years of experience in the beverage, tea, coffee, hospitality, and technology sectors. He contributes to Questex’s Bar & Restaurant News as a reporter/writer, and he was previously the editor of Questex’s World Tea News, as well as the Specialty Coffee Association’s member journal, The Chronicle, among other editorial roles. His work with Bar & Restaurant News has earned multiple accolades, including the 2025 Folio: Eddie & Ozzie Award for “Range of Work by a Single Author – B2B” and the 2024 award for “Best Single Article, Culture & Community – B2B.” He also received a Gold Northeast Region Award in the American Society of Business Publication Editors’ (ASBPE) Azbee Awards under the “Diversity, Equity & Inclusion” category for best single article. In addition, Kiel was named a recipient of the 2024/2025 ASBPE Diversity Fellowship Award, which supports and recognizes diversity in the field of B2B journalism. Connect with him on Instagram @adventurer_explorer or visit akprgroup.com.
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