[NOTE: This article first appeared in the Fall 2011 Edition of Hyatt & Stubblefield, P.C.'s "The Client Letter"]
If someone has too much to drink at a social function hosted by a community association or private club and then the person causes property damage or injury or death to a third party due to his or her intoxicated state, can the association or club (the host) be liable for the injury or damage? The answer may vary depending upon whether the host is licensed to sell alcohol. Persons and establishments that are licensed to sell alcohol may have liability under what are called "dram shop" laws. Licensed vendors are generally well aware of the rules that govern their business, so dram shop liability is not the subject of this article. Instead, the focus is on the social host that does not sell alcohol but serves alcohol at a social function.
The laws vary from state to state, but the prevailing thought is a social host should not be liable for injuries to a third party since the act of the host serving the alcohol was not the cause of the injury but rather was the act of the intoxicated person. The intoxicated person may be liable to the third party for the injury he or she caused, but the social host is generally not liable to the third party.
There are two common exceptions to this general rule, however. In many states, the social host may be liable for third party injuries if alcohol was served or otherwise made available at the event to a minor or to a person that had obviously had too much to drink. At least one state will not impose third party liability unless the social host knew that the intoxicated person would soon be driving, but most states do not make that distinction. So what can an association do to protect itself from social host liability for serving alcohol? Here are a few recommendations:
1. Adopt association rules prohibiting:
(a) any person from bringing alcoholic beverages onto the common areas without the prior approval of the association;
(b) any person from using the common property while intoxicated;
(c) any person under the age of 21 from consuming alcoholic beverages on the common property; and
(d) any person from giving any alcoholic beverage to a person under the age of 21 for consumption at an association-sponsored event;
2. Check with the association's insurance agent to determine the extent of the association's liability insurance coverage with respect to the selling or serving of alcohol at association-sponsored events and obtain additional coverage if required (this may be available on a single-event basis);
3. Check applicable state, city, or county statutes and ordinances to determine if the association or any caterers or other vendors are required to have a special event permit or other permit for vendors to sell or serve alcohol at the association-sponsored event;
4. Provide each vendor with rules for selling or serving alcohol and require vendors to sign them, agreeing to comply with those rules and to indemnify the association against any claims arising out of the vendor's (or its employees') breach of the rules. The rules for vendors should require, at a minimum, that the vendor:
(a) have a current liquor license and all required permits to sell and serve the types of alcohol beverages they propose to sell or serve (permits may distinguish between beer/wine and liquor);
(b) comply with all state and local laws relating to the selling and serving of alcoholic beverages;
(c) have liability insurance, including liquor liability coverage and contractual liability coverage, with at least a $1,000,000 limit per occurrence, have the association named as an additional insured on such policy, and provide evidence of such insurance to the association prior to the event;
(d) not have anyone under the age of 21 serving or selling alcohol;
(e) require every guest to show identification and check the identification to verify the age of every guest before the sale or serving of alcohol to the guest;
(f) not sell or serve alcohol to anyone under the age of 21 or sell or serve it to any person if the vendor believes the guest intends to provide the beverage to someone under the age of 21;
(g) not sell or serve alcohol to anyone who appears to be intoxicated; and
(h) discontinue selling and serving alcohol at least 90 minutes before the end of the event;
5. Be sure there are also non-alcoholic beverages and food available;
6. Be sure all advertisements for and announcements of the event encourage guests who choose to drink to drink responsibly and not drink and drive;
7. Encourage guests who drive to the event to designate a driver on arrival at the event and give them a "designated driver" wristband; have vendors agree not to serve alcoholic beverages to designated drivers and consider offering free non-alcoholic beverages to designated drivers; and
8. Have a committee of people monitoring the crowd throughout the event to:
(a) identify anyone who appears to have had too much to drink and assist them in getting home safely; and
(b) look for and dispose of cups, bottles, or cans containing alcoholic beverages that may be left sitting unattended or in trash cans or other places within easy reach of minors.
A little prevention can go a long way in limiting liability for a social host and may also prevent injuries or even death to someone else.