10/24/2012

Who’s at Fault When It’s Party Time?

Party hosts who serve alcohol need to be aware that they potentially could be held liable should a guest have an accident on the way home from their soirée.

By Mary Anne Medina

Fall is a favorite time of the year for many of us. Football season is back, the leaves turn, and kids and adults alike are gearing up for having the best costume at a Halloween party. Then we slide right into Thanksgiving, Christmas, and other holiday celebrations. From now until New Year’s Eve, there is no shortage of parties and travel. However, the holiday season is one of the deadliest times of the year for travel on highways and even on our neighborhood streets. Party hosts who serve alcohol need to be aware that they potentially could be held liable should a guest have an accident on the way home from their soirée.

Many states have passed laws, such as “dram shop laws,” which hold legally liable those who sell or serve alcoholic beverages to minors or the obviously intoxicated who then become involved in vehicle crashes and other incidences that cause death or injury to third parties. The laws vary from state to state in their interpretation and the way they impose comparative negligence upon those who may be deemed liable.

Currently, 10 states have no dram shop laws in place. Some states have passed “social host laws,” which typically hold a private individual liable in criminal and civil actions for serving drinks to impaired or minor persons in a non-commercial setting.  The hosts are not held liable to the intoxicated guest who causes an accident, only to the third party victims.

In 2010, the National Highway Traffic Safety Administration (NHTSA) reported that 10,228 people were killed in alcohol-impaired auto crashes. These crashes accounted for 31 percent of the total motor vehicle traffic fatalities in the U.S. that year—an average of one fatality occurred every 51 minutes.

In a wrongful-death dram shop liability case in Michigan, a vehicle was traveling northbound on I-75 and was struck head-on by another vehicle proceeding in the wrong direction. The oncoming vehicle was driven by a person who earlier had attended a wedding reception where alcohol was served. The driver of the first vehicle died at the scene. The courts held the hosts of the wedding reception liable for the driver’s death. In another case, a Colorado man was awarded $18.5 million after an intoxicated driver, who had just left a party, ran him over in his driveway.

What issues should be investigated to determine legal liability? What duty is owed by those who host an event where alcohol is served? One of the most debated issues is that of who supplied the alcohol. Is there a difference in liability when alcohol is furnished by a party host versus an event where guests bring their own alcoholic beverages?

Some of the information that must be determined when investigating an incident in a commercial establishment is whether or not the employees knew, or should have known, that a patron was intoxicated. Did they continue to serve the patron after they appeared intoxicated? The same inquiries apply to non-commercial incidents.

A social host also may be held liable for injuries caused by a guest to a third party if they were aware or should have known that the guest was intoxicated, or if the social host was aware that the guest was driving after drinking alcohol. Not every state recognizes social host liability laws, but in the states that do, the host owes the duty of responsibility and penalties could potentially be severe, especially in cases involving a motor vehicle accident. The laws are not specific regarding the size of the gathering—it can be a single guest, wedding, dinner party, or an informal gathering or company party.

Some social host liability laws are specific in holding the social host responsible for the intoxication of minors. In January 2011, California enacted the social host liability law, [California Civil Code 1714 (d)]. The law states, “(d) Nothing in subdivision (c) shall preclude a claim against a parent, guardian, or another adult who knowingly furnishes alcoholic beverages at his or her residence to a person under 21 years of age, in which case, notwithstanding subdivision (b), the furnishing of the alcoholic beverage may be found to be the proximate cause of resulting injuries or death.”

If partygoers bring their own alcohol, the host may be held liable if they invited guests to bring the alcohol to be consumed at the party or social gathering.

If a party or event is hosted at a commercial location, such as a bar or restaurant, liability is minimized because the facility will likely bear some responsibility. The host still has the same duty owed, but some of it is imputed to the bar or restaurant. The facility owes a greater duty of care to its patrons, as they are considered invitees as opposed to social guests. A greater duty of care is owed to invitees because they are there for the benefit of the bar or restaurant owner; it is selling to them and making a profit regardless if they are there for their own benefit. However, if you have invited guests, you may be deemed liable for the damages or injuries to the third party.

