Chapter 4: How to Mitigate Your Liquor Liability Risks & Avoid Lawsuits
Part 1: Protecting Your Business from Dram Shop Liability Lawsuits
Here are some tips that can reduce your risk and support responsible alcohol service:
Train Your Employees in Safe Alcohol Service
Responsible drinking begins with responsible service. To enroll your bartenders, servers, and staff in an alcohol-service certification program, check out Training for Intervention Procedures (TIPS). TIPS offers training that instructs servers on…
- Their legal responsibilities when serving alcohol.
- How to recognize and prevent intoxication.
- The appropriate precautions to take with guests who've had too much to drink.
In Texas, your establishment can be immune to liquor liability suits if you can prove the employee who served the intoxicated guest is certified in alcohol service. Plus, 11 states have laws requiring server training for alcohol, including
- New Hampshire
- New Jersey
- New Mexico
- Rhode Island
Manage Your Risks
In addition to properly training your staff, you'll want to mitigate the risks that are within your control. Here are a few ideas to get the ball rolling:
- Don't give away free drinks. This encourages overdrinking. Instead, you can give away free appetizers that will help slow the rate of alcohol absorption.
- Make last call before your bar closes. Or before the party is over. That way, folks have a chance to sober up before heading home.
- Always card everyone. No matter how old your patrons appear to be, everyone should always present their IDs before a drop is served. You never want to risk inadvertently serving a minor.
- Create official protocol for handling inebriated guests. That way, your employees won't have to do any guesswork. This should include action steps, such as denying service, asking for a designated driver, or offering to call a cab.
- Keep your patrons aware with signage. All places that serve or sell alcohol should have a sign that explains your establishment cards and only sells booze to those who are 21 and older. You might also want to put up signs in a well-trafficked area (such as the bathroom) that explain how to drink and stay under the legal driving limit. These signs usually explain what constitutes "one drink" and how a person's height, weight, and sex can affect the way alcohol is metabolized.
- Pull receipts. As soon as you catch wind that there's been an accident, physical altercation, or other alcohol-related incident, you should pull receipts. Credit card transactions are easy to pull – the receipts are often even itemized. Depending on your setup, cash payments may be more difficult to track. Immediately find the person who served the person in question, and ask what was served, how many drinks were served, and whether or not the server engaged that person in conversation. Document all of this. The point here is to gather evidence while all the information is still fresh in case you do wind up in court.
- Pull surveillance footage. Again, as soon as you hear about an incident involving someone you served, try to secure the video footage from that night. Video surveillance can be valuable – if can show when the person was at your establishment, how many beverages he drank, and how he was behaving – all from an objective perspective. But it's important to secure the footage as soon as possible. After all, most business owners overwrite their footage after a certain number of days.
Outsource the Risk with Indemnification Clauses
Often, a successful event takes a number of key players to pull it together. For example, let's say your business is hosting a holiday party. You hire a caterer and book a banquet hall for the occasion. Because there are a lot of different entities involved in the function, liability shouldn't be such an issue, right?
Not so fast. More entities in play just mean more ways to pass the buck. And under liquor liability laws, you can be held liable if one of your guests overindulges and hurts someone at the party or once they leave – even if you weren't the one pouring the drinks.
One way to parse out liability is to draw up a contract with your vendors and / or caterers that includes an "indemnification clause." This clause clearly states…
- That the vendor will indemnify, defend, and hold harmless your company from all liability arising from alcohol-related incidents.
- Specific stipulations that prohibit bartenders and servers from serving individuals who appear intoxicated.
An "indemnification clause" helps protect you, the client, from legal issues related to the vendor performing the contract on your behalf. Whether or not the contract holds up in court depends on the legal strength of the document. Even if the contract does have staying power, it's ultimately the court's decision to recognize the terms of the agreement. Be sure to work with an attorney to ensure yours has a better chance of protecting your business in court.
Purchase a Liquor Liability Insurance Policy
Think of a Liquor Liability Insurance policy as your last line of defense when you're slapped with a lawsuit despite your best-laid risk management plans. If your business is sued for serving the intoxicated person who harmed a third party, you can rely on your policy to cover your…
- Lawyers' fees.
- Damages arising from the liquor-related accident.
- Judgments or settlements.
- Other court expenses.
Be sure to look for a plan that covers typical liquor liability claims, such as injuries arising from drunk driving and assault and battery. And keep in mind that no matter how inclusive your policy may be your coverage will not protect your business if you serve alcohol to minors.
(For more information on Liquor Liability Insurance, jump to the section Protecting Your Business with Liquor Liability Insurance.)
Next: Part 2: Protecting Yourself from Social Host Liability Lawsuits
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