This post was contributed by Michael R. Kelley, Esq., Chair of McNees Wallace & Nurick LLC's Insurance Recovery & Counseling Group.
Let's say that you are having a Holiday party (with alcohol served) at your home, or you are a business owner and have a voluntary "company" party for your employees. If someone becomes "visibly intoxicated" at your party, are you as the host of the party liable if the visibly intoxicated guest leaves your party and injures himself or someone else? Does your homeowners or commercial liability policy cover you for defense costs and for a settlement or judgment if you get sued? What about worker's comp coverage for your employees?
In Pennsylvania, the courts have ruled that the Dram Shop Act (which covers alcohol-related liabilities) limits liability for serving intoxicated persons to only those who serve for money, unless the servee is under 21. So, social and business hosts that are not in the business of providing alcohol for money can definitely be civilly liable for serving persons under 21 years of age. However, social and business hosts are generally not liable under the Dram Shop Act for serving alcohol to those 21 and older. But, courts leave open the possibility of a common law action for negligence if a social or business host serves a visibly intoxicated person and knows or should know that the person will be driving, or engaging in some other dangerous activity.
The answer to the insurance coverage question depends on your specific coverages. In some cases, unless you specifically purchased liquor liability coverage, your homeowners and commercial liability policies will not cover you if you are sued under either the Dram Shop Act or the common law. Check your insurance policy. If "liquor liability" is a specific exclusion, you are not covered. If the policy is silent on this, you are covered. This is an area of coverage that has evolved over time, so make sure to check your policy. We recommend having insurance for liquor liability claims if you plan to spike the egg-nog this holiday season.
If an employee becomes intoxicated and is subsequently injured after attending a "voluntary" company party, there is a question as to whether your worker's comp policy will cover it. If the party is truly voluntary, the claim may not be covered. If, despite being "voluntary," employees are expected to attend the party and it is seen by employees has having an impact on their employment status, worker's comp coverage likely will cover the injuries. Based on experience, courts look to find worker's comp coverage in these scenarios and only deny coverage if employees clearly were not required to attend and attendance had no bearing on employment status.
So, what is a good social or business host to do? Make sure that your guests don't have too much to drink this Holiday season, and, if they do, make sure that they have a safe ride home. It's not only good sense, it's good insurance sense too. Also, make sure you have liquor liability coverage on your homeowners or commercial liability policy – just in case.