alcohol server liability law suits result from dram shop statutes

8/12/2019 Alcohol Server Liability Law Suits Result From Dram Shop Statutes

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Hospitality Review

Volume 4Issue 1 Hospitality Review Volume 4/Issue 1

Article 1

1-1-1986

Alcohol Server Liability Law Suits Result FromDram Shop Statutes

James M. GoldbergAbrams, Westermeier and Goldberg, P.C., [email protected]

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Recommended CitationGoldberg, James M. (1986) "Alcohol Server Liability Law Suits Result From Dram Shop Statutes,"Hospitality Review: Vol. 4: Iss. 1,Article 1.Available at: hp://digitalcommons.u.edu/hospitalityreview/vol4/iss1/1
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lcohol Sewer Liability Law SuitsResult From Dram Shop StatutesbyJames M. GoldbergAbrams Westermeier Goldberg P.C.Washington D.C.

The country is experiencing a trend of alcohol server liability law suitsresulting from dram shop statutes and common law liability relatively re-cent develop men ts in the field of tort law. The author an expert on liquorliability law explores the meaning of this trend for the hospitality industry.

In Michigan, a tavern's insurance company settles a claim with therelatives of two deceased parties for $10.8 million, including a $3million cash payment.In Ohio, a bar and its owner are sued for 24 million by the widowsof two men killed in a head-on automobile collision.In Pennsylvania, a judge refuses to dismiss a suit against a Catholicchurch which hosted a oneday festival after which an intoxicatedattendee killed two men in a car crash.In Indiana, a ury cites the University of Notre Dame for $53,000in damages for failure to exercise crowd control at a football game,after which a drunken fan assaulted another fan in the stadium park-ing lot.

These are but a few instances of what many are convinced is a grow-ing trend of alcohol server liability law suits being brought llacross thecountry.Increased media attention and public awareness of drunkdriving andits consequences, plus the "megabucks" damages being awarded byjuries and in settlements by insurance companies, are probably at theroot of the trend. Though no definitive statistics are available, someknowledgeable observerspeg the growth rate of alcohol server liabilitylitigation at 300 percent per yearAnd it's not just commercial providers .e., hotels, restaurants, bars,and taverns which are being hit with litigation. Social hosts, too, arefacing the attack. In the last 18months alone, appellate-level courts innearly a dozen states considered the question of whether to hold a non-commercial provider of alcoholic beverages liable for the damages causedby someone to whom he served intoxicating beverages.Dram shop statutes and common law liability are relatively recentdevelopments n the field of tort law. Prior to he temperancemovement

FIU Hospitality Review, Volume 4, Number 1, 1986Copyright: Contents 1986 by FIU Hospitality Review. The reproduction of any artwork,

editorial, or other material is expressly prohibited without written permission fromthe publisher.


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of the early 19thcentury, he common law principle of proximate causewas universally applied; this held that a tavern owner or other liquordispenser could not be liable for any damage because the proximatecause of the damage was the drunk, with the tavern owner's contribu-tion too far removed to be considered the proximate cause.This principle of law still holds in many states lthough a decreas-ingnumber ener llyprohibiting recovery of damages against thesupplier of drinks, even if he supplied liquor to a minor or an obviously in-toxicated person.In nearly two dozen states, the old common law has given way to adoctrine of common law liability. In the absence of a specific statute, com-mon law liability permits recovery for damages against a tavern owner,and, in some states, a social host, by inferring liability due to the viola-tion either of a state law making it illegal tb serve alcohol to a minor oran intoxicated person, or of a duty to protect the general public againstharm. Common liability assumes that the server could reasonablybeex-pected to foresee damages resulting from the actions of the intoxicatedperson, and thus owed a duty to protect against that probability.The first modern decision establishing common law liability wasthe landmark Rappaport v ichols case, in which the New JerseySupreme Court awarded the plaintiff's family compensation from atavern owner for damages arising from theillegalsale of alcoholto a minorwho was later involved in an automobile accident.But even the 1959Rappaport decision had its roots in an opinionrendered more than 110 years earlier by the South Carolina SupremeCourt, whichruled against a merchant who had provided liquor to a slavein violation of law. The slavedr nk oo much, stayed out all night, anddiedof exposure, leavinghis master without what was then a valuableproperty right. The master sued the merchant nd won.While common law -e., rulings made by courts in the absence ofstatute s one way of holding alcohol servers iable, egislatures in morethan 20 states, including some of the same states where common lawliability exists, have adopted statutes specifically holding licensedalcoholicbeverage servers (and, n some cases, social hosts)responsiblefor the actions of the patrons whodrink oo much.Laws Date Back Century Or More

