Claims involving allegations of alcohol intoxication require careful analysis when determining what policy or policies may apply.
Two common theories centered on alcohol-related allegations that come into play include premises liability and dram shop liability, according to John P. Cunningham and Julia B. Jackson, presenters on this subject at the recent Property Loss Research Bureau’s national conference in Orlando.
Generally, these negligence claims arise from injuries that are caused by intoxicated persons on the landowner’s premises, according to Cunningham, who is vice chairman of the St. Louis-based Brown & James Liability Insurance Litigation Department.
The theory of liability usually raised against a tavern owner is the failure to protect the injured party from the danger posed by the intoxicated person, Cunningham said.
Premises liability typically falls under a tavern’s commercial general liability (CGL) insurance coverage, he said. Examples of alcohol-related premises liability claims are injuries resulting from bar fights and falls.
“What we most often see are bar fights,” Cunningham said. He noted foreseeability is not always clear-cut.
“When the bar knows that a particular individual has a reputation for violence, then [it is] exposing [its] customers to perhaps what would be an unreasonable exposure to harm,” he said.
A tavern or bar with a history of violence will likely have evidence of such. Plaintiff attorneys will obtain police records to use as supporting evidence, Cunningham said.
Even so, showing the attack is reasonably foreseeable alone is not sufficient to give rise to liability on the part of a tavern owner for an injury from a bar fight, he said.
The plaintiff also needs to prove that the tavern owner failed to take reasonable steps to prevent the foreseeable injury.
An issue can arise when the bar provides extra safety measures, like adding security cameras or having security guards on hand.
“The tavern voluntarily assumes a duty of what otherwise might not be a duty,” Cunningham said.
Cunningham said that reasonable foreseeability is the determining factor in whether a case should be defended or targeted for settlement.
Dram Shop Liability
Dram shop liability claims generally stem from allegations of bars over-serving alcohol.
Cunningham described the most common dram shop claims as “serving or over-serving a customer who causes an injury on or off premises to a third party.”
The plaintiff is typically a party who is injured by the insured’s customer, he said.
Dram shop laws are usually based on state statutory provisions, Cunningham said. Some 43 states have some form of dram shop law in place. The laws are meant to be a deterrent to the over-serving or illegal sale of alcohol by tavern owners, said Jackson, chief litigation officer at Illinois Casualty Co.
The states that don’t recognize dram shop liability include Delaware, Kansas, Louisiana, Maryland, Nebraska, Nevada, South Dakota and Virginia.
Dram shop claims usually involve drinking and driving accidents, or intoxicated individuals who end up hurting others and sometimes even themselves, she said.
According to Jackson, there are some common misconceptions relating to dram shop liability:
- One is that an intoxicated individual may recover damages. In reality, only 10 states allow an intoxicated person to recover damages he or she sustained as a result of an alcohol-related injury. Jackson explained that the point of the dram shop law is to cover others injured by an intoxicated person.
- Another misconception is that criminal liability for furnishing alcohol can be equated to civil liability. Jackson said that a majority of states have different standards for what constitutes an illegal sale of alcohol and what constitutes a sale that could give rise to dram shop liability.
In analyzing dram shop liability, Jackson suggested asking the following questions:
- Who did the drinking?
- Who is in line for the money?
- Is a third party claim or counterclaim possible.
According to Jackson, while 43 states have a dram shop law in place, there are variances among the laws based on:
Type of sale. For instance, whether the sale was to a visibly intoxicated person, knowingly serving a habitual drunken person, has knowledge of the fact that an intoxicated party will soon be driving or selling alcohol to a minor. In the majority of states, both package liquor and by the drink vendors can be held liable. In Missouri and Florida, package liquor vendors are immune from suit.
Proof requirements. By preponderance of the evidence, clear and convincing evidence is required in Missouri and Oregon, or proof beyond a reasonable doubt is needed in Tennessee.
Damage caps. The following states apply damage caps to dram shop actions: Colorado, Connecticut, Illinois, Maine, Montana, New Mexico, North Carolina and Utah.
Both presenters emphasized that just because alcohol is mentioned within the complaint doesn’t mean that liquor liability coverage is triggered. In addition, the assault and battery exclusion may apply if a claim involves a fight.
Cunningham and Jackson said it’s important to be familiar with the applicable state’s social host liability law, if allegations arise from a house party. In those cases, coverage may be available under homeowners’ policies.
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