Liquor liability insurance in Texas, and the statute behind it
Texas holds a provider liable for serving someone who was obviously intoxicated to the point of clear danger, when that intoxication goes on to cause harm. The same code gives employers whose staff completed TABC-approved seller training a statutory safe harbor with three conditions. TABC issues the permits and asks for a conduct surety bond in some cases; it does not list insurance among its permit requirements. The exposure is why the coverage exists.
What coverage a restaurant needsChapter 2: the Texas dram shop act
The Texas dram shop act is Chapter 2 of the Alcoholic Beverage Code, "Civil Liabilities for Serving Beverages," on the books since 1987. A "provider" is anyone who sells or serves an alcoholic beverage under a TABC license or permit, or who otherwise sells one to an individual, so a bar, a restaurant with a mixed beverage permit, and a taproom are all providers (Texas Alcoholic Beverage Code §2.01).
Section 2.02(b) sets the test. Serving a drink can be the basis of a statutory claim, and of a permit revocation proceeding, "upon proof that: (1) at the time the provision occurred it was apparent to the provider that the individual being sold, served, or provided with an alcoholic beverage was obviously intoxicated to the extent that he presented a clear danger to himself and others; and (2) the intoxication of the recipient of the alcoholic beverage was a proximate cause of the damages suffered" (§2.02(b)). Both elements are required, and the standard is obvious intoxication amounting to clear danger, not merely that the patron had been drinking. A separate subsection, added in 2005, makes an adult who knowingly serves a minor under 18, or knowingly lets one be served on premises the adult owns or leases, liable for the minor's intoxication, unless the adult is the minor's parent, guardian, spouse, or court-appointed custodian.
Section 2.03 makes the chapter the whole story on the provider side. A provider's liability under Chapter 2 "is in lieu of common law or other statutory law warranties and duties of providers of alcoholic beverages," the chapter imposes no obligations on a provider beyond those it states, and it "provides the exclusive cause of action for providing an alcoholic beverage to a person 18 years of age or older" (§2.03). The injured person's common-law claim against the drunk patron personally is preserved by §2.02(a). What this means for coverage is plain: a claim under Chapter 2 is the liquor-related claim the Insurance Information Institute says a standard commercial general liability policy does not respond to without separate liquor liability coverage (Insurance Information Institute). How that coverage is structured, and what a carrier asks a Texas bar before writing it, is on our bar and restaurant insurance page.
The safe harbor in §106.14, as the statute states it
Texas does not require servers to be certified. TABC's own answer is one word and a qualifier: "No. There is no requirement to be certified under state law, but many employers require certification for employment" (TABC Certification FAQs). The reason employers require it is §106.14. For purposes of the code's provisions on selling or serving to a minor or an intoxicated person, "the actions of an employee shall not be attributable to the employer if: (1) the employer requires its employees to attend a commission-approved seller training program; (2) the employee has actually attended such a training program; and (3) the employer has not directly or indirectly encouraged the employee to violate such law" (Texas Alcoholic Beverage Code §106.14(a)). All three conditions, and the third is the one that gets litigated: a happy hour built on volume, a manager who leans on staff to keep pouring, and the harbor is gone.
TABC implements the statute through its own rule and frames the result as protection from administrative action against the permit. Its published conditions go past the statute's three: the seller is not an owner or officer, holds a current certification, every employee who sells or serves and their immediate managers are certified within 30 days of hire, the employer has written responsible-service policies each employee has read and understood, the employer does not directly or indirectly encourage violations, and there are not three or more such violations in a 12-month period. Certification is valid for two years from the date it is issued (TABC, citing §106.14(a) and Rule §34.4). Keep the two layers distinct. The statute is the statute; TABC's rule is how the agency applies it on the licensing side. Whether and how the safe harbor operates inside a civil dram shop suit, and who carries the burden of proving its conditions, is Texas case law that this page does not summarize; ask a lawyer, and expect every liquor liability application to ask whether your staff is certified regardless.
TABC permits, the conduct surety bond, and what TABC does not require
The on-premise permits a Texas restaurant or bar holds are the Mixed Beverage Permit (MB), which "authorizes the sale of distilled spirits, wine and malt beverages for on-premise consumption," and the Wine and Malt Beverage Retailer's Permit (BG), which "authorizes the sale of wine and malt beverages for on- and off-premise consumption." Older material still calls the BG a wine and beer retailer's permit; TABC now says malt beverage. Either permit can carry a Food and Beverage Certificate (FB), a subordinate certificate for holders that meet the legal definition of a restaurant or keep alcohol at 60 percent or less of total sales, and a Late Hours Certificate extends service between midnight and 2 a.m. (TABC, License and Permit Types). The FB certificate matters to an underwriter for the same reason it matters to TABC: it is the agency's own line between a restaurant that serves and a bar that sells.
What TABC asks for is a bond, not a policy. Its bonds page says it directly: "You will need this if you're a retailer who does not hold a Food and Beverage (FB) Certificate." The conduct surety bond comes in two amounts, one for premises more than 1,000 feet from a public school and a larger one for premises closer than that, and it can be posted as a bond, a letter of credit, or an assigned certificate of deposit; the current figures are on TABC's page (TABC, Bonds). Neither that page nor TABC's permit-type list mentions liquor liability insurance or any other insurance as a condition of a permit. That is the accurate way to say it: TABC's published permit requirements contain no insurance condition. It is not the same as saying nobody will require the coverage. A lease, a lender, a franchisor, or a city can require liquor liability by contract, and the Chapter 2 exposure is there either way.
The food side of the same operation, including which health jurisdiction permits the kitchen and the workers compensation decision Texas leaves to private employers, is on our Texas restaurant insurance page. A truck or trailer that pours at locations it does not control has a different set of questions, starting with the commissary rule on our Texas food truck insurance page. Or start at the overview.