LIQUOR LIABILITY INSURANCE? I'LL DRINK TO THAT
A Complete Guide to Serving and Hosting Responsibly

Chapter 3: Liquor Liability Lawsuits: Everything You Need to Know
Part 1: How Do Liquor Liability Lawsuits Work?

In 2001, a patron was served 14 drinks – seven rounds of cognac shots with beer "chasers" – over a two-hour span at the Club Caravan bar in Massachusetts. The patron was stumbling by the time he left at 2:00 a.m. After leaving the bar, the patron hopped in his car and headed south on Route 24.

Not far from where the driver was barreling down the highway, State Trooper Gerald Shea had pulled over to help Juan Rivera in the breakdown lane. Then, the driver slammed into the police cruiser. Both Shea and Rivera were severely injured.

Shea and Rivera brought negligence claims against the driver, Club Caravan Inc., Caravan Realty Inc., and individuals that owned or operated the bar that had served the driver. Club Caravan Inc. held the liquor license and ran the business that served the driver, while Caravan Realty Inc. owned the underlying real estate.

A Superior Court jury found all of the defendants liable. In turn, they awarded the plaintiff almost $5 million in damages.

The case, Rivera v. Club Caravan Inc., is a good example of how liquor liability lawsuits work – and how a business owner like you could be implicated.

This case was a civil trial, meaning the defendants were not being tried for criminal charges (though the driver did jail time for driving under the influence). Instead, the defendants were being sued for compensatory damages – money lost as a result of the defendant's negligence, as well as compensation for pain and suffering.

Civil wrongs like these are called "torts." Let's break this tort down into steps so you can see how a lawsuit plays out.

 

Step 1: The Triggering Incident

This is the event that started it all. In the Rivera case, the "triggering" incident is the car crash. As soon as that drunk driver hurt Shea and Rivera, the injured parties had reason to seek compensation for their losses (such as lost work time and through-the-roof medical bills).

Then there is the "trigger of liability" – the action that ties your establishment to the incident in question. Each state has its own definition of this trigger, but here are some common stipulations:

  • If you serve a person who appears to be intoxicated, you're probably on the hook for any third-party injuries that may happen as a result of his intoxication.
  • You must see that the person is intoxicated.
  • The alcohol must be the "proximate" (i.e., primary) cause of the injuries. You can ask yourself: if the alcohol weren't consumed, would this injury have happened? If the answer is no, then alcohol is likely the proximate cause.

If the injured party believes your establishment is on the hook for any of the above, they may name you in the lawsuit.

Step 2: Settling Out of Court

Whenever possible, most parties try to settle an issue out of court. Some states even require an attempt at dispute resolution before a case can be tried in court. And if you have a Liquor Liability Insurance policy, there's a solid chance your provider would rather settle than progress with a trial. The costs of litigation are exorbitant and only add up as a trial drags on.

(To learn more about why these lawsuits cost so much, jump to "Part 3: Why Are Liquor Liability Lawsuits So Expensive?")

 

Step 3: Pleadings

In the case of Rivera v. Club Caravan Inc., a settlement was off the table. So each party in the lawsuit filed initial papers called "pleadings." These papers explain each party's side of the dispute, which includes…

  • The complaint. The party who filed the lawsuit is called the "plaintiff" (in this case, it's Rivera). The plaintiff's pleading is called the "complaint," which triggers litigation. The plaintiff files a complaint with the court and formally delivers a copy to the defendant. This document outlines the defendant's negligence that caused the plaintiff harm. In liquor liability cases, this would be serving alcohol to an intoxicated person or a minor.
  • The answer. The accused party in a lawsuit is called the "defendant" (in this case, it's Club Caravan Inc.). The "answer" is the defendant's response to the complaint, and it provides the defendant's side of the story. Sometimes, the defendant will file counter-claims against the plaintiff. There are some instances when a defendant will request the other party to clarify its legal theories or ask the court to dismiss the suit altogether. How the defendant responds will determine whether a new complaint is filed and a new answer requested. Once the parties have completed this process, the pleadings are submitted so the court knows the problem that needs to be resolved.

Step 4: The Discovery Process

This is where the legwork of a lawsuit takes place. After the lawsuit is filed with the court, discovery begins. Each party asks each other and third parties about facts and issues surrounding the case. Lawyers on either side research the law, interview witnesses to assess the merits of claims and defenses, and organize their cases.

During this phase, information is compiled through formal means, such as written questions, requests for copies of documents, and requests for admission (which ask a party to admit or deny statements of fact).

Attorneys will also conduct depositions where they question witnesses under oath and have the interviews recorded by a court reporter. These may be used at trial to highlight inconsistencies in the other party's story. Here are some other important aspects of the discovery period:

  • Expert witnesses. If a claim requires technical information to validate an argument, an expert witness may be called on to weigh in. If the liquor liability suit is being tried in New York, for example, the plaintiff's attorney may have a toxicologist testify that the blood alcohol level of the driver was enough that he would invariably exhibit visible signs of intoxication. In Massachusetts, the patron need only have been served a "large number of strong alcoholic drinks" for the bar to have had sufficient information that it was serving a man who could potentially endanger others.
  • Motions. Even before a trial ever takes place, the parties in the lawsuit may use motions to ask the court to rule or act. Some motions ask the court to dismiss part or all of a plaintiff's case or a defendant's defense without trial. Other motions might ask the court to order a party to exclude certain evidence from trial.
  • Timing. Under the rules of court, the parties decide the amount of time for discovery. The court, however, sets trial dates.

Step 5: The Trial

Before the case is tried, each party submits a "brief" to the judge, which outlines the arguments and evidence to be used at trial. If a trial does not have a jury, it's called a "bench trial." If the trial does have a jury, both parties are allowed to question potential jury members. And then the trial begins. Here's what you can expect:

  • Opening statements. These start the trial. Each party presents the highlights of its case in its opening statement.
  • Evidence. After both parties introduce their cases, they present evidence. This is the time witnesses are called to testify, witnesses are cross-examined, or documents and exhibits are introduced for the judge or jury's consideration. The plaintiff goes first, and the defendant follows.
  • Closing arguments. After all the evidence has been presented, each party delivers its closing arguments.
  • Jury instruction. After closing arguments, the court instructs the jury on the law to be applied to the evidence. In the case of Rivera v. Club Caravan Inc., the jury considered Massachusetts's dram shop laws, but it also had to consider the liability of Caravan Realty, which had been sold after the incident.
  • Verdict. In the Rivera case, the jury awarded the plaintiffs $5 million in damages and found all named defendants liable.
  • Post-verdict. If the trial court made an error, a party may challenge the jury's verdict. The defense in the Rivera trial did request a motion for judgment notwithstanding the verdict, which asks the court to disregard the jury's verdict and enter a different decision.
  • Costs and fees. Whichever party wins the case will typically file a motion to order the losing party to pay for their court costs to defend or prosecute the case. These costs typically exclude attorneys' fees.

Step 6: Appeals

If a party is dissatisfied with the result of the case, they may appeal and request a retrial by a higher court. The appellate court will affirm the verdict if it finds that the previous trial court didn't make an error. If there was an error, the appellate court will either reverse the verdict or order a new trial.

This process can extend the case by years. The Rivera case was appealed and the appellate court found the proceeding trial court did make an error. They found the plaintiff's liability case against the realty trust failed as a matter of law.

As you can see, litigation is a long, intricate, and costly process – and one that is best avoided. But sometimes, the worst-case scenario comes to fruition. So let's take a look at how you can respond if you are sued over liquor liability.

Next: Part 2: What to Do if You're Sued: A Step-by-Step Guide

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