Restaurants & Bars: Liquor Sales, Risk Transfer & Other Trends

From the rising costs of food and beverage products and the ongoing challenges in the hospitality labor market, restaurants and bars throughout the U.S. must overcome substantial challenges to keep serving their customers.

Also, establishments that rely upon liquor sales must contend with the fact people are drinking less.

Consumer demand remains solid, but customers’ spending power is restrained. The National Restaurant Association’s (NRA) recent State of the Market report found more than 7 in 10 consumers would use restaurants more often if they had added disposable income.

The NRA report showed that 9 in 10 food establishments cited food, labor, insurance, energy, and swipe fees as significant cost challenges. These undercut profitability, but insurance specialists say a softening insurance market is helping by providing at least one line item where costs should decrease.

“I’ve been in the industry now for about 15 years–I owned an agency in St. Louis for many years, and now I’m on the MGA side–and I’ve never seen the market soften this quickly,” said Brennen Grone, executive vice present, sales, at Rainbow, a San Francisco-based managing general agency specializing in restaurants as well as beauty and wellness focused businesses.

Liquor Liability

Regardless of whether the market is hard or soft, the risks remain significant–and increasingly extend beyond liquor liability to include entertainment exposures, firearms, employment practices, cyber, and other emerging threats.

According to Grone, liquor’s still somewhat a hard insurance market, especially for establishments that generate more than 40% of their sales in alcohol. “But I see a lot more competition for establishments where alcohol sales are 40% and under,” which is new, Grone added. “We weren’t seeing the same competition a year ago.”

Liquor remains an area where rates vary the most state by state in the bar, tavern, and nightclub space, said Connor Farquharson, manager of commercial insurance for Burns & Wilcox.

As of 2025, 43 states and the District of Columbia have some form of a dram shop law in place, which increases the risk of litigation against bars and restaurants for serving or selling alcohol to minors or intoxicated people. However, these laws vary significantly by state and shape the way the insurance market responds to the risk.

‘One other thing I would tell all bar and restaurants owners is to have strong controls in place for overserving alcohol and for assault and battery, and agents need to make sure that their submission to the broker, to the underwriter, includes those things.’

Overall, the liquor liability market remains challenging, Farquharson said, especially for bar, tavern, and nightclub establishments. He added that he sees a lot of sublimits placed on assault and battery and sexual abuse and molestation coverage.

“In Texas, liquor liability is still a very, very tough marketplace,” he said. Many cases in the state make it to jury trials, letting the courts figure out what’s covered. Whereas in other states such as Louisiana and Nevada, dram shop laws are more defined when it comes to an overserving liquor claim, Farquharson said.

In South Carolina, long-awaited liquor liability and tort reform measures were passed in 2025 and officially took effect Jan. 1. Since 2018, state law had required $1 million in liquor liability coverage for most bars and restaurants, a requirement that led to huge insurance premiums and reportedly drove many establishments out of business.

South Carolina has been the most difficult state to write liquor coverage for years, but the reform measures should help, Farquharson said.

The new state law lowers the coverage requirement for most places where alcohol is less than 40% of total sales. The law also says that for incidents involving DUIs, a business cannot be held liable for more than 50% of the plaintiff’s damages, as opposed to 100% under the previous law. In addition, the law allows establishments to lower their liquor liability coverage by requiring only an aggregate limit of $1 million if the bars and restaurants stop selling alcohol at midnight, provide training to servers, and other measures.

More established bars and taverns with good loss history will find a much better liquor liability market, he added. “Once you get to three years in business with little to no claims, no assault and battery claims, and no overserving claims, that opens up the market,” he said.

“One other thing I would tell all bar and restaurants owners is to have strong controls in place for overserving alcohol and for assault and battery, and agents need to make sure that their submission to the broker, to the underwriter, includes those things,” Farquharson advised. “It will make them a more attractive risk if they have strong controls in place and can show that they follow them.”

Reduced Alcohol

According to a 2025 Gallup poll, the percentage of U.S. adults who say they consume alcohol has fallen to 54%, the lowest point in Gallup’s nearly 90-year trend. Young adults had already become less likely to report drinking alcohol a decade ago, but that trend has accelerated, Gallup said in August 2025, with the rate falling from 59% in 2023 to 50% in 2025.

