The question is often raised regarding whether a person, institution, or business insured under a general liability policy needs special insurance against liability arising out of business entertaining. The issue is important because courts are now more likely than in the past to impose liability on liquor providers, even hosts at purely social events, under negligence principles.

You should be aware of the exposure that can be present where you provide alcoholic beverages in a business-social setting, such as a company Christmas party, summer picnic, or other gathering. The facts that could lead to an employer’s liability are similar to the situation of the liquor retailer: the employer provides liquor to an intoxicated client or employee, the employee proceeds to drive away from the company outing subsequently injuring a third party, and the employer is found to be liable under principles of common law negligence.

Where alcoholic beverages are provided without a charge of any kind, there is no exclusion in the general liability policy that would eliminate coverage in this situation. Entertaining customers with alcoholic drinks or providing beer at a company picnic is not equivalent to being engaged in the business of selling or serving alcoholic beverages.

However, the issue is not so clear where the business or institution, such as a university or volunteer fire department, sells alcoholic beverages at special events or even charges admission to events at which alcoholic beverages are available. For coverage purposes under the 2001 liability policy, are these insureds then, albeit limitedly, "in the business of manufacturing, distributing, serving or selling alcoholic beverages?"

Liability arising out of incidents where the insured serves liquor for a charge is excluded, and is not excluded where no charge is made, if no license is required for the activity.