Liquor liability for every pour.

California's dram shop rules, in the statute's words

California put its dram shop rules in two codes, and the exception is narrower than most owners expect. Here is what each section says.

• Civil Code 1714(b): the Legislature restored the rule that "the furnishing of alcoholic beverages is not the proximate cause of injuries resulting from intoxication, but rather the consumption of alcoholic beverages is the proximate cause" of injuries an intoxicated person inflicts on someone else.
• B&P Code 25602: subdivision (a) makes it a misdemeanor to sell, furnish or give alcohol "to any habitual or common drunkard or to any obviously intoxicated person." Subdivision (b) says the person who does it is not civilly liable to someone injured as a result of the drinker's intoxication.
• B&P Code 25602.1, the minor exception: notwithstanding 25602(b), a suit can be brought for injury or death when alcohol goes to "any obviously intoxicated minor" and that is the proximate cause. Anyone licensed, or required to be licensed, under Section 23300 (and federally authorized sellers on military bases) is exposed if it sells, furnishes or gives the drink. Anyone else is exposed only if it sells the drink or causes it to be sold.
• Civil Code 1714(c) and (d), social hosts: a social host who furnishes alcohol generally can't be held accountable for the harm that follows. The exception is a parent, guardian or other adult who "knowingly furnishes alcoholic beverages at his or her residence" to someone they know, or should have known, is under 21. The person under 21, or someone that person harmed, can bring the claim.

Two practical points. "Required to be licensed" means selling without the ABC license you should hold doesn't move you out of the first group. And serving an obviously intoxicated adult is still a misdemeanor under 25602(a), even where 25602(b) blocks the civil claim. Outside California, dram shop rules vary by state, so read your own state's statute. If you run a bar or nightclub or a tasting room, the ID check is where this exposure is controlled.

How the GL liquor exclusion decides who needs a separate policy

The standard ISO commercial general liability form handles alcohol in exclusion c. under Coverage A. IRMI breaks it into three parts: causing or contributing to anyone's intoxication, furnishing alcohol to someone underage or already under the influence, and liability under any statute, ordinance or regulation on selling, giving or using alcohol. In the standard form, the exclusion applies only if the named insured is "in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages."

• Host liquor: when alcohol is incidental to the business, as in IRMI's examples of a company picnic or a customer appreciation open house, that threshold isn't met. IRMI says host liquor exposures are insurable under standard general liability policies.
• "In the business" isn't defined in the unendorsed form. IRMI's review of the cases found courts split: some looked for a direct profit objective and held a nonprofit's one-day fundraiser outside the exclusion, while others applied it to nonprofit clubs running a bar.
• Landlords: IRMI notes a landlord not in the liquor business is generally outside its own policy's liquor exclusion, but the liquor exclusion in a tenant's GL "applies to any insured," additional insureds included.

So if your lease has you name the landlord as an additional insured on your GL, the standard form does not carry liquor protection to them. Ask whether your liquor policy can add them.

Official sources

• California Civil Code 1714 (California.Public.Law)
• California Business and Professions Code 25602 (California.Public.Law)
• California Business and Professions Code 25602.1 (California.Public.Law)
• California Business and Professions Code 25682 (California.Public.Law)
• California ABC: Responsible Beverage Service (RBS) Training Program
• California ABC: RBS Frequently Asked Questions
• California ABC: License Types
• IRMI: Raising the Bar, The Liquor Liability Exclusion in the CGL (Stanovich, 2008)
• IRMI: More Coverage Misconceptions of the CGL Policy (Stanovich, 2018)
• IRMI: A High-Level View of the CGL Policy (Stanovich, 2010)