While we have focused on vehicular accidents and host liability, it is also important to understand that, depending upon the state social host liability laws, party hosts may be held liable for other incidents that occur. A few examples of other occurrences would be when guests become ill after eating spoiled food, a person falls and is injured on the premises, and incidents involving swimming pools, pets, trampolines, guns, sexual harassment, and other unacceptable conduct.  


Mary Anne Medina is an instructor and course developer for Vale Training Solutions. She has extensive experience in claims process redesign and claims handling training, with an emphasis on liability loss adjusting. She has been a CLM Fellow since 2010 and can be reached at MMedina@vale-ts.com.

 

Social Host Liability Case Law

“Coverage for social host liability typically arises, if at all, under the host’s homeowners’ policy,” says Eric Zivitz, a partner at Butler Pappas. “This is in contrast with dram shop actions, which differ from social host liability actions, as the tortfeasor in dram shop actions is usually in the business of selling alcohol for profit and would need to have a liquor liability endorsement issued as part of their CGL policy in order to be extended coverage.

“Case law with regard to homeowners being covered for social host liability situations turns on the language contained in the personal liability section of the homeowners’ policy, and any applicable exclusions,” continues Zivitz. “Several state courts have ruled on the social host liability coverage issue. Perhaps the easiest case is illustrated in Zutphen v. Schemenauer, 151 Wis 2d 559, 1989 WL 100262 (Wis App 1989), wherein the appellate court affirmed summary judgment in favor of American Family Mutual Insurance Company, the carrier for the Schemenauer’s homeowners’ policy, relying upon an express exclusion stating that there was no bodily injury coverage ‘arising out of the insured’s knowingly permitting or failing to take action to prevent the illegal consumption of alcohol(ic) beverages by an underage person on premises owned by the insured or under the insured’s control.’

“Other cases turn on the language of the auto exclusion contained in the personal liability section,” says Zivitz. “Worcester Mut. Ins. Co. v. Marnell, 398 Mass. 240, 496 N.E. 2d 158 (1986), found coverage under the homeowners’ policy for social host liability based on the severability clause, whereas Merrimack Mut Fire Ins. Co. v. Sampson, 28 Mass. App Ct. 353, 550 N.E. 2d 901, found the auto exclusion applicable and made it unnecessary for the carrier to defend insureds in social host liability cases because an owner or operator of a motor vehicle involved in an automobile accident causing bodily injuries is not entitled to coverage for claims such as social host liability.

“In contrast, however, when a homeowner is subjected to claims as a social host or negligent supervisor for actions of persons operating vehicles owned by others, the homeowner does not usually control the amount of automobile insurance covering the operator or owner of such vehicles and can be afforded coverage,” he says. “But note Massachusetts Property Insurance Underwriting Association v. Berry, 80 Mass. App. Ct. 598, 954 N.E. 2d 584, which found that exclusions applied to ‘any person’ who operated or used the motor vehicle in a social host liability situation and therefore was not limited to the ownership or use of a motor vehicle owned or operated by the insured and the third party injuries that arose out of use of motor vehicle.  

“See also Taylor v. American Fire and Casualty Co., 925 P.2d 1279 (Ut. App. 1996), which states that the majority of jurisdictions have adopted the finding that negligent supervision claims are so inextricably intertwined with the motor vehicle that there can be no independent, non-auto-related act that takes the claims outside of the motor vehicle exclusion.”



Mary Anne Medina is an instructor and course developer for Vale Training Solutions. She has extensive experience in claims process redesign and claims handling training, with an emphasis on liability loss adjusting. She has been a CLM fellow since 2010 and can be reached at MMedina@vale-ts.com.

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