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Definition of Dram Shop Act

The Dram Shop Act holds retail businesses liable for damages or loss caused by serving alcohol to intoxicated patrons. The law was passed to create an incentive for owners of alcohol establishments to develop responsible service policies and to properly train employees to refuse alcohol sales to intoxicated patrons.

Dram shop laws vary by state. For example, some states will not require a business to pay for damages suffered by the injured party because the courts recognize it was the customer's decision to drink too much.In some states the amount a victim can sue a business is also limited because the drinker is equally responsible for their decision to drink too much. To limit liability a business is generally required to purchase liquor liability insurance in addition to general liability coverage. But these insurance policies have limitations and may not cover the costs if a minor was served alcohol or if the patron was obviously drunk.

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