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Managing your risk by Michael Kelly

NCACC Risk Management Director Michael Kelly writes a regular column on risk management for CountyLines. With more than 41 years of risk management/ insurance experience, he holds the CPCU - Chartered Property & Casualty Underwriter, ARM-P - Associate in Risk Management for Public Entities, CRM - Certified Risk Manager, ARe - Associate in Reinsurance and CIC - Certified Insurance Counselor Professional Designations. He can be reached at michael.kelly@ncacc.org or (919) 719-1124.  For archives of this column click here.

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Sep 12

Host-Liquor liability exposures for Counties

Posted on September 12, 2012 at 9:52 AM by Chris Baucom

In order to understand Host Liquor Liability exposure, it is helpful to do a little research on the rules and regulations concerning dram-shop acts in general.  Blacks Law Dictionary defines a dram-shop as “A place where alcoholic beverages are sold; a bar or saloon.” It goes on to define a dram-shop act as “A statute allowing a plaintiff to recover damages for the plaintiff’s injuries caused by a customer’s intoxication.” 
Stating up front that I am not an attorney and any specific circumstances should be addressed with your county attorney; generally, any individual injured by an intoxicated person has a right of action against the tavern or bar operator who by selling liquor has caused the intoxication in whole, in part, first or last.

With this assumption, if it is possible for a bartender to be legally liable for serving alcohol to a customer that becomes intoxicated, leaves the bar and injures someone else, could this same responsibility be extended for a county or entity that hosts a social/special event where alcohol is served?

The short answer is, yes. More than 30 states currently have social host laws or common law roots that tie responsibility of the social host for the actions of their guests.  A social host is the host of a gathering or assembly of any kind – and the size or number of guests does not matter.  Examples are many – such as conferences, social dinners, Christmas parties, board functions, etc.

My research determined that North Carolina was the 11th state to recognize liability of a social host that serves alcohol to a guest who later drives drunk or at least under the influence and hurts someone.  (See Generally, N.C.G.S. 18B-120 et. seq.; 18B-302; 18B-305; 18B-1005.)

So what is necessary in order for a social host to be responsible?  Generally, when the following three requirements exist a social host is potentially liable for third-party injuries – both financial and physical.
  • The social host did serve alcohol to the person who caused the personal injury or property damage in question;
  • The social host knew, or should have know that the person who caused the personal injury or property damage was intoxicated; and
  • The social host knew that the person who caused the personal injury or property damage would be driving after the social occasion.

Anytime you hold such a function, consideration should be given to the host liquor liability exposure from the consumption of alcohol by guests, and steps should be taken to mitigate the circumstances best as they can be.

So as your risk manager, what steps are helpful to address this exposure?  As usual, common sense rules, and the best method to circumvent this problem is to not serve alcohol at the function in the first place.

Assuming that is not truly an option, next, consider having that portion of the event catered – by licensed, insured bartenders.  This will not eliminate the problem, but will insulate your entity somewhat.  Have them furnish a certificate of insurance for their operations, including liquor liability, and add your entity as an additional insured under their coverage.

Include in the contract with the caterer that any employees serving alcohol must have received alcohol awareness training.

Impose a reasonable time limit (30 minutes to an hour) the bar is open before serving the meal, and/or have food available during the time the bar is open.
Control the actual number of drinks per guest through the issuance of drink tickets, and limit the number of tickets to each guest.

Serve drinks from a bar instead of having drinks circulated through the room by servers – making the act of getting a drink a more deliberate action on the part of the guest.
Offer non-alcoholic beverages (soft drinks, etc.) at no charge for guests who are designated drivers.

Encourage designated drivers – do not serve them alcohol and make sure they are the ones with the car keys so that when it comes time to leave, the person who is driving is the one with the keys.

Close the bar at least an hour before the scheduled end of the party to give some buffer of time for recovery after the meal.

Finally, know that host liquor liability is typically included in a standard general liability coverage form, but given special circumstances, you may still want to consider purchasing stand-alone special event coverage.  It is very affordable with premiums based on expected number of attendees/type of function and is often broader in scope.  It may include such ancillary coverage as cancellation due to conditions, medical payments for participants in any sports activities, (such as a softball game at a picnic) or extra dollar limits for setup expenses if the event cancels for a reason outside of your control.