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Vol. 73, No. 8, August 2000 |
Another Look at
Dram Shop Liability
Dram Shop Liability by State (PDF)
Under the current approach to dram shop liability a substantial
portion of the drinking driver crash-related costs fall upon
innocent victims. Here's how Wisconsin compares to other states,
and what legislators can do to more fairly distribute these costs.
by Nina J. Emerson & Sarah B. Stroebel
he legal
landscape in Wisconsin has remained the same in terms of dram shop1
liability since 1985. However, the costs of alcohol-related crashes2 continue to rise. In Wisconsin alone, it
is estimated that alcohol-related crashes cost $464 million in 1998.3
Many states, including Wisconsin, have attempted to disburse some of
the economic impact of alcohol-related crashes through the imposition
of dram shop liability.
Despite these efforts, the existing dram shop liability system often
forces victims to absorb a substantial portion of the costs. For example,
dram shop laws frequently contain limitations on who may bring the cause
of action, against whom the action may be initiated, and the circumstances
that give rise to the cause of action.4
As a result, many injured parties are left with inadequate compensation.5
To avoid this dilemma, it is important for state legislators to critically
examine their current approach to dram shop liability and determine
whether it is providing victims with the necessary relief. If the current
laws are not meeting this goal, then more effective alternatives should
be considered.
This
article provides the historical basis for imposing dram shop liability,
including both vendor and social host liability. The article also discusses
the current status of Wisconsin's dram shop laws, particularly
in light of the dram shop laws implemented in neighboring states. Finally,
the authors examine an innovative alternative approach to compensating
victims of alcohol-related crashes.
Historical Basis for Dram Shop Liability
At common law, no cause of action existed against any party who sold
or otherwise provided alcoholic beverages to a person who subsequently
injured a third person. The underlying theory was that the consumption
of alcohol, rather than the actual furnishing of it, was the proximate
cause of the injury.6 However,
beginning in the 1970s, courts increasingly refused to adhere to the
traditional common law approach, reasoning instead that servers should
be held liable for providing alcohol to intoxicated or underage persons
who subsequently injured others.
The traditional approach used by the courts for imposing dram shop liability
was based upon general concepts of negligence law, which holds servers
responsible for foreseeable harm caused by their negligence.7
Since such liability is predicated on common law principles of negligence,
state courts have the power to adopt the new common law rule as part
of their inherent powers, without the need for legislative directives.
However, state legislators also have the authority to create dram shop
statutes and set the parameters of the common law if they choose.
Early dram shop liability was limited solely to licensed vendors. The
major purpose behind the imposition of such liability was and is to
provide victim compensation and to prevent alcohol-related crashes.8
First, imposing civil liability upon licensed vendors significantly
increases the chances that an injured victim will receive complete compensation.
In states that have no right of action against liquor vendors, liability
usually is limited to claims against the drinking driver. However, drinking
drivers often fall short in fully compensating victims due to either
limited automobile insurance or no insurance at all.9
Liquor vendors, on the other hand, typically are able to purchase insurance
coverage that is specifically written to reimburse the policyholder
for the costs of tort liability to victims of drinking-driver customers.
A second justification for imposing dram shop liability is that it
helps prevent alcohol-related crashes. Here, the rationale is that the
potential of liability will encourage vendors to operate their businesses
in a more responsible manner given that public drinking establishments,
especially bars and restaurants, are the single largest source of alcohol-impaired
drivers.10 In fact, studies show that between one-third
and one-half of all intoxicated drivers consumed their last drink at
a public, on-premises-sale establishment.11
Therefore, it stands to reason that imposing liability on vendors will
in turn help reduce the incidence of serving intoxicated and underage
persons - both of which are prohibited by statute in most states.12
As dram shop liability expanded over time to include social
hosts, the same basic justifications for imposing liability applied.
However, several states have refused to extend liability to social
hosts. There are two major reasons for this limitation: 1) unlike
vendors, social hosts are not in the business of selling alcohol
and often do not have the insurance to cover large damage awards;
and 2) social hosts are considered less adept at monitoring and
evaluating the level of intoxication of their guests. As such,
these states believe that the imposition of dram shop liability
upon social hosts cannot be adequately justified.
Dram Shop Liability in Wisconsin
In 1984 the Wisconsin Supreme Court in Sorenson v. Jarvis13 created an exception to the shield of
immunity previously afforded to liquor vendors by abrogating the common
law rule of nonliability. In Sorenson, the Wisconsin Supreme
Court held that an injured third person could maintain a negligence
action against a commercial vendor for damages caused by a person that
the vendor knew or should have known was underage (specifically, under
the legal drinking age) and whose alcohol consumption was a significant
factor in causing the injury.14
Within the same year, the court in Koback v. Crook15
expanded the Sorenson holding to include social hosts.16 In 1985 the Wisconsin Legislature responded
by enacting Wisconsin Statutes section
125.035. This statute essentially codifies Sorenson and Koback
and explicitly removes the traditional immunity protection in situations
where a liquor provider knew or should have known that the person being
served was underage, and where the alcoholic beverages provided to the
person were a substantial factor in causing injury to a third party.17
Here, the statute does not limit itself to vehicle injuries. It could
cover any injury incurred whether through a physical altercation18
or a crash involving some other vehicle (that is, a motorboat or snowmobile)
provided the two criteria above are satisfied.
However, liability as a result of serving an underage person is not automatic.
The statute provides a defense. A party will not be held liable if the
following conditions are satisfied: 1) the underage person falsely represents
that he or she has attained the legal drinking age; 2) the underage
person supports the representation with documentation that he or she
has attained the legal drinking age; 3) the alcoholic beverages are
provided in good faith reliance on the underage person's representation
that he or she has attained the legal drinking age; and 4) the appearance
of the underage person is such that an ordinary and prudent person would
believe that he or she had attained the legal drinking age.19
Thus, even if an underage drinker was served alcohol and consequently
injured a third person, the party who supplied the alcohol may be able
to avoid liability.
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