Typically, insurance costs are higher for places serving more alcohol than food, but insurance is not reflecting the trend of people drinking less, according to David DeLorenzo, CEO and owner of Ambassador Group Insurance and Bar and Restaurant Insurance, based in Phoenix. Establishments’ receipts for alcohol sales have fallen significantly, but insurance costs have not.

Arizona has always been a difficult market for liquor liability, and even lower alcohol consumption trends have not helped reduce the cost of insurance.

“We’re looking at this system that has always been tough, but it’s getting even worse for places that serve more alcohol than food,” he said.

DeLorenzo said the lower alcohol consumption trend is adding more profitability pressures on establishments that serve primarily alcohol. “So, this ability to make seven, eight million a year just off of bottle service is dwindling down to almost nothing, but yet the carriers have yet to really respond to the trend by considering it as any better of a risk,” he said.

DeLorenzo has seen some bars and taverns with receipts down 40% to 50% in alcohol sales that are still paying the same dollar per thousand rate for insurance. “It’s to the point where it’s cost-prohibitive in many ways to get your traditional $1 million on assault and battery, $1 million liquor policy with no exclusions,” he said. Plus, he sees tightening assault and battery sublimits on every policy. “In fact, it’s hard to even get $1 million. You’re seeing sublimits of anywhere from $250,000 to $500,000.”

In addition to more restrictive sublimits, insurers are demanding higher deductibles and implementing other exclusions on bars, taverns, and nightclubs. “You’re seeing firearms exclusions on all policies to where you’re having to carve that out and go find a weapons policy to cover that exposure, which is a real exposure in this day and age,” he said. “So, then you’re seeing places that are doing maybe $1.6 million in sales but still being charged almost $90,000 for insurance.”

Entertainment adds another element of risk to the mix, said Lynn Bertram, vice president, commercial underwriting at XPT Specialty.

“You may have this little brewery or tavern that starts out and is a pretty cut-and-dried establishment,” Bertram said. “Then the next thing you know, they’re going to have a local entertainer come in and play guitar on Friday and Saturday nights. And then maybe they’re going to have a dance floor. And then maybe they’ll have an event and they’ll sell tickets,” she explained. Those changes increase the risk from a liquor liability standpoint. “That’s where it gets challenging.”

Bertram said it’s critical to know about that Saturday night entertainment or the occasional wedding event being hosted at the establishment. “I need to be able to tell the carrier that because with the market being somewhat restricted, sometimes those events will be excluded, and that’s the last thing I want to do–not cover the insured for that exposure,” she said. “They need to get all that covered.”

Ancillary Coverages

For the typical fast casual restaurant, underlying coverages on a package policy with minimal liquor sales are finding a competitive insurance market, according to DeLorenzo. “I can still insure a fast casual restaurant with very minimal liquor sales, that’s doing about $2 million in sales, for anywhere from $7,000 to $9,000 a year,” he said.

“But when you’re looking at getting an umbrella to go over the liquor, or you’re looking at any of the ancillary coverages that I really feel a restaurant should purchase–not coverages that are just thrown in on these BOPs, like cyber, crime, EPLI, but real ancillary coverages that you want people to buy–costs certainly go up,” he said. But DeLorenzo stresses to all his clients that those coverages are needed “because those exposures are just as great as a slip and fall.”

Employment practices exposures and cyber exposures from point-of-sale (POS) systems are serious risks for both restaurants and bars, DeLorenzo said. And “throw-in” coverages on BOPs are not enough, he said.

“If POS systems go down and information’s lost, the POS company is not going to save them. … The POS company does not care about you. They’re going to go do what they need to do to make themselves whole. Meanwhile, you’re sitting there with no coverage,” he said.

So, while restaurants with minimal alcohol sales might find a better insurance market today, with affordable pricing that meets their lease requirements, the exposures that come with cyber risk and employment practices should be covered with better standalone policies, DeLorenzo advised.

The challenges facing restaurants and bars will not diminish opportunities to insure these risks.

“Hospitality’s not going anywhere in the world of technology and AI,” DeLorenzo said. “It’s going to change the industry, it’s going to look different, but there’s always going to be needed ways to entertain and take care of people.”

DeLorenzo advises agents that are in this space to stay current on emerging trends to be successful. “Start talking to underwriters and finding the companies that are following the trends,” he said.

“Whether it’s social clubs, more event centers, pickleball, or theatre, you just have to follow what’s the next big thing going on. It’s still hospitality, and it’s still entertainment at the end of the day.”

Topics Trends