Does TABC Require Liquor Liability Insurance? No.
No. The Texas Alcoholic Beverage Code doesn't require a bar or restaurant to carry liquor liability insurance, and the phrase "liability insurance" appears nowhere in it. TABC's Required Certifications form, the one an applicant takes to local officials before a license or permit is issued, asks for no insurance either. The money the code does require is posted with the state, as bonds and security conditioned on following the law or paying tax, not coverage that pays an injured customer. The code also gives every seller a way to keep an employee's illegal sale from being charged to the business.
Sources: Tex. Alco. Bev. Code · TABC Form L-CERT, Required Certifications · Tex. Alco. Bev. Code § 11.11 · Tex. Alco. Bev. Code § 11.61 · Tex. Alco. Bev. Code § 28.17 · Tex. Alco. Bev. Code § 204.02
Where the $500,000 and $1 Million Figures Come From
They come from bills that didn't pass: HB 880 in 2013 and HB 409 in 2015 proposed $500,000 per person and $1 million per occurrence for alcohol permit holders, and neither became law.
Sources: HB 880 (83R) history and analysis · HB 409 (84R) history and analysis
The Bond That Does Exist
TABC's conduct surety bond is $5,000, or $10,000 if the business is within 1,000 feet of the property line of a public school. Section § 11.11 requires it of wine and malt beverage retailer's, mixed beverage, and private club permits. Section § 61.13 requires the same bond, in the same amounts, of the retail dealer's on-premise license for beer.
The bond is a promise that the holder won't violate alcoholic beverage law or a TABC rule. It's paid to the state if the permit is revoked or on a final finding that the holder violated the code, "regardless of whether the actions of an employee of a holder are not attributable to the holder under Section 106.14." A certificate of deposit or a letter of credit from a federally insured bank or savings institution can stand in for all or part of it.
Sources: Tex. Alco. Bev. Code § 11.11 · Tex. Alco. Bev. Code § 61.13 · TABC, Bonds
Food and Beverage Certificate Holders Don't Post It
A permit holder with a Food and Beverage certificate doesn't post the conduct bond. For the wine and malt beverage retailer's permit and the beer license, the certificate goes to a restaurant, or to a location where alcohol is 60 percent or less of total receipts; either way the location needs "permanent food service facilities for the preparation and service of multiple entrees."
Sources: Tex. Alco. Bev. Code § 25.13 · Tex. Alco. Bev. Code § 28.18 · Tex. Alco. Bev. Code § 32.23 · Tex. Alco. Bev. Code § 69.16
The Bond Drops Off After Three Clean Years
A holder who has held a permit for three years or more stops furnishing the bond at renewal if three things are true: no license or permit of theirs has been revoked in the five years before the renewal application, no revocation proceeding is pending, and they've operated continuously on the premises for three years or more. Once exempt, the holder is exempt from the bond at its other locations too.
Sources: Tex. Alco. Bev. Code § 11.11(e)–(f) · Tex. Alco. Bev. Code § 61.13(e)–(f)
Dram Shop Liability in Texas
A Texas bar or restaurant is liable for an intoxicated customer's damage only on proof of two things. Under § 2.02(b), it has to have been "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 "the intoxication of the recipient of the alcoholic beverage was a proximate cause of the damages suffered." The same proof can cost you the license: under § 2.02(b), over-service "may be made the basis of a revocation proceeding under Section 6.01(b)," which makes a license or permit "subject to revocation or suspension if the holder is found to have violated a provision of this code or a rule of the commission."
Minors are a separate rule: an adult 21 or older who knowingly serves or provides alcohol to a minor under 18, or allows it on premises the adult owns or leases, is liable for damages the minor's intoxication causes.
A defendant found more than half responsible can owe the whole judgment, not just its share. Each defendant ordinarily pays only its own percentage under § 33.013(a), but under § 33.013(b)(1), a defendant whose percentage of responsibility "is greater than 50 percent" is also "jointly and severally liable for the damages recoverable by the claimant." Chapter 33 states this rule for tort defendants generally, and whether it reaches a dram shop claim is settled in case law rather than in the statute. That is the argument for liability limits sized to the whole loss rather than to a share of it.
Sources: Tex. Alco. Bev. Code § 2.02 · Tex. Alco. Bev. Code § 6.01 · Tex. Civ. Prac. & Rem. Code § 33.002 · Tex. Civ. Prac. & Rem. Code § 33.013
The Seller-Training Safe Harbor
Texas keeps an employee's illegal sale from being attributed to the employer if three conditions in § 106.14(a) are met: "the employer requires its employees to attend a commission-approved seller training program," "the employee has actually attended such a training program," and "the employer has not directly or indirectly encouraged the employee to violate such law." How a court applies it to a particular claim is a question for your lawyer.
Training itself isn't required by law. TABC says "There is no requirement to be certified under state law," and a seller training certificate "is valid for two years from the date it is issued." Before it declines administrative action over an employee's sale, TABC also looks for employees and their immediate managers certified within 30 days of hire and written policies on responsible alcohol service. The safe harbor doesn't reach the conduct bond: § 11.11 pays the bond on a violation whether or not the employee's actions are attributable to the holder.
Sources: Tex. Alco. Bev. Code § 106.14 · TABC, Certification FAQs · Tex. Alco. Bev. Code § 11.11
Questions People Ask
Does TABC require liquor liability insurance?
No. The Texas Alcoholic Beverage Code has no liquor liability insurance requirement and never uses the phrase "liability insurance."
What bond does TABC require of a bar or restaurant?
A conduct surety bond of $5,000, or $10,000 within 1,000 feet of a public school, under § 11.11 for wine and malt beverage retailer's, mixed beverage, and private club permits and § 61.13 for the beer retail on-premise license. A holder with a Food and Beverage certificate doesn't post it.
When can I stop posting the TABC conduct bond?
After three years, at renewal, if no license or permit of yours has been revoked in the prior five years, no revocation proceeding is pending, and you've operated continuously on the premises for three years or more.
Is TABC seller-server training required?
Not by state law. It's what § 106.14 rests on: if you require it, the employee actually took it, and you didn't encourage the violation, an employee's illegal sale isn't attributed to you.
What does it take to win a dram shop claim against a Texas bar?
Proof that it was apparent to the server that the customer was obviously intoxicated to the point of being a clear danger to themselves and others, and that the intoxication was a proximate cause of the damages, under § 2.02(b).