Texas-Specific · Insurance Term
Dram Shop Act (Dram Shop Liability)
Definition
Texas's Dram Shop Act lets an injured person sue a business that sold or served alcohol to someone who was obviously intoxicated and a clear danger. The intoxication must have been a proximate cause of the injury. It can apply to bars, restaurants, hotels and stores licensed to sell alcohol.
In Plain English
Under Texas Alcoholic Beverage Code §2.02(b), a provider can be held liable only if two things are proven. First, it was apparent at the time that the person was obviously intoxicated to the point of being a clear danger to themselves and others. Second, the intoxication was a proximate cause of the damages.
Insurance for this exposure is called liquor liability. General liability policies usually exclude it for businesses that sell or serve alcohol, so licensees typically need a separate policy or endorsement. Businesses that only serve alcohol incidentally, such as at an event, may rely on host liquor liability instead.
Texas also has a defense often called the TABC safe harbor. Under §106.14(a), an employee's actions aren't attributed to the employer when three things are true. The employer requires TABC-approved seller training, the employee actually attended it, and the employer didn't directly or indirectly encourage the violation.
Not sure how your policy handles this? Have us review it, or get a quote.
Example
Hypothetical and simplified: A convenience store clerk sells beer to a customer who is stumbling and slurring. The customer then causes a crash that injures another driver, who sues the store under the Dram Shop Act. The store's liquor liability policy, if it has one, may defend the claim, and records of TABC-approved training may support a safe harbor defense.
Why It Matters for Texas Property Owners
This is a Texas law, and it reaches gas station and convenience store owners, hotels with bars, and shopping centers with restaurant tenants. Landlords often require alcohol-serving tenants to carry liquor liability and to name the landlord as an additional insured where available. For legal questions, consult a Texas attorney.
What to Watch For
- Keep every employee's TABC seller-server training certificate on file and current.
- Write and enforce a policy against serving or selling to intoxicated customers.
- Check whether your liquor liability policy excludes assault and battery claims.
- Require restaurant and bar tenants to carry liquor liability and send proof every year.
Common Questions
Does the Dram Shop Act apply to stores that sell packaged beer and wine?
It can. The law applies to providers that sell or serve alcohol, which can include licensed convenience stores. Ask a Texas attorney how it applies to your business.
Does TABC training protect my business from all claims?
No. The safe harbor helps only when all its conditions are met, and it doesn't stop someone from filing suit. Liquor liability insurance is still important.
Sources
Last updated October 14, 2026 · Primesure editorial team · How We Write