This article is a companion piece to our On-Subrogation Podcast about Dram Shop and Social Host laws.
What do dram shop and social host laws have to do with subrogation practice?
Dram Shop and Social Host laws arise in situations where a defendant is inebriated. When a tortfeasor causes personal injury, death, and/or property damage while drunk, the person or entity who served alcohol to the wrongdoer may be liable for damages resulting from the intoxicated person’s negligence.
These laws are important for insurance companies and those who practice subrogation law, because they potentially create another pocket to reach into to satisfy your claims. This is especially true when a subrogating insurance company encounters a DUI defendant who is uninsured. You may have a defendant who is liable for a collision, but the insurance company can’t collect on the claim because the tortfeasor is uninsured, or underinsured, or otherwise may not have any assets to satisfy a judgment. Therefore, any time an insurance claim involves a DUI, it is important for the subrogation team to look into the circumstances surrounding intoxication. Your defendant may have been at a bar or restaurant. If so, you now have an insured party who may be able to satisfy some of your damages if you are able to properly plead a dram shop count in your subrogation complaint. You will hopefully end up with a settlement and some cash, rather than a judgment that goes uncollected.
Intoxication as a Defense
At common law, there was no tort liability for the seller or provider of alcohol to able bodied persons. The law reasoned that the drinking, not the furnishing of alcohol, was the proximate cause of the injury in question. Over time, states began addressing this defense by passing dram shop laws, which impose liability where none existed at common law.
How Do Dram Shop Laws Work?
Dram Shop laws vary considerably from state. Insurance companies and subrogation professionals need to be aware of the dram shop laws in the jurisdiction at issue.
First party dram shop laws involve the drinker him or herself suing a bar or restaurant for negligently serving them too much alcohol. Some states prohibit these kinds of lawsuits altogether, reasoning that when you get yourself drunk and injured yourself, you can’t turn around and sue the parties who served you the alcohol. When allowed, first party dram shop cases are tough to win, because juries don’t favor individuals who deny responsibility for becoming voluntarily intoxicated. Generally, a subrogation lawyer has better success with first party dram shop situations making this argument where alcohol was served to a minor.
The more common, and more successful, case involves third parties. Here, the injured party is an innocent person harmed as a result of the intoxicated defendant’s negligence. For a subrogating insurance company, it’s important to know if your client was injured by a drunk driver. Many states will extend third party dram shop liability to anyone serving alcohol that results in an accident, particularly if a reasonable person under same or similar circumstances should know that person served is already intoxicated.
A subrogating insurance company is more likely to find dram shop liability where minors are involved. Liquor stores and other purveyors of alcohol are already violating a civil statute for providing alcohol to minors, so it is not hard for a subrogation lawyer to extend a negligence argument from there.
How Do Dram Social Host Laws Work?
Another set of laws that has arisen to address negligence in alcohol sales are social host laws. Subrogation law experts need to be similarly aware of these laws, particularly when considering a suit involving drunk driving. Social host laws create a cause of action against those who serve alcohol to his or her guests. Unlike dram shop laws, the alcohol is not served for pecuniary gain. Nonetheless, in some jurisdictions, if a social host serves or condones consumption of alcohol on his or her property, and their guests drive away, the host has liability if that guest causes an automobile accident or otherwise injures another person.
These social host laws focus on whether or not the host knew the guest was intoxicated and driving an automobile (usually), and are more specific about liability than dram shop acts. Generally, they won’t extend liability to a property owner with knowledge of the drinking on their property. New Jersey provides a good example of the specificity of these laws. New Jersey extends liability if the drinker is visibly intoxicated in the presence of the host, or the beverages were provided under circumstances manifesting reckless disregard of the consequence of another, and the circumstances created an unreasonable risk of harm to life or property. Furthermore, injury must result from an automobile accident caused by the intoxicated person who was served by the social host. This law would not extend to someone sneaking into a liquor cabinet or bringing their own flask, and it is limited to drunk driving incidents. Other states, like Rhode Island, limit social host liability to those serving alcohol to minors. In these states, the social host faces criminal liability for serving to minors plus civil liability on whatever damage is created by the drunk minors after leaving the property. These laws extend not only to parents but to any adult in charge of a party, and usually require that the adult knowingly and affirmatively delivers the alcohol. This is why it is so important for subrogation professionals to be familiar with social host laws and also to ask lots of detailed questions about what happened prior to any car accident involving a dunk driver.
If a jurisdiction does not have a social host law, there are certain times when general negligence law will impose a duty on social hosts. As a general rule, a landowner has no duty to protect another from harm caused by the dangerous or illegal acts of someone else, even when those acts occur on the landowner’s property. However, there is an exception when the plaintiff and defendant bear a special relationship to one another. When the wrongdoer is a minor, general negligence law may be an avenue for a subrogating insurance company to hold a landowner financially liable for the acts of their drunken guest.
The Takeaway for Subrogation Professionals
It is extremely important to ask questions about a tortfeasor involved in a car accident. Where that person is coming from, what they did, and who they interacted with can be critical information for subrogation litigation. It can open avenues of financial liability that help an insurance company recoup loss. This is especially true if you have a police report that indicates that one of the parties was intoxicated at the time of the accident. A good subrogation lawyer includes these questions in their discovery process; it is especially important where the wrongdoer is uninsured and lacks assets. Here, a subrogating insurance companies need the additional liable party to help satisfy the paid out damage claims.
A Note About Subrogation, Bankruptcy and Intoxication
When you have a tortfeasor who was intoxicated when they caused damage, bankruptcy discharge specifically does not discharge an individual debtor for the death or personal injury caused by the tortfeasor’s operation of a motor vehicle, vessel, or aircraft. Therefore, even if your tortfeasor is discharged in bankruptcy court, you still may have an avenue for recovery under the right circumstances. If the damages arose out of a motor vehicle collision and tortfeasor was driving under the influence at the time of the collision, and the damages are personal injury or death, then that discharge does not apply to your claim. This exception does not extend to property damage. So a subrogating insurance company may be able to pursue an individual following an accident even after that person files for bankruptcy.
Additionally, willful and malicious injury by a tortfeasor to another entity is not dischargeable; here, this includes personal property damage. So, if the tortfeasor committed the action on purpose, they can’t get out of that in bankruptcy either. Negligent drunk driving will not extend to property damage, bankruptcy proceeding do not protect the deliberate, willful, and malicious conduct of a tortfeasor.
Last Words For Anyone Hosting a Party
Even if you are not a subrogation professional, it is important to realize that if you are throwing a party, you may be responsible for the actions of your friends and guests. When you take away your drunken guest’s keys, call them rideshare, or let them stay overnight at your house, you not only prevent them from harming themselves and others, but may also protect yourself from financial liability for their actions.