Reducing Liability From Dram Shop Laws and DUI Update

1. Reducing Liability FromDram Shop Laws and DUI Update American Beverage Licensees 10th Annual Convention June 12, 2012

2. Common Law • At common law, establishments were not liable for selling or providing alcoholic beverages to individuals who became intoxicated and injured themselves or others • Courts recognized that the problem wasn’t the drink, but the drinker

3. Dram Shop Laws

4. Dram Shop Laws • Impose liability on commercial establishments that provide alcoholic beverages to certain adults or underage customers for on-premise consumption • In some jurisdictions, may also apply to retailors under certain circumstances

5. DS Laws: Service to Adults • 35 states and DC hold licensees accountable for serving a visibly intoxicated person or knowingly serving a habitual drunkard • Other states are likely to join them

6. DS Laws: Service to Adults • The burden of proof varies • Some states require plaintiffs to prove proximate cause by clear and convincing evidence • Some states provide for special defenses • Engaging in responsible business practices

7. DS Laws: Service to “Minors” • 42 states and DC hold licensees accountable for serving “minors” • Most states use 21 as a cutoff; remember, it is illegal to serve those under 21 under Federal law • A small minority of states limit liability to patrons under 19 or 18

8. DS Laws: Service to “Minors” • Some states hold vendors responsible for “serving” a minor if they sell alcohol to a person who provides alcohol to a minor if they knew or should have known the person would do so

9. DS Laws in the Real World • Researchers from Washington State University examined 167 cases tried to verdict between 1992 and 1998 where licensees were sued for improper service • Most involved car crashes • Verdicts routinely exceeded $100,000 and many were well above $1,000,000

10. Additional Risks

11. Additional Risks • Proprietors may have a duty to safeguard customers from “extreme danger” while on the premises • Some states may recognize a cause of action for negligence per se when hosts violate criminal statutes

12. Additional Risks: Improper Supervision • Do licensees have an obligation to monitor patrons? • Bauer v. Nesbitt (NJ Ct App 2008) • Held that an establishment had a duty to ensure that a visibly intoxicated patron was driven home by a sober companion and/or to protect the person from hurting himself or others! • Reversed by NJ Supreme Court

13. Additional Risks: Improper Eviction • Licensees typically evict patrons who are underage, become belligerent or endanger others • Is there risk? • Not in most jurisdictions • Exceptions: • Facilitation of tortious conduct • Outrageous conduct

14. Additional Risks: “Improper” Refusal • Improper refusal of service • Example: What happens when a server refuses to serve a patron who has a speech impediment because the server thinks he or she is drunk? • Licensees can minimize the risk by training staff to ask questions about prior drinking and watching for changes in behavior

15. Insurance and Indemnification

16. Because you can’t prevent someone from suing you • In December 2011, a Texas woman sued a bar when she was raped by a pair of police officers after leaving a local club • She claimed that employees served her until she became drunk • Continued to sell to her after she became drunk • Allowed her to leave when she was obviously intoxicated and posed a clear danger to herself and others

17. Insurance and Indemnification • General liability policies • Generally exclude coverage for negligent service • Generally apply to on-premises harms only • Liquor liability policies should be sought that cover • Assaults and batteries • Suits brought be third parties injured off-premises by a patron served at the establishment • All types of damages (ie. mental) • Employee drinking • Defense costs

18. Insurance and Indemnification • Some states provide licensees and hosts with a right of indemnification • In the real world, this often is of little value • Hotels and other venues that allow patrons to host parties should consider requiring the hosts to obtain insurance and indemnify them if someone is hurt

19. Reducing Risk

20. Reducing Risk • Develop relationships with state and local regulators • Obtain state certification as a responsible vendor where available • Draft written policies and follow them • Provide training to staff by certified trainers from third party vendors • Audit/monitor staff • Prohibit employees from drinking on duty • Require anyone who appears to be under 30 to produce identification

21. Reducing Risk • Maintain appropriate staffing • Publicize responsible business practices • Remove customers in appropriate cases • Avoid engaging in behaviors that encourage overconsumption or overservice • Encourage designated drivers • Document and track incidents • Obtain and maintain insurance • Refuse service to habitual drunkards or visibly intoxicated patrons

22. What’s happening nationally?

23. Attacks on the Industry • Responsibility • Is the problem the product or the drinker? • Some advocates suggest that “You caused the problem” • The truth is that the vast majority of Americans use alcohol responsibly and that the industry is part of the solution

24. DUI Update: Industry Contributions • Several national organizations are working hard to reduce drunk driving and underage drinking • Supporting change • STOP Act • Legislation addressing hardcore drunk drivers (Federal and state) • Resources for judges, prosecutors and probation officers • Funding for national non-profits organizations and working groups (Beam Global, Anheuser-Busch and others)

25. DUI Update: Industry Contributions • Providing resources • ABL toolkits • TCC guides • Funding conferences • Funding publications

26. Underage Drinking • Marketing and youth • Criticism remains high despite industry efforts • Many seem to be ignoring the realities • The government’s ability to regulate advertising is limited by the First Amendment • Most in the industry follow voluntary standards • Underage drinking has dropped significantly during the past 10 years • Among underage drinkers, less than 10% purchase the alcohol themselves

27. DUI Update • Federal legislation • SAFETEA-LU expired two years ago • The current bill is unlikely to be passed this year • NTSB Forum • “Friends don’t let friends drive drunk” versus “Don’t drink and drive” • Interlock • First offender interlock is becoming a reality • 15 states already have legislation and the number is growing quickly

28. Bonus Discussion: Drugged Driving • Drugged driving • Drugged driving appears to be as significant as alcohol impaired driving • About 1/3 of drivers killed in motor vehicle crashes have a drug or drugs in their systems • Over 16% of weekend nighttime drivers have a drug or drugs in their systems • One of the key components of the President’s drug control strategy

29. Contact Stephen K. Talpins stalpins@rumberger.com (305) 995-5432