Again, much attention has been focused on legislative activity in r ecent years, but the first statute of this type was passedin Wisconsin in1849. I t required tavern owners to post a bond conditioned that theysupport all paupers, widows and orphans, and pay the expenses of llcivil and criminal prosecutions growing out of or justly attributableto.. raffic in alcoholic beverages.An Indiana statute passed in 1953 (thoughrepealed two years later)was the first prototype of the present-day dram shop statute. Ohio andPennsylvania followedwith statutes in 1854; New Yorkpassed alaw in1957, and Maine adopted a liability statute in 1858.The temperance movement, which was responsible for the passage ofthese laws, was temporarily sidetracked by the events which led to theCivil War, but i t resumed activity after the conflict. By the mid-1870s,




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states had dram shop liability laws in force. Connecticut, Indiana(which eadopted a law after repeal of the earlier statute),Maine, and NewHampshire each had statutes which conditioned liability only on theunlawful saleof alcoholic beverages. Thelaws of Illinois, Iowa, Kansas,Michigan, New York, Ohio, and Wisconsin were much broader, beingwritten in such a manner astocover the giving (withoutsale)of alcoholicbeverages. Although these laws could be read to cover social hosts, thereis no evidence of early cases so interpreting these statutes.Either through statutory enactment or common law judicial decree,38states now impose some form of liability on commercial. i.e., licens-ed) servers of alcoholic beverages for the actions of their patrons. Onlyin Arkansas, Delaware, Georgia, Kansas, Maryland, Montana (thougha federal court decision found liability on the government),Nebraska,Nevada, and South Dakotais the current lawsuchthat thereis no liabilityon licensed alcoholic beverage dispensers. In three other states,Oklahoma, Texas, and West Virginia, there is neither a statute nor anyreported cases, so hat the status of dram shop liability is unclear at best.In the sta tes where a commercialprovider of alcoholic beverages canbe held liable, there are generally only two instances in which this liabilitywhether imposed by s tatute or common law ll be found: wherethe licensed establishment serves a minor (i.e., someone under the legaldrinking age) or where a patron is intoxicated.Although none of the statutes or court decisions makes a distinctionamong the kind of licensed establishments, t is clear from the cases thatthe on-premisesestablishment .e., the restaurant, hotel, bar, or tavernhas the greater exposure to litigation than does the off-premisesestablishment or package store. There are few, if any, cases involvingthe sale of alcoholic beverages to a sober adult who later becomes intox-icated at another location and subsequently causes damages.Liability Coverage Costs Are A Problem

Add to the growingnumber of law suits and the increased number ofstates which hold alcohol servers liable for damages caused by theircustomers the fact tha t many insurance companies which formerly of-fered liquor liability coverage are now sharplyescalating their premiumsor dropping coverage dtogether, and it's easy to understand why thecommercial alcohol beverage service industry considers dram shop liabili-ty a crisis.The insurance costlavailability questionis aproblem in many states.Liquor liability coverage was a specialty of many small companies tobegin with most large insurers do not write this specialized coveragend even though these companies may not have gotten it with largeawards, several have decided to either get out of the business altogetheror up the premium cost substantially.In at least three sta tes New Hampshire, Massachusetts, and Min-nesota herearestateoperatedinsurance pools which rean attemptto divide the risks amongparticipating companies and make necessaryliability coverage available to ll commercial servers. It 's too early totell, however, whether these stateencouraged poolswillbe successful.Another approach to the dram shop liability problem, particularly if




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the size of damage awards continues to escalate, may be to impose alegislated eilingon the amount of damages which can be awarded. Thereis precedent for this type of action in the medical malpractice area, andthe Supreme Court of the United States recently upheld a Californiastatute which imposes a dollar cap on such verdicts.However, such solutions ake time and, in the interim, many commer-cial servers are groping for programs and methods to cut their exposureto financially crippling law suits, while at the same time not sacrificingthe profitable service of alcoholic beverages.One step is relatively simple: an aggressive program to ascertainwhether customers are of lawful drinking age. For example, the Dallas-based Southland Corp., operator of the 7-Eleven convenience stores, hasput in place a highly visible Come of Age program under whichcustomers and store employees alike are advised that it's company policyto require identification of anyone who appears to be under age25. Newstore employees are given specific training in recognizing youngercustomers and in handling the sometimes delicate question of asking foridentification.Somewhat more complicated is a program to spot potential intoxicatedcustomers andtorefuse service to anyone who appears to have had onetoo many.Urged on by state liquor regulatory agencies, many commercial serversare eliminating happy hours which in the past have featured reduced-price drinks, two-for-one specials, or other promotions. In their place,the happy hour has been recast to feature free food on the notion thatscientific evidence indicates that intoxication is slowed when alcohol isingested with food, as contrasted to drinking without eating.Staffing Patterns Trainirlg Should Be Reviewed

It's also agoodidea toreview physical conditions and s t a . f alcoholservi eareas like cocktail ounges and bars. For example, a dimly- lightedroom is thought to be conducive to good conversation and alcohol con-sumption. But it's also a fact that a skilled plaintiff's attorney can useto his advantage,pointing out to ajury that the lighting was solow thatthe establishment and its employees couldn't possibly watch the drink-ing habits of the customers.Staffing, too, can be used in litigation. For instance, if one bartenderserves many patrons, or one waiter or waitress is responsible for a largearea, it's again questionable whether the employee can keep an eye onthe drinking habits and patterns of all customers. And, if they can't, apicture of a non-caring management can be painted to the jury in adram shop liability case.Employees should beurged to reportallpossible intoxication ncidentsto management at the time they occur so that apotential drinking drivercan perhapsbetaken off the road by an establishmentwhich would preferto shell out a couple of dollars for taxi fare than run the risk of a multi-million- dollar law suit later.Then,too here is employee training n the controversial ssue of alcoholequivalence. The giant distiller Seagram's has upset many of its col-leagues with its A drinkis adrink s adrink campaign, which stresses




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that there is an equal amount of alcohol in standard-sized servings ofdistilled spirits, wine, and beer. The theme is to increase customerawareness hat wine and beer arenot less intoxicating han hard liquor,as many would believe. The Seagram's theme matches one soundedearlier by the National Alcoholic Beverage Control Association, whichdistributed a Sobering Facts About Alcohol poster to several thou-sand retail liquor outlets in the 18 control states, those which direct-ly control the distribution and sale, either at wholesale or retail, ofalcoholic beverages.There are also informationalposters and brochures on how alcohol con-sumption affects blood alcohol content level which is the standard lawenforcement and measurement for determiningwhen someone is legal-lydrunk This material indicates that a specific number of cocktails orglasses of wine or beer converts into a specific BAC level, thus enablingbartenders and servers to better ascertain when a customer has had toomuch.Of course, some establishments aren't as prone to potential liabilityas others. For example, a high traffic bar in a downtown office buildingsetting which caters to the after work'' crowd could face aproblem moreso than a hotel which caters to arge numbers of business travelers sincethe business traveler doesn't drive home from the cocktail lounge; he orshe merely takes the elevator to aroom,but the patrons of the downtownbar ,mostly drive home after consuming their post-5 p.m. cocktail.Hotels and restaurants which rent out private rooms for private func-tions also may face a problem, if the sponsoring party overserves a guest,who later causes injury. I t' s agoodidea, therefore, for the establishment'sattorney to review existing function contracts to ensure that holdharmless and insurance clauses are inserted in the rental agreement;such provisionsw ll not stop law suits, but they can reduce the cost ofdefending them.Drwn shop liability is an escalating and costly problem which won'tgo away by itself. What is needed are some innovativemanagement ap-proaches to reduce possible exposure to damaging law suit, and a coor-dinated hat is, a joint effort byallsegments of the alcohol beverageproduction, distribution, and retailing segments approach tolegislative solutions.

Editor s Note: The author is a partner in the law firm of Abrams, WestermeierGoldberg, P.C.; general counsel for the National Alcoholic Beverage Control Associa-tion (which represents the 18 states which directly control the distribution of alcoholicbeverages pursuant to the 21st Amendment);author of an annual compilation of statedr mshop statutes and relevant court decisions for NABCA;andceauthor of a treatiseon liquor liability law to be published soon.



alcohol server liability law suits result from dram shop statutes

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