Protecting a Business from Dram Shop Laws

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 What are Dram Shop Laws and Commercial Host Liability?

Dram shop laws are state laws which hold a business civilly liable for damages that are caused by overly intoxicated patrons. These laws may also apply to social hosts.

Commercial host liability arises when a business sells alcohol to a visibly intoxicated customer or to a minor. A business may be held liable for damages that result from accidents and crimes, including:

Dram shop laws vary by state. There are some states that do not have dram shop laws. Other states, such as California, make serving alcohol to obviously intoxicated customers a misdemeanor instead of simply imposing civil liability.

Dram shop laws were enacted to place responsibility on individuals who profit from the distribution of alcohol. These laws also provide incentives to owners of alcohol serving establishments to develop responsible service policies as well as to properly train employees to refuse alcohol sales.

Every state varies regarding who is liable when an intoxicated patron, guest, or minor causes an injury to themselves or others. States that impose dram shop laws vary in terms of how they used and define certain terms, including:

  • Intoxication;
  • Guest or patron;
  • Sales; and
  • Retailers.

A similarity among the states that have adopted dram shop laws is the application of the obvious intoxication test. This means that an employee or retailer knew or should have known that the patron was considerably intoxicated and that more alcohol would cause them to be a danger to themselves or to others.

The following states do not have dram shop liability:

What are Liquor Licenses?

Liquor laws are the body of laws which govern the sale and consumption of alcoholic beverages. Every state has its own liquor laws, meaning that may vary by jurisdiction.

In general, liquor laws govern the following:

  • Who is permitted to sell alcoholic beverages;
  • Who is permitted to buy alcoholic beverages;
  • Where liquor can be sold and at what times it may be sold;
  • Drinking and driving or DUI laws, in addition to other crimes such as open container laws;
  • Issuing liquor licenses as well as licenses to serve alcohol; and
  • Alcohol consumption at bars and other venues that serve alcohol.

Liquor licenses are specific documents which allow businesses to sell or to serve alcoholic beverages in the state in which they operate. These licenses include permissions related to:
The cost of beverages;

  • Where alcohol can be sold;
  • How much alcohol can be sold;
  • Who can buy alcohol; and
  • When alcohol can be served.

The process to obtain a liquor license is extensive and time-consuming. The application may also be expensive depending on where an individual is opening their business.

In addition, cities and towns frequently limit the number of establishments that are permitted to use these licenses at one time, referred to as a quota. The first step in applying for a liquor license is submitting a request to the city government.

This is generally reviewed in a meeting that is open to the public where citizens in attendance have the right to share their opinions of the application. Once the application is processed, it will be submitted to the state for review.

If the state government approves the application, the liquor license will be awarded to the restaurant or business. It is important to be aware that not every application for a business license is approved, especially for liquor licenses.

If a jurisdiction has met its quota for businesses that are permitted to sell alcohol, the application may be rejected.

What Happens if Liquor Laws are Violated?

Liquor licenses come with a list of regulations and laws that the business is required to adhere to. For example, once a business obtains a liquor license, they are required to maintain and renew it regularly.

Serving or selling alcohol without a valid liquor license may result in the loss of the business. It may also result in jail time in especially serious circumstances.

When renewing a liquor license, a business may be required to pay additional fees. Examples of violations of liquor laws include:

  • Selling a type of alcohol that is not included in the liquor license;
  • Selling alcohol to an underage person;
  • Bartenders over serving customers;
  • Allowing open containers to leave the premises; and
  • Allowing employees to drink excessively after their shift.

If a business violates the terms of their liquor license, they will receive an accusation, or a formal document that informs the business owner of the laws that they violated. In addition, the owner will be required to attend a hearing with the state’s alcohol controlling agent.

A court will then determine if the terms of the license were actually violated as well as whether any disciplinary actions should be taken. If the court determines that the business has violated the terms of the lease, it may impose a series of consequences on the business.

The most common example of this would be a revocation of the liquor license of the business, which may, in some cases, be permanent. It is common for a restaurant that sells alcohol to individuals under the age of 21 to permanently lose their liquor license.

In addition, fines and fees may be included or they may be the only disciplinary action that the court imposes. A business may be able to have its license restored after meeting certain conditions.

A mistake in law enforcement procedure may, in some cases, serve as a defense to a liquor law violation. Some violations, however, are strict liability violations.

This means that the individual may be held liable simply for the action regardless of their knowledge or intentions at the time. An example of this would be selling alcohol to minors, which may be punished even if the shop owner was not aware that the individual was a minor.

Can a Business Limit Exposure to Commercial Host Liability?

A business may limit its exposure to commercial host liability by developing and implementing practices and procedures which help prevent visibly intoxicated customers and minors from being served alcohol. In order for a business to develop an effective plan, it should be aware of the dram laws of the state.

In order to prevent a visibly intoxicated customer from being served, a business can:

  • Train employees in responsible alcohol service. Training programs may be effective, including:
  • Refuse entrance or service to visibly intoxicated customers;
  • Carefully control the amount of alcohol that is served in the drinks;
  • Develop clear policies and procedures to prevent over-serving; and
  • Strongly support employee’s decisions to cut-off alcohol service to visibly intoxicated persons.

In order to prevent a minor from being served, a business can:

  • Check the IDs of all customers before serving them alcohol;
  • Train bouncers and bartenders to spot fake IDs;
  • Post signage that reflects the business’s ID checking policy;
  • Invest in an ID card scanning system; and
  • Carefully monitor tables where alcohol is served and minors are seated.

A business may also purchase liability insurance in order to further limit liability in the event that the business is sued.

Can a Lawyer Help?

Yes, if you have any issues, questions, or concerns related to the dram shop laws in your state, a business attorney can help. Your attorney can advise you of the laws in your state, assist you with developing policies and procedures to limit exposure to commercial host liability, and help you choose a liability insurance policy that will protect your business if you are sued.

If a lawsuit is brought against your business for commercial host liability, your lawyer can advise you of your legal rights and defenses and represent you and your business in court